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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 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
VIXEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 3669 84-1176505
(STATE OF OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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11911 NORTHCREEK PARKWAY SOUTH
BOTHELL, WASHINGTON 98011
(425) 806-5509
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JAMES M. MCCLUNEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VIXEL CORPORATION
11911 NORTHCREEK PARKWAY SOUTH
BOTHELL, WASHINGTON 98011
(425) 806-5509
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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JAMES C. T. LINFIELD, ESQ. GREGORY M. GALLO, ESQ.
GREGORY B. ABBOTT, ESQ. GRAY CARY WARE & FREIDENRICH LLP
COOLEY GODWARD LLP 400 HAMILTON AVENUE
5200 CARILLON POINT PALO ALTO, CA 94301
KIRKLAND, WA 98033-7355 (650) 833-2000
(425) 893-7700
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
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,
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, 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
number 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 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
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PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $0.001 par value.................... $40,000,000 $11,120
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
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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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JUNE 23, 1999
[LOGO]
SHARES
COMMON STOCK
Vixel Corporation is offering shares of our common stock.
This is our initial public offering. We anticipate that the initial public
offering price will be between $ and $ per share. We have applied
for approval for quotation of our common stock on the Nasdaq National Market
under the symbol "VIXL."
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INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 3.
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PER SHARE TOTAL
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Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to Vixel........................................... $ $
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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.
We have 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.
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BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
NEEDHAM & COMPANY, INC.
THE DATE OF THIS PROSPECTUS IS , 1999
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[EDGAR ARTWORK DESCRIPTIONS]
Location: inside front cover
Title: "Bringing connectivity and management to Storage Area Networks" is flush
left and is in white lettering against a black background. The image of a purple
Fibre Channel borders the left edge of the page. The remainder of the words are
in black lettering against white background.
Below the title, flush right, are the words "Vixel Corporation", in bold font.
Beneath our name are the words "designing and producing the essential building
blocks for connecting high-speed Storage Area Networks or SANs".
In the middle of the page is the caption "A full suite of Fibre Channel
products:", in bold font, followed by these bullet points: "Comprehensive
management software", "High-performance fabric switches", "Managed Arbitrated
Loop hubs", "Cost-effective entry-level hubs" and "Fiber optic transceivers".
In the lower third of the page is another caption, "Optimizing the benefits of
storage networking:", in bold font, followed by these bullet points: "Scaling
from entry-level to complex enterprise SANs", Designed-in interoperability
across the product suite", "Engineered for serviceability to maximize uptime",
"SAN interconnect management from a single platform" and "Facilitates SANs for
both Unix and NT environment."
In the lower right corner of the page is our logo, which is the word "Vixel",
with a black background and white lettering, and a green slanted oval
surrounding the letter "x".
Location: top of cover bi-fold
Title: The Vixel logo. Following the logo are the words "Making the Fibre
Channel Connection". Title is flush left.
Image: The image consists of three graphical components, all of which are
connected to one another. The top component consists of a local area network,
labeled "LAN", represented by a yellow and purple straight line running across
the top of the page, approximately 85% up from the bottom of the page. Above the
LAN are four clusters of images, each connected by a line to the LAN, three
consisting of an image of a green computer monitor and an image of a green
computer, labeled "End-Users", and the fourth consisting of an image labeled
"Router", which connects by a bent line to a blue cloud image containing the
acronym "WAN", or wide area network.
There are seven lines intersecting below the LAN at 90 degree angles.
The first line connects to an image entitled "Traditional SCSI Cabling",
consisting of a purple device labeled a "Server", which connects to a purple
device labeled a "Disk".
The second line connects an image entitled "Vixel R1000 Entry-level Arbitrated
Loop Hub." The image consists of a device labeled "Server", which connects by
another line to a hub, which connects by three lines to three objects, labeled
"Disks".
The third and fourth lines connect to an image entitled "Vixel R2000 Managed
Arbitrated Loop Hub". The image consists of two devices, labeled "Servers",
which connect to a hub, which connects by one line to an image labeled "Tape
Subsystem", by three additional lines to three disks, and by one line to an
image of a gigabit interface converter. Beneath the gigabit interface converter
are the words "GBICs in All Active Ports".
The fifth, sixth and seventh lines each connect to one device. The devices,
labeled "Servers", connect by separate lines to a switch labeled the "Vixel 8100
Fabric Switch". Five additional lines connect the Vixel 8100 Fabric Switch to
different devices. The Vixel 8100 Fabric Switch and these devices are depicted
in a cloud labeled "SAN", or Storage Area Network, on the right side of the
cloud. The first line from the
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Vixel 8100 Fabric Switch connects to a device labeled "Storage Array", the
second line connects to a device labeled "Shared Tape Library" and the third,
fourth and fifth lines connect to three separate switches, each labeled a "Vixel
8100 Fabric Switch". Each of the Vixel 8100 Fabric Switches within the cloud are
connected to one another by lines.
Of the three additional Vixel 8100 Fabric Switches, the first connects by two
additional lines to two devices, labeled "Storage Arrays", and by three
additional lines to three of the other Vixel 8100 Fabric Switches within the
cloud.
Three additional lines run from the second additional Vixel 8100 Fabric Switch.
The first line, the distance of which is labeled "10 kilometers", connects to an
additional switch labeled a "Vixel 8100 Fabric Switch", which in turn connects
by two lines to the image of two storage arrays. The second and third lines
connect to an image entitled "Vixel R2000 Managed Arbitrated Loop Hub",
consisting of two hubs, each connected to storage arrays.
The third additional Vixel 8100 Fabric Switch is connected by two lines to two
devices labeled "Storage Arrays".
At the left side of the image of the cloud is the SAN InSite logo, which
consists of the words "SAN InSite" placed within an oval, which is placed to the
left of an image of a computer monitor showing the SAN InSite graphical user
interface above the words "Vixel SAN InSite Comprehensive Management Software".
Location: Bottom of cover bi-fold
Title: "Vixel's Total SAN Solution"
Bullets: Full Product Portfolio
Fabric Switches, Managed Hubs, Entry-Level Hubs, Transceivers
Comprehensive Interconnect Management With SAN InSite
Designed-in Interoperability
Simplifies SAN Deployment & Support
Image: The image is located to the left of the bullet points. It consists of a
spoke and hub design. The Vixel logo is the hub, and it connects by a separate
line to logos of our customers and partners.
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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, 25 days after the date of this prospectus, 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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Prospectus Summary.......................................... 1
Risk Factors................................................ 3
You Should Not Rely on Forward-Looking Statements Because
They are Inherently Uncertain............................. 14
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Capitalization.............................................. 16
Dilution.................................................... 17
Selected Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Business.................................................... 28
Management.................................................. 41
Certain Transactions........................................ 51
Principal Stockholders...................................... 53
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 58
Underwriting................................................ 60
Legal Matters............................................... 62
Experts..................................................... 62
Where You Can Find Additional Information................... 62
Index to Financial Statements............................... F-1
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Unless otherwise indicated, this prospectus assumes that the underwriters
have not exercised their option to purchase additional shares. It also assumes
the conversion of 19,889,331 shares of preferred stock, which includes 894,333
shares of preferred stock issuable upon exercise of warrants.
We own or have rights to the trademarks or tradenames that we use in
conjunction with the sale of our products and services. Vixel(R) and SAN
InSite(TM) are 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 Colorado in June 1991 as Photonics Research
Incorporated and reincorporated in Delaware in February 1995 as Vixel
Corporation. Our corporate headquarters are located at 11911 Northcreek Parkway
South, Bothell, Washington 98011 and our telephone number is (425) 806-5509. Our
website address is www.vixel.com. Information contained on our website is not
part of this prospectus.
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PROSPECTUS SUMMARY
You should read this summary together with the more detailed information
and our financial statements and notes appearing elsewhere in this prospectus.
THE COMPANY
We are a leading provider of comprehensive interconnect solutions for use
in storage area networks, or SANs. Our portfolio of Fibre Channel products
includes SAN management software, fabric switches, arbitrated loop hubs and
transceivers. These products are fully interoperable and designed to perform in
concert to enable customers to easily deploy a range of SAN configurations, from
simple point-to-point connections to more complex high-performance networks. We
believe our unique SAN InSite management software optimizes the performance of
our fabric switches, managed hubs and transceivers, facilitates maximum
availability of data, supports network stability and reduces enterprise
information technology staffing, training and support requirements.
In recent years there has been a significant increase in the volume of data
created, processed and accessed throughout the enterprise. This growth has been
fueled by the rapid expansion of the Internet, measured both by the number of
users as well as the number of web-based corporate initiatives which require
continuous access to critical business information 24 hours a day, seven days a
week. Enterprises traditionally have attempted to support and manage storage
requirements by linking single servers to dedicated storage devices through
storage interfaces such as the small computer system interface, or SCSI.
However, the SCSI-based storage architecture has significant speed, distance and
connectivity constraints. Furthermore, SCSI-based storage devices are dependent
on the servers to which they are attached, creating captive pockets of storage
behind each server.
Fibre Channel technology addresses the limitations of traditional
server-to-storage connections and enables data to be transferred from one
network device to another, allowing any server to access any storage device on
the network. The technology combines the connectivity and distance features of
networking with the simplicity and reliability benefits of the channel, or the
dedicated circuit that carries information to and from data storage devices.
Fibre Channel technology is most commonly applied in network configurations
known as SANs, where storage devices are connected through interconnect devices,
such as switches, hubs and transceivers. In January 1999, International Data
Corporation estimated that worldwide revenue from SAN products would grow from
approximately $2.5 billion in 1998 to over $13.3 billion in 2002, representing a
compound annual growth rate of over 50%.
Our objective is to expand our position as a leading developer and supplier
of comprehensive SAN interconnect solutions. Key elements of our strategy
include the following:
- Offer new and existing customers a full Fibre Channel interconnect
product portfolio;
- Leverage our technology platforms and expertise to address rapidly
evolving SAN market demands;
- Extend our SAN interconnect management software leadership;
- Partner with major storage solutions providers to promote
interoperability and enhance functionality;
- Expand our distribution channels; and
- Promote the Vixel brand in order to position ourselves as the leading
provider of high-performance, cost-effective SAN interconnect solutions.
We primarily market and sell our products to original equipment
manufacturers, or OEMs, and resellers. To date we have shipped products
representing over 500,000 Fibre Channel ports to more than 30 OEMs and
resellers, which we believe are more ports than any other Fibre Channel
interconnect vendor has shipped.
1
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THE OFFERING
COMMON STOCK OFFERED BY VIXEL................... shares
COMMON STOCK TO BE OUTSTANDING AFTER THIS
OFFERING........................................ shares
USE OF PROCEEDS................................. Repayment of a promissory
note and accrued interest,
totaling $2.0 million,
working capital, general
corporate purposes and
repayment of other corporate
indebtedness.
PROPOSED NASDAQ NATIONAL MARKET SYMBOL.......... VIXL
Our shares outstanding after the offering do not include 3,237,781 shares
of common stock subject to outstanding options under our 1995 stock option plan
or 404,798 shares of common stock issuable upon exercise of warrants. It also
assumes the conversion of 19,889,331 shares of preferred stock, which includes
894,333 shares of preferred stock issuable upon exercise of warrants.
The as adjusted balance sheet data summarized below reflects the conversion
of our preferred stock into 19,889,331 shares of common stock upon the
completion of this offering and the application of the net proceeds from the
sale of shares of common stock offered by us at an assumed
initial public offering price of $ per share, after deducting underwriting
discounts and commissions and our estimated offering expenses. See note 1 to our
financial statements for an explanation of the determination of the number of
shares used in calculating per share data.
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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FISCAL YEAR ENDED QUARTER ENDED
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DEC. 29, DEC. 28, JAN. 3, MARCH 29, APRIL 4,
1996 1997 1999 1998 1999
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(UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Revenue....................................... $ 6,941 $ 22,783 $ 39,445 $10,623 $10,522
Gross profit (loss)........................... (401) 3,736 3,246 2,258 2,993
Loss from operations.......................... (17,260) (13,525) (29,560) (8,424) (3,596)
Net (loss) income............................. (17,652) (13,759) (21,233) 502 (4,039)
Basic and diluted net loss per share
(audited)................................... $ (6.88) $ (.94)
Pro forma basic and diluted net loss per share
(unaudited)................................. $ (.97) $ (.17)
Weighted-average shares outstanding........... 3,113 4,369
Pro forma weighted-average shares outstanding
(unaudited)................................. 21,828 23,364
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APRIL 4, 1999
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ACTUAL AS ADJUSTED
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(UNAUDITED)
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BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 596 $
Investments................................................. 3,635
Working (deficit) capital................................... (10,238)
Total assets................................................ 24,421
Long-term obligations and noncurrent portion of capital
leases.................................................... 6,525
Redeemable preferred stock.................................. 20,042
Total stockholders' deficit................................. (23,884)
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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 that case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
WE HAVE INCURRED SIGNIFICANT LOSSES SINCE OUR INCEPTION, WE EXPECT FUTURE
LOSSES, AND WE MAY NOT BECOME PROFITABLE.
We have incurred significant losses since inception and expect to incur
losses in the future. As of April 4, 1999, we had an accumulated deficit of
$60.2 million. We cannot be certain that we ever will realize sufficient revenue
to achieve profitability. We expect to incur significant product development,
sales and marketing and administrative expenses, and we will need to generate
significant revenue to achieve and maintain profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability.
OUR OPERATING RESULTS ARE DIFFICULT TO FORECAST, MAY FLUCTUATE ON A QUARTERLY
BASIS AND MAY BE ADVERSELY AFFECTED BY MANY FACTORS.
Our revenue and results of operations have varied on a quarterly basis in
the past and may vary significantly in the future due to a number of factors,
many of which may cause our stock price to fluctuate. As a result of these and
other factors, we believe that period to period comparisons of our operating
results should not be relied upon as an indicator of our future performance. It
is likely that in some future period our operating results will be below your
expectations or those of public market analysts. The primary factors that may
affect us include the following:
- the size, timing, terms and fluctuations of customer orders, particularly
large orders from a limited number of OEMs;
- our ability to attain and maintain sufficient reliability levels for our
SAN interconnect products;
- our ability to expand our relationships with OEMs and resellers,
including distributors and value added resellers, or VARs;
- the timing of the introduction or enhancement of products by us, our OEMs
and our competitors;
- decreases in the prices at which we can sell our products;
- the mix of products sold, as our switches and hubs typically have higher
margins than our transceivers, and the mix of distribution channels
through which our products are sold;
- the relatively long sales and deployment cycles for our products,
particularly those sold through our OEMs;
- our ability to obtain sufficient supplies of sole or limited-source
components of our products, including vertical cavity surface emitting
lasers, or VCSELs, and application specific integrated circuits, or
ASICs;
- increased operating expenses, particularly in connection with our
strategies to increase brand awareness and to expand our relationships
with OEMs and resellers;
- the ability of our contract manufacturers to produce and distribute our
products in a timely fashion;
- activities of and acquisitions by our competitors; and
- changes in technology, industry standards or customer preferences.
3
<PAGE> 9
A decline in the quantity of products that our OEMs and resellers order
will adversely and disproportionately affect our quarterly results of
operations. This is because our expense levels are partially based on our
expectations of future sales and our expenses may be disproportionately large if
our sales do not meet expectations. Hence, we may be unable to adjust spending
in a timely manner to compensate for any unexpected revenue shortfall. Any
shortfall in sales in relation to our quarterly expectations, or any delay of
customer orders, would likely have an immediate and adverse impact on our
business, results of operations and financial condition.
A COMPONENT USED IN OUR TRANSCEIVERS HAS EXPERIENCED AN ABNORMALLY HIGH FAILURE
RATE WHICH HAS ADVERSELY AFFECTED OUR SALES.
Our gigabit interface converter, or GBIC, and gigabaud link module, or GLM,
transceivers manufactured prior to March 1999 incorporate a compact disk, or CD,
laser manufactured by a third party. We have observed, and some customers have
confirmed, that in certain applications the transceivers that incorporate this
CD laser have experienced an abnormally high failure rate. Although we recorded
a warranty reserve of $3.6 million in the fourth quarter of fiscal 1998 as a
result of these problems, there is a risk that this reserve will be inadequate
to implement a remedy that is satisfactory to our customers. In addition, we
cannot assure you that, over time, failure rates for products that incorporate
these CD lasers will not increase or that the VCSELs which we began using in our
GBIC transceiver products in March 1999 will not experience problems. Claims
against us in excess of the amount of our reserve could have a material adverse
effect on our business, results of operations and financial condition. One of
our OEMs has reduced its purchases of GBIC transceivers as a result of this
problem. In addition, if we are unable to resolve this matter to our customers'
satisfaction, or if failure rates in transceiver products increase, our
reputation and relationships with current and prospective customers could be
damaged and adversely affect the sales of all of our products.
THE LOSS OF ONE OR MORE KEY CUSTOMERS COULD SIGNIFICANTLY REDUCE OUR REVENUE.
Our success will depend on our continued ability to develop and manage
relationships with significant OEMs and resellers, as well as on the sales
efforts and success of these customers. Sun Microsystems, Compaq and
Hewlett-Packard represented 39.6%, 15.7% and 14.3% of our revenue, respectively,
for the quarter ended April 4, 1999. In fiscal 1998, sales to our top two
customers, Sun Microsystems and Hewlett-Packard, represented 54.4% and 12.3% of
our revenue, respectively. Although we are attempting to expand our base of
OEMs, most of our future revenue may come from a small number of OEMs.
Our agreements with our customers do not provide any assurance of future
sales to those customers. For example:
- our OEMs and resellers can stop purchasing and marketing our products at
any time;
- our OEM and reseller agreements are not exclusive and contain no renewal
obligation; and
- our OEM and reseller agreements do not require minimum purchases.
We cannot be certain that we will retain our current OEMs and resellers or
that we will be able to recruit additional or replacement customers. Many of our
OEMs and resellers carry or utilize competing product lines. If we were to lose
one or more important OEMs or resellers to a competitor, our business, results
of operations and financial condition could be significantly harmed.
OUR OEMS HAVE UNPREDICTABLE ORDER PATTERNS WHICH MAY CAUSE OUR REVENUE TO VARY
SIGNIFICANTLY FROM PERIOD TO PERIOD.
Our OEMs tend to order sporadically, and their purchases can vary
significantly from quarter to quarter. Our OEMs generally forecast expected
purchases in advance, frequently do not order as expected and tend to place
purchase orders only shortly before the scheduled delivery date. These order
habits cause our backlog to fluctuate significantly. Moreover, our backlog is
not necessarily indicative of actual sales for any succeeding period, as orders
are subject to cancellation or delay by our OEMs with limited or no
4
<PAGE> 10
penalty. Also, we typically generate a large percentage of our quarterly revenue
in the last month of the quarter.
OUR SUCCESS IS DEPENDENT UPON ACCEPTANCE OF FIBRE CHANNEL TECHNOLOGY AND THE
GROWTH OF THE EMERGING SAN MARKET.
Our SAN InSite management software, switches, hubs and transceivers are
used exclusively in SANs. Accordingly, widespread adoption of SANs is critical
to our future success. The market for SANs and related software, switches, hubs
and transceivers has begun to develop only recently and is evolving rapidly.
Because this market is new, it is difficult to predict its potential size or
future growth rate. SANs are often implemented in connection with deployment of
new storage systems and servers. Potential end-user customers that have invested
substantial resources in their existing data storage and management systems may
be reluctant or slow to adopt a new approach, such as SANs. Our success in
generating revenue in this emerging SAN market will depend on, among other
things, our ability to:
- demonstrate the benefits of SANs and our SAN InSite management software,
switch, hub and transceiver products to OEMs, resellers and end-users;
- develop, maintain and build relationships with leading OEMs and
resellers; and
- accurately predict the direction of industry standards and base our
products on those industry standards.
Our failure to do any of these activities would adversely affect our
ability to successfully compete in the emerging SAN market.
BECAUSE A SIGNIFICANT PORTION OF OUR REVENUE IS DERIVED FROM SALES OF
ENTRY-LEVEL HUBS AND TRANSCEIVERS, WE ARE DEPENDENT ON CONTINUED WIDESPREAD
MARKET ACCEPTANCE OF THESE PRODUCTS.
We currently derive substantially all our revenue from sales of our
entry-level hubs and transceivers. We expect that revenue from these products
will continue to account for a substantial portion of our revenue for the
foreseeable future. If the market does not continue to accept our entry-level
hubs and transceivers, our revenue will decline significantly. Some of these
products have been introduced and shipped in volume only recently. Accordingly,
the demand for and market acceptance of these products are uncertain. Factors
that may affect the market acceptance of our products include the continued
growth of the market for SAN interconnect products, the performance, price and
total cost of ownership of our products, the availability, functionality and
price of competing products and technologies, and the success and development of
our OEMs and resellers. Many of these factors are beyond our control.
WE EXPECT THAT A GROWING PERCENTAGE OF OUR FUTURE REVENUE WILL BE DERIVED FROM
OUR SWITCH AND MANAGED HUB PRODUCTS, AND OUR SUCCESS WILL DEPEND ON WIDESPREAD
ACCEPTANCE OF THESE PRODUCTS.
Our future success depends upon our ability to address the rapidly changing
needs of our customers by developing and introducing high-quality,
cost-effective products as well as product enhancements and services on a timely
basis and by keeping pace with technological developments and emerging industry
standards. If we do not successfully develop, introduce and market new products,
especially our switch and managed hub products, our revenue may decline. In
particular, our future revenue growth will depend on the success of new product
launches of our switch and managed hub products and success of our current
switch and managed hub products. In addition, as we introduce new or enhanced
products, we will have to manage successfully the transition from older products
in order to minimize disruption in our customers' ordering patterns, avoid
excessive levels of older product inventories and ensure that enough supplies of
new products can be delivered to meet our customers' demands. To the extent
customers defer or cancel orders in expectation of new product releases, any
delay in development or introduction of new products could cause our operating
results to suffer.
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COMPETITION IN OUR MARKETS MAY LEAD TO REDUCED PRICES AND SALES OF OUR PRODUCTS,
INCREASED LOSSES AND REDUCED MARKET SHARE.
The markets for SAN interconnect products are highly competitive. Our
current competitors include a number of domestic and international companies,
many of which have substantially greater financial, technical, marketing and
distribution resources than we have. We expect that more companies, including
our OEMs, will enter the market for SAN interconnect products. We may not be
able to compete successfully against either current or future competitors.
Increased competition could result in significant price erosion, reduced
revenue, lower margins or loss of market share, any of which would have a
material adverse effect on our business, results of operations and financial
condition.
For fabric switch sales, we compete primarily with Ancor Communications,
Brocade Communications and McDATA. For hub sales, we compete primarily with
Emulex Corporation and Gadzoox Networks. For transceiver sales, we compete
primarily with Cielo Communications, Finisar, Hewlett-Packard and IBM. Although
we do not believe that any other vendor offers comprehensive SAN interconnect
management software that directly competes with ours, other vendors, such as
Brocade and Gadzoox, provide single point-device managers for either fabric
switch or hub products, but not across multiple interconnect devices, including
fabric switches, hubs and transceivers. Our competitors continue to introduce
improved products with lower prices, and we will have to do the same to remain
competitive. Furthermore, larger companies in other related industries may
develop or acquire technologies and apply their significant resources, including
their distribution channels and brand recognition, to capture significant SAN
market share.
OUR FAILURE TO ENHANCE OUR EXISTING PRODUCTS AND INTRODUCE NEW PRODUCTS ON A
TIMELY BASIS COULD CAUSE OUR REVENUE TO FALL.
Given the product life cycles in the markets for our products, any delay or
unanticipated difficulty associated with new product introductions or product
enhancements could significantly harm our business, results of operations and
financial condition. Product development delays may cause our revenue to
decrease and the price of our stock to fall. We may not be able to develop,
manufacture and market new products or product enhancements in a timely manner
that achieve market acceptance. We also may not be able to develop the
underlying core technologies necessary to create new products and enhancements,
or to license these technologies from third parties. Product development delays
may result from numerous factors, including:
- changing OEM product specifications;
- difficulties in hiring and retaining necessary personnel;
- difficulties in reallocating engineering resources and overcoming
resource limitations;
- difficulties with independent contractors;
- changing market or competitive product requirements; and
- unanticipated engineering complexities.
THE SALES CYCLE FOR OUR PRODUCTS IS LONG AND WE MAY INCUR SUBSTANTIAL
NON-RECOVERABLE EXPENSES AND DEVOTE SIGNIFICANT RESOURCES TO SALES THAT DO NOT
OCCUR WHEN ANTICIPATED OR
AT ALL.
OEMs and resellers typically conduct significant evaluation, testing,
implementation and acceptance procedures before they begin to market and sell
new solutions that include our products. This evaluation process is lengthy and
may range from six months to one year or more. This process is complex and may
require significant sales, marketing and management efforts on our part. This
process becomes more complex as we simultaneously qualify our products with
multiple customers. As a result, we may expend significant resources to develop
customer relationships before we recognize any revenue from these relationships.
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FAILURE TO MANAGE OUR OEM AND RESELLER RELATIONSHIPS AND EXPAND OUR DISTRIBUTION
CHANNELS COULD SIGNIFICANTLY REDUCE OUR REVENUE.
We rely on OEMs and resellers to distribute and sell our products. Our
success depends substantially on our ability to initiate, manage and expand our
relationships with OEMs, our ability to attract additional resellers and the
sales efforts of these OEMs and resellers. Our failure to manage and expand our
relationships with OEMs and resellers, or their failure to market our products
effectively, could substantially reduce our revenue and seriously harm our
business.
ANY FAILURE BY US TO SUCCESSFULLY EXECUTE OUR DISTRIBUTION STRATEGY WILL
NEGATIVELY IMPACT OUR REVENUE.
Our distribution strategy focuses primarily on developing and expanding
indirect distribution channels through OEMs and resellers, as well as expanding
our field sales organization. Our failure to execute this strategy successfully
could limit our ability to grow or sustain revenue. Furthermore, as we expand
our sales to resellers, we may increase our selling costs as these parties
generally require a higher level of customer support than our OEMs. If we fail
to develop and cultivate relationships with significant resellers, or if these
resellers are not successful in their sales efforts, sales of our products may
decrease and our operating results would suffer. Many of our resellers also sell
products that compete with our products. 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.
Our failure to successfully manage our reseller relationships or their failure
to sell our products could reduce our revenue.
In order to support and develop opportunities for our indirect distribution
channels, we plan to expand our field sales and support staff significantly. We
cannot assure you that this expansion will be successfully completed, that the
cost of this expansion will not exceed the incremental revenue generated or that
our expanded field 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
field sales and support staff would have a material adverse effect on our
ability to grow and increase revenue.
IF WE DO NOT SUCCESSFULLY COMPLETE THE TRANSITION OF OUR PRODUCT MANUFACTURING
TO K*TEC ELECTRONICS, OUR BUSINESS COULD BE NEGATIVELY AFFECTED.
We rely on outside contract manufacturing firms, K*TEC Electronics, a
division of Kent Electronics, and Solectron Corporation, to manufacture our
products. Currently K*TEC manufactures our switches, hubs and GBIC transceivers,
and Solectron manufactures our GLM transceivers. We are in the process of
transitioning all GLM manufacturing to K*TEC. Our failure to manage this
transition effectively may disrupt the manufacture of our products. Any
difficulties or disruptions in the manufacture of our products could prevent us
from making timely customer deliveries and result in lost opportunities and
reduced revenue.
THE LOSS OF K*TEC, THE FAILURE TO FORECAST ACCURATELY DEMAND FOR OUR PRODUCTS OR
TO MANAGE SUCCESSFULLY OUR RELATIONSHIP WITH K*TEC WOULD NEGATIVELY AFFECT OUR
BUSINESS.
Once the transition to K*TEC is complete, as we expect it to be in the
second half of 1999, we will rely exclusively on K*TEC to manufacture, store and
ship our products. We share K*TEC's manufacturing capacity with numerous
companies whose manufacturing needs may conflict with ours. If K*TEC is unable
or unwilling to complete production runs for us in the future, or experiences
any significant delays in completing production runs or shipping our products,
the manufacturing and sale of our products would be temporarily suspended. We
have in the past experienced delivery problems based on capacity constraints for
production test and material supply. As our product volume requirements
increase, we may find it necessary to augment our manufacturing capacity by
exploring new subcontract manufacturers. We may not be successful in finding
qualified manufacturers that meet our needs. An interruption in supply of our
products, or additional costs incurred to qualify and shift production to an
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alternative manufacturing facility, would significantly harm our business,
results of operations and financial condition.
K*TEC is not obligated to supply products for us, except as may be provided
in a particular purchase order that K*TEC has accepted. We place purchase orders
with K*TEC based on periodic forecasts. While most of the materials used in our
products are standard products, some are proprietary and/or sole-source and
require extended lead times. Our business will be adversely affected if we are
unable to accurately forecast demand for our products and manufacturing capacity
or if materials are not available at K*TEC to meet the demand. Lead times for
materials and components vary significantly and depend on the specific supplier,
contract terms and demand for a component at a given time. We also may
experience shortages of components from time to time, which could delay the
manufacture of our products.
We plan to regularly introduce new products and product enhancements, which
will require that we coordinate our efforts with K*TEC to rapidly achieve volume
production. If we do not effectively manage our relationship with K*TEC, or if
K*TEC experiences delays, disruptions, capacity constraints or quality control
problems in its manufacturing operations, our ability to ship products to our
customers could be delayed and our competitive position and reputation could be
harmed. Qualifying a new contract manufacturer and commencing volume production
is expensive and time consuming. If we are required to or choose to change
contract manufacturers, we may lose revenue and damage our customer
relationships.
WE MAY LOSE SALES IF OUR SOLE SOURCE SUPPLIERS FAIL TO MEET OUR NEEDS.
We currently purchase several key components from single sources. We depend
on single sources for our VCSELs, ASICs and microprocessors. In addition, we
license from a third party software that is incorporated into our switches and
hubs. If we cannot supply products due to a lack of components, or are unable to
redesign products with other components in a timely manner, our business,
results of operations and financial condition would be materially adversely
affected.
We use rolling forecasts based on anticipated product orders to determine
our component requirements. Lead times for materials and components that we
order vary significantly and depend on factors such as specific supplier
requirements, contract terms and current market demand for particular
components. As a result, our component requirement forecasts may not be
accurate. If we overestimate our component requirements, we may have excess
inventory, which would increase our costs. If we underestimate our component
requirements, we may have inadequate inventory, which could interrupt our
manufacturing and delay delivery of our products to our customers. Any of these
occurrences would negatively impact our business and operating results.
A DECREASE IN THE SELLING PRICES OF PRODUCTS WOULD REDUCE OUR REVENUE AND GROSS
MARGINS.
As the markets for SAN interconnect products mature, it is likely that the
average unit prices of our products will decrease in response to competitive
pricing pressures, increased sales discounts, new product introductions by us or
our competitors or other factors. If our efforts to reduce the cost of our
products through manufacturing efficiencies, design improvements and cost
reductions, as well as through increased sales of higher margin products are not
successful, our revenue and gross margins will decline, significantly harming
our operating results and financial condition which may cause our stock price to
drop.
UNDETECTED SOFTWARE OR HARDWARE DEFECTS COULD INCREASE OUR COSTS AND REDUCE OUR
REVENUE.
SAN interconnect products frequently contain undetected software or
hardware defects when first introduced or as new versions are released. Our
products are complex and problems may be found from time to time in our
existing, new or enhanced products. Our products incorporate components
manufactured by third parties. We have in the past experienced difficulties with
quality and reliability of components obtained from third parties and we could
experience similar problems in the future. In addition, our products are
integrated with products from other vendors. As a result, when problems occur,
it may be difficult to identify the source of the problem. These problems may
cause us to incur significant
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warranty and repair costs, divert the attention of our engineering personnel
from our product development efforts and cause significant customer relations
problems.
IF WE FAIL TO SUCCESSFULLY DEVELOP THE VIXEL BRAND, OUR REVENUE MAY NOT GROW AND
OUR STOCK PRICE MAY FALL.
We believe that establishing and maintaining the Vixel brand is a critical
aspect of our efforts to maintain and develop strategic OEM and reseller
relationships, and that the importance of brand recognition will increase due to
the growing number of vendors of SAN interconnect products. Our failure to
successfully develop our brand may prevent us from growing our revenue, which
could cause the price of our stock to fall. We intend to increase our spending
on programs, including advertising campaigns and marketing events, to create and
maintain brand loyalty among our customers. If we do not generate a
corresponding increase in our revenue as a result of our branding efforts or
otherwise fail to promote our brand successfully, or if we incur excessive
expenses in an attempt to promote and maintain the Vixel brand, our business,
results of operations and financial condition may be materially adversely
affected. In addition, if our OEMs, resellers and end users of our SAN
interconnect products do not perceive our products to be of high quality, or if
we introduce new products or technologies that are not accepted by the market,
the value of the Vixel brand will decline and our business will suffer.
OUR MANAGEMENT TEAM IS NEW AND MAY NOT BE ABLE TO WORK TOGETHER SUCCESSFULLY.
Our success depends to a significant degree upon the continued joint
contributions of our key management, many of whom we only recently hired. In
April 1999, we hired a new president and chief executive officer, James M.
McCluney, and in September 1998, we hired a chief financial officer, Kurtis L.
Adams. Other members of our management team also joined us only recently.
Because of the limited time in which our management team has been working
together, we cannot assure you that management will be able to work effectively
as a team.
IF WE LOSE KEY PERSONNEL OR ARE UNABLE TO HIRE ADDITIONAL QUALIFIED PERSONNEL,
WE MAY NOT BE SUCCESSFUL.
We believe our future success will depend in large part upon our ability to
attract and retain highly skilled managerial, technical, sales and marketing,
finance and operations personnel. In particular, we will need to increase the
number of technical staff members with experience in high-speed networking
applications as we further develop our product line. Competition for these
highly skilled employees in our industry is intense. Our failure to attract and
retain these key employees could have a material adverse effect on our business,
results of operations and financial condition.
We currently are conducting a search for a vice president of marketing as
well as additional sales and marketing personnel. Competition for qualified
sales and marketing personnel, particularly at the senior level, is intense and
we might not be able to hire the kind and number of sales and marketing
personnel we are targeting. Unless we expand our sales and marketing force, we
may not be able to increase our revenue or extend our brand awareness. We also
have a small customer service and support organization and will need to increase
our staff to support new OEMs and resellers and the expanding needs of our
existing customers. Hiring customer service and support personnel is very
competitive in our industry due to the limited number of people available with
the necessary technical skills and understanding of SAN interconnect products.
The loss of the services of any of our key employees, the inability to
attract or retain qualified personnel in the future or delays in hiring required
personnel could hinder the development and introduction of and negatively impact
our ability to sell our products. In addition, employees may leave our company
and subsequently compete against us. Moreover, companies in our industry whose
employees accept positions with competitors frequently claim that their
competitors have engaged in unfair hiring practices. We may be subject to claims
of this type in the future as we seek to hire qualified personnel and some of
these claims may result in material litigation. We could incur substantial costs
in defending ourselves against these claims, regardless of their merits.
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WE MUST CONTINUE TO IMPROVE OUR OPERATIONAL SYSTEMS AND CONTROLS TO MANAGE
FUTURE GROWTH.
We have experienced a period of rapid growth, which has placed and
continues to place a significant strain on our resources. Unless we manage our
growth effectively, we may make mistakes in operating our business, such as
inaccurate sales forecasting, material planning and financial reporting, which
may result in fluctuations in our operating results and cause the price of our
stock to decline. We plan to continue to expand our operations significantly.
This growth will place a significant demand on our management and operational
resources. In order to manage growth effectively, we must implement and improve
our operational systems, procedures and controls on a timely basis. Our key
personnel have limited experience managing this type of growth. If we cannot
manage growth effectively, our business could suffer.
OUR PRODUCTS MUST COMPLY WITH EVOLVING INDUSTRY STANDARDS AND GOVERNMENT
REGULATIONS.
The market for SAN products is characterized by the need to support
industry standards as they emerge, evolve and achieve acceptance. To remain
competitive, we must continue to introduce new products and product enhancements
that meet these industry standards. All components of a SAN must utilize the
same standards in order to operate together. Our products comprise only a part
of an entire SAN and we depend on the companies that provide other components,
many of which are significantly larger than we are, to support industry
standards as they evolve. The failure of these providers to support these
industry standards could negatively impact market acceptance of our products.
In addition, 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 also will
be required to comply with standards established by authorities in various
countries. Failure to comply with existing or evolving industry standards or to
obtain timely domestic or foreign regulatory approvals or certificates could
materially harm our business.
WE PLAN TO INCREASE OUR INTERNATIONAL SALES ACTIVITIES SIGNIFICANTLY, WHICH WILL
SUBJECT US TO ADDITIONAL BUSINESS RISKS.
We plan to expand our international sales activities significantly. In 1999
and 2000, we intend to expand our sales activities in Europe and Asia. Our
international sales growth will be limited if we are unable to establish
relationships with international distributors, establish foreign operations,
effectively manage international sales channels, hire additional personnel and
develop relationships with service organizations. We cannot be certain that we
will be able to establish, generate and build market demand for our products
internationally. Our international operations will be subject to a number of
risks, including:
- recruiting sales and technical support personnel with the skills to
support our products;
- increased complexity and costs of managing international operations;
- supporting multiple languages;
- protectionist laws and business practices that favor local competition;
- dependence on local vendors;
- multiple, conflicting and changing governmental laws and regulations;
- longer sales cycles;
- difficulties in collecting accounts receivable;
- reduced or limited protections of intellectual property rights; and
- political and economic instability.
To date, none of our international revenue and costs has been denominated
in foreign currencies. As a result, an increase in the value of the U.S. dollar
relative to foreign currencies could make our products
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more expensive and thus less competitive in foreign markets. In the future, a
portion of our international revenue may be denominated in foreign currencies,
including the Euro, which would subject us to risks associated with foreign
currency fluctuations.
Our SAN interconnect products are subject to U.S. Department of Commerce
export control restrictions. Neither we nor our customers may export those
products without obtaining an export license. These U.S. export laws also
prohibit the export of our SAN interconnect products to a number of countries
deemed by the United States to be hostile. These restrictions may make foreign
competitors facing less stringent controls on their products more competitive in
the global market than are we or our customers. The U.S. government may not
approve any pending or future export license requests. In addition, the list of
products and countries for which export approval is required, and the regulatory
policies with respect thereto, could be revised. The sale of our SAN
interconnect products could be harmed by our failure or the failure of our
customers to obtain the required government licenses or by the costs of
compliance.
OUR INTELLECTUAL PROPERTY PROTECTIONS MAY PROVE TO BE INADEQUATE.
We believe that our continued success depends on protecting our proprietary
technology. We currently rely on a combination of patents, copyrights,
trademarks, trade secrets and contractual provisions to establish and protect
our intellectual property rights. In addition, 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. Our failure to protect our
intellectual property rights could have a material adverse effect on our
business, results of operations and financial condition. We cannot be certain
that the steps we take to protect our intellectual property will adequately
protect our proprietary rights, that others will not independently develop or
otherwise acquire equivalent or superior technology or that we can maintain any
of our technology as trade secrets. In addition, the laws of some of the
countries in which our products are or may be sold may not protect our products
and intellectual property rights to the same extent as the laws of the United
States or at all.
THIRD-PARTY CLAIMS OF INFRINGEMENT OF THEIR INTELLECTUAL PROPERTY RIGHTS COULD
ADVERSELY AFFECT OUR BUSINESS.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We occasionally
receive communications from third parties alleging patent infringement, and
there always is the chance that third parties may assert infringement claims
against us. For example, we recently settled claims of patent infringement
related to our transceivers, which require us to make future payments. We
established a reserve for these payments in the fourth quarter of fiscal 1998.
Future patent infringement disputes, with or without merit, could result in
costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. We cannot be certain that the necessary
licenses would be available or that they could be obtained on commercially
reasonable terms. If we fail to obtain these royalty or licensing agreements in
a timely manner and on reasonable terms, our business, results of operations and
financial condition would be materially adversely affected.
WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE OUR STOCKHOLDERS AND CAUSE US
TO INCUR DEBT OR ASSUME CONTINGENT LIABILITIES.
We expect to review opportunities to buy other businesses or technologies
that would complement our current products, expand the breadth of our markets or
enhance our technical capabilities, or that may otherwise offer growth
opportunities. While we have no current agreements or negotiations underway, we
may buy businesses, products or technologies in the future. If we make any
future purchases, we could issue stock that would dilute existing stockholders'
percentage ownership, incur substantial debt or assume contingent liabilities.
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These purchases also involve numerous risks, including:
- problems assimilating the purchased operations, technologies or products;
- unanticipated costs associated with the acquisition;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with suppliers and
customers;
- risks associated with entering markets in which we have no or limited
prior experience; and
- potential loss of key employees of purchased organizations.
OUR FAILURE AND THE FAILURE OF OUR SUPPLIERS AND CUSTOMERS TO BE YEAR 2000
COMPLIANT COULD HARM OUR BUSINESS.
The year 2000 computer issue creates risks for us. Failure of our products
to recognize date information correctly when the year changes to 2000 could
result in significant decreases in market acceptance of our products, increases
in warranty claims and legal liability for defective software. We have not
tested our products in every possible computer environment, and therefore our
products may not be fully year 2000 compliant. Our internal year 2000 compliance
review is focused on reviewing our internal computer information and security
systems for year 2000 compliance, and developing and implementing remedial
programs to resolve year 2000 issues in a timely manner. Additionally, we are
contacting our third party suppliers and requesting their assurances that their
systems are year 2000 compliant.
If our suppliers, vendors, major distributors and partners fail to correct
their year 2000 problems, these failures could result in an interruption in, or
a failure of, our normal business activities or operations. If a year 2000
problem occurs, it may be difficult to determine which vendor's products have
caused the problem. These failures could interrupt our operations and damage our
relationships with our customers. Due to the general uncertainty inherent in the
year 2000 problem resulting from the readiness of third-party suppliers and
vendors, we are unable to determine at this time whether any year 2000 failures
will harm us. We believe our year 2000 worst case scenario would be the failure
of a sole or limited source supplier to be year 2000 compliant. The failure of
one of these suppliers to be year 2000 compliant could seriously interrupt our
manufacturing process, which could substantially reduce our revenue.
As we have not yet completed our year 2000 assessment, we have not
developed a contingency plan. We anticipate that our full year 2000 review,
necessary remedial actions and contingency plan will be substantially complete
by the end of November 1999. To date our year 2000 costs primarily have been
driven by the cost of our personnel conducting the year 2000 compliance review.
We estimate that the costs of completing any required modifications, upgrades or
replacements of our internal systems will not exceed $280,000, almost all of
which we believe will be or has been incurred during fiscal 1999. However, this
amount may increase as we identify and address remaining issues.
Additionally, our customers' purchasing plans could be affected by year
2000 issues if they need to expend significant resources to fix their existing
systems. This situation may reduce funds available to purchase our products.
Therefore, some customers may wait to purchase our products until after the year
2000, which may reduce our revenue.
MANAGEMENT CAN SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH OUR
STOCKHOLDERS MAY
NOT AGREE.
Except for the promissory note and accrued interest totaling $2.0 million
which we are required to pay to Western Digital upon completion of this
offering, our management will be able to spend the remaining net proceeds from
this offering in ways with which our stockholders may not agree. We cannot
assure you that our investments and use of the net proceeds of this offering
will yield favorable returns or results.
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OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL EXERCISE SIGNIFICANT
CONTROL OVER VIXEL.
Upon completion of this offering, our executive officers and directors and
their affiliates will beneficially own, in the aggregate, approximately % of
our outstanding common stock. As a result, these stockholders will be able to
exercise significant control over all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions, which could delay or prevent someone from acquiring or merging
with us.
PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF VIXEL AND MAY REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may discourage,
delay or prevent a merger or acquisition that a stockholder may consider
favorable. These provisions include:
- authorizing the issuance of preferred stock without stockholder approval;
- providing for a classified board of directors with staggered, three-year
terms;
- prohibiting cumulative voting in the election of directors;
- requiring super-majority voting to effect certain amendments to our
certificate of incorporation and bylaws;
- limiting the persons who may call special meetings of stockholders; and
- prohibiting stockholder actions by written consent.
Other provisions of Delaware law also may discourage, delay or prevent
someone from acquiring or merging with us.
OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.
There has been no public market for our common stock prior to this
offering. The initial public offering price for our common stock will be
determined through negotiations between the underwriters and us. The market
price of our common stock after the offering may vary from the initial public
offering price. If you purchase shares of our common stock, you may not be able
to resell those shares at or above the initial public offering price. The market
price of our common stock may fluctuate significantly in response to the
following factors, some of which are beyond our control:
- actual or anticipated fluctuations in our operating results;
- losses of our key OEMs;
- changes in financial estimates by securities analysts;
- changes in market valuations of other technology companies;
- announcements by us or our competitors of significant technical
innovations, contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments;
- additions or departures of key personnel; and
- sales of common stock in the future.
In addition, the stock market has experienced extreme volatility that often
has been unrelated to the performance of particular companies. These market
fluctuations may cause our stock price to fall regardless of our performance.
You should read the "Underwriting" section for a more complete discussion of the
factors to be considered in determining the initial public offering price of our
common stock.
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WE MAY NOT BE ABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS, LIMITING OUR ABILITY
TO GROW.
We believe that the net proceeds of this offering, after repayment to
Western Digital of a promissory note and accrued interest totaling $2.0 million,
together with our existing cash balances, credit facilities and the cash flow we
expect to generate from future operations, will be sufficient to meet our
capital requirements at least through the next 12 months. However, we may need,
or could elect, to seek additional funding prior to that time. If we need to
raise additional funds, we may not be able to do so on favorable terms, or at
all. Further, if we issue equity securities, existing stockholders may
experience additional dilution or the new equity securities may have rights,
preferences or privileges senior to those of existing holders. If we cannot
raise funds on acceptable terms, we may not be able to develop or enhance our
products, take advantage of future opportunities or respond to competitive
pressures or unanticipated funding requirements.
SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS
OUR STOCK PRICE.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. The
shares sold in this offering will be freely tradable. The
other shares outstanding will be restricted securities as defined
in Rule 144 of the Securities Act. Approximately of those shares will be
freely tradable beginning 180 days after the effective date of this offering,
and the remainder of these will become freely tradable at various later times.
Sales of a substantial number of shares of our common stock after this offering
could cause our stock price to fall. In addition, the sale of these shares could
impair our ability to raise capital through the sale of additional stock.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price is substantially higher than the book
value per share of our outstanding common stock. Accordingly, if you purchase
common stock in the offering, you will incur immediate dilution of approximately
$ in the book value per share of our common stock from the price you
pay for our common stock.
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," "expects,"
"future," "intends," "plans" and similar expressions to identify forward-looking
statements. These statements are only predictions. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. 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 on
the preceding pages and elsewhere in this prospectus.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors listed
above, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could have a material adverse effect on our business, operating results,
financial condition and stock price.
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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 underwriting
discounts and commissions and estimated offering expenses.
We will use $2.0 million of the net proceeds to repay a promissory note and
accrued interest due Western Digital. We currently expect to use the remaining
net proceeds 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
and the repayment of other corporate indebtedness. Repayment of corporate
indebtedness might include the early repayment of a $7.5 million promissory note
due to Greyrock Capital on September 30, 2000. 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 to make any such acquisitions. Our management
will have broad discretion concerning the allocation and use of the net proceeds
of the offering to be received by us. 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. In addition, we have entered into agreements with creditors
which restrict our ability to pay dividends.
15
<PAGE> 21
CAPITALIZATION
The following table sets forth our capitalization as of April 4, 1999:
- on an actual basis;
- on a pro forma basis to reflect the conversion of all outstanding shares
of preferred stock into 19,889,331 shares of common stock, which includes
894,333 shares of preferred stock issuable upon exercise of warrants; and
- on a pro forma as adjusted basis to reflect 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 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 APRIL 4, 1999
-----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ------------ --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Long-term obligations and noncurrent portion of capital
leases................................................ $ 6,525 $ 6,525 $
Redeemable preferred stock, $.001 par value; 4,623,482
shares authorized, 4,529,221 shares issued and
outstanding, actual; no shares authorized, issued or
outstanding, pro forma and pro forma as adjusted...... 20,042 -- --
-------- -------- --------
Stockholders' (deficit) equity..........................
Preferred stock, $.001 par value, 15,536,522 shares
authorized, 14,465,777 shares issued and
outstanding, actual; no shares issued or
outstanding, pro forma and pro forma as adjusted... 14 --
Common stock, $.001 par value, 30,000,000 shares
authorized, 4,385,703 shares issued and
outstanding, actual; 24,275,034 shares issued and
outstanding, pro forma; shares
issued and outstanding, pro forma as adjusted...... 5 24
Additional paid-in capital............................ 37,343 58,497
Deferred compensation................................. (915) (915)
Treasury stock, at cost; 100,000 shares............... (50) (50)
Accumulated deficit................................... (60,281) (60,281)
-------- --------
Total stockholders' (deficit) equity............... (23,884) (2,725)
-------- --------
Total capitalization............................. $ 2,683 $ 3,800
======== ======== ========
</TABLE>
The outstanding share information in the table above is as of April 4, 1999
and excludes:
- 4,365,425 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.20 per share;
- 404,798 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $7.25 per share; and
- 2,415,724 shares available for future issuance under our 1995 stock
option plan.
16
<PAGE> 22
DILUTION
As of April 4, 1999, our pro forma net tangible book value was
approximately $(7.8) million, or $(.32) 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 April 4, 1999, 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 April 4, 1999 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 April 4,
1999................................................... $ (.37)
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 April 4, 1999,
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................ 24,275,034 % $ % $
New investors........................
---------- ----- -------- -----
Total................................ 100.0% 100.0%
========== ===== ======== =====
</TABLE>
The information presented above with respect to existing stockholders
assumes the conversion of 19,889,331 shares of preferred stock, which includes
894,333 shares at preferred stock issuable upon exercise of warrants. This
information is as of April 4, 1999 and excludes:
- 4,365,425 shares of common stock issuable upon exercise of options
outstanding at a weighted average exercise price of $1.20 per share;
- 404,798 shares of common stock issuable upon exercise of warrants
outstanding at a weighted average exercise price of $7.25 per share; and
- 2,415,724 shares of common stock available for future issuance under our
1995 stock option 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 -- 1995 Stock Option Plan" and note 1 to our financial statements.
17
<PAGE> 23
SELECTED FINANCIAL DATA
The following selected 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. We derived the statement of
operations data for the fiscal years ended December 29, 1996, December 28, 1997
and January 3, 1999, and balance sheet data as of December 28, 1997 and January
3, 1999, from the audited financial statements in this prospectus. The selected
balanced sheet data set forth below for us as of December 29, 1996 is derived
from our audited financial statements not included in this prospectus. Those
financial statements were audited by PricewaterhouseCoopers, LLP, independent
accountants. We derived the statement of operations data for the quarters ended
March 29, 1998 and April 4, 1999 and balance sheet data as of April 4, 1999 from
the unaudited financial statements included in this prospectus. The selected
balance sheet data set forth below as of March 29, 1998 was derived from
unaudited financial statements not included in this prospectus. The historical
unaudited financial statements include, in the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information contained in them. The results of
operations for the quarter ended April 4, 1999 are not necessarily indicative of
results expected for the full fiscal year 1999 or future results. Net (loss)
income available to common stockholders shown below includes our net income or
loss, as well as the accretion related to our redeemable preferred stock.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED QUARTER ENDED
------------------------------ --------------------
DEC. 29, DEC. 28, JAN. 3, MARCH 29, APRIL 4,
1996 1997 1999 1998 1999
-------- -------- -------- --------- --------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue..................................................... $ 6,941 $ 22,783 $ 39,445 $10,623 $10,522
Cost of revenue............................................. 7,342 19,047 36,199 8,365 7,529
-------- -------- -------- ------- -------
Gross profit (loss)......................................... (401) 3,736 3,246 2,258 2,993
-------- -------- -------- ------- -------
Operating expenses:
Research and development.................................. 13,107 9,360 16,228 7,578 3,101
Selling, general and administrative....................... 3,549 7,629 14,521 2,874 3,045
Amortization and writedown of goodwill and intangibles.... 167 222 2,057 230 340
Amortization of deferred compensation..................... 36 50 -- -- 103
-------- -------- -------- ------- -------
Total operating expenses........................... 16,859 17,261 32,806 10,682 6,589
-------- -------- -------- ------- -------
Loss from operations........................................ (17,260) (13,525) (29,560) (8,424) (3,596)
Other (expense) income...................................... (392) (234) 8,327 8,926 (443)
-------- -------- -------- ------- -------
Net (loss) income........................................... $(17,652) $(13,759) $(21,233) $ 502 $(4,039)
======== ======== ======== ======= =======
Net (loss) income available to common stockholders.......... $(17,693) $(13,955) $(21,424) $ 449 $(4,088)
======== ======== ======== ======= =======
Basic net (loss) income per share........................... $ (37.91) $ (12.60) $ (6.88) $ .28 $ (.94)
======== ======== ======== ======= =======
Diluted net (loss) income per share......................... $ (37.91) $ (12.60) $ (6.88) $ .03 $ (.94)
======== ======== ======== ======= =======
Weighted-average shares outstanding......................... 467 1,107 3,113 1,601 4,369
======== ======== ======== ======= =======
Weighted-average shares outstanding, assuming dilution...... 467 1,107 3,113 15,190 4,369
======== ======== ======== ======= =======
Pro forma net loss available to common stockholders
(unaudited)............................................... $(21,233) $(4,039)
======== =======
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (.97) $ (.17)
======== =======
Pro forma weighted-average shares outstanding (unaudited)... 21,828 23,364
======== =======
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 19,883 $ 3,776 $ 3,841 $ 2,038 $ 596
Investments................................................. -- -- 2,490 4,477 3,635
Working capital (deficit)................................... 18,477 2,352 (7,043) 9,910 (10,238)
Total assets................................................ 29,374 19,934 23,165 34,495 24,421
Long-term obligations and noncurrent portion of capital
leases.................................................... 6,012 6,057 6,528 3,629 6,525
Redeemable preferred stock.................................. 19,327 19,523 19,993 19,576 20,042
Total stockholders' deficit................................. (18,937) (14,030) (19,924) 1,380 (23,884)
</TABLE>
18
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and the related notes included elsewhere in this prospectus.
OVERVIEW
We are a leading provider of comprehensive interconnect solutions for use
in SANs. Our portfolio of Fibre Channel products including our SAN management
software, fabric switches, arbitrated loop hubs and transceivers, is fully
interoperable and designed to perform in concert to address a wide variety of
data and storage needs.
We incorporated in Colorado in 1991 under the name Photonics Research
Incorporated and initially developed fiber optic components for data
communications and related applications. In January 1995, we reincorporated in
Delaware and changed our name to Vixel Corporation. In the first quarter of
1996, we acquired the Fibre Channel hub and transceiver product lines from
Western Digital Corporation. In 1997 we began developing our SAN InSite software
to manage our SAN interconnect solutions. In the first quarter of 1998, we
acquired Arcxel Technologies, Inc., a developer of Fibre Channel switches. In
early 1998, we sold our laser diode fabrication facility and gigabit Ethernet
transceiver product line to Cielo Communications, and have since been focused
exclusively on designing, developing and marketing our Fibre Channel SAN
interconnect solutions.
We derive substantially all of our revenue from the sale of SAN
interconnect products, including switches, hubs and transceivers. We currently
include our SAN InSite software with our switches and managed hubs, and do not
independently realize revenue from the sale of software. We sell our products
primarily to a limited number of OEMs. Sun Microsystems, Compaq Computer and
Hewlett-Packard represented 39.6%, 15.7% and 14.3% of our revenue, respectively,
for the quarter ended April 4, 1999. In fiscal 1998, five OEMs accounted for
81.6% of our revenue, with sales to Sun Microsystems and Hewlett-Packard
accounting for 54.4% and 12.3% of our revenue, respectively. No other individual
customer represented more than 10.0% of our revenue in either period. The level
of sales to any customer may vary from quarter to quarter. However, we expect
that sales to a small number of OEMs will continue to represent a significant
portion of our revenue.
We currently have one distributor in North America and one in Japan. These
distributors which sell our products to VARs and end users currently represent
only a small percentage of our revenue. We plan to expand our sales channels to
include systems integrators, VARs and additional distributors in North America
and Europe.
We generally recognize revenue at the time of product shipment, unless we
have future obligations for installation or when we ship product demonstration
units. Our agreement with our North American distributor provides for price
protection and for stock rotation based on a percentage of actual revenue for
the preceding quarter when an offsetting order is requested. We provide an
allowance for estimated stock rotation and price protection rights. We also
maintain a reserve for product warranty costs based on a combination of
historical experience and specifically identified potential warranty
liabilities.
Our gross profit as a percentage of revenue is affected by the mix of
products sold, sales channels and customers to which our products are sold. Our
gross profit as a percentage of revenue also is affected by fluctuations in
manufacturing volumes and component costs, manufacturing costs charged by our
contract manufacturers, new product introductions, changes in our product
pricing and estimated warranty costs. We expect that average unit selling prices
for our products will decline over time in response to competitive pricing
pressures, increased sales discounts, new product introductions by us or our
competitors and other factors. We seek to maintain gross profit as a percentage
of revenue by selling a higher percentage of higher margin products and reducing
the cost of our products through manufacturing efficiencies, design improvements
and cost reductions for components.
19
<PAGE> 25
We currently outsource our product manufacturing to two contract
manufacturers, K*TEC Electronics, a division of Kent Electronics, and Solectron
Corporation. We are in the process of moving all our product manufacturing to
K*TEC, and we expect to complete this process in the second half of 1999. Our
contract manufacturers also provide distribution and repair operations and most
of our materials management. We purchase certain components directly from
suppliers and resell them to our contract manufacturers at our cost and
recognize no revenue from these transactions. We also outsource the
manufacturing of our ASICs to third-party manufacturers that ship these
components to K*TEC for assembly.
In connection with the grant of stock options to employees during the first
quarter of fiscal 1999, we recorded deferred compensation of $1.0 million.
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 on a graded vesting method over the remainder of the vesting
period of the options. During the first quarter of fiscal 1999, we recognized
$103,000 of the deferred compensation as a compensation expense.
Since our inception, we have incurred significant losses. As of January 3,
1999, we had operating loss carryforwards of $31.1 million for federal income
tax purposes. These operating loss carryforwards expire on various dates through
2017. We have recorded a valuation allowance equal to the gross deferred tax
asset balance because our accumulated deficit, history of recurring net losses
and possible limitations on the use of carryforwards give rise to uncertainty as
to whether the deferred tax assets are realizable. Further, these operating loss
carryforwards could be subject to usage limitations due to changes in our
ownership resulting from equity financings.
As of April 4, 1999, we had an accumulated deficit of $60.2 million and we
expect to continue to incur significant losses for the foreseeable future. We
also expect to incur significant product development, sales and marketing and
administrative expenses. We cannot be certain that we will ever realize
sufficient revenue to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenue, statement of
operations data for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED QUARTER ENDED
----------------------------- --------------------
DEC. 29, DEC. 28, JAN. 3, MARCH 29, APRIL 4,
1996 1997 1999 1998 1999
-------- -------- ------- --------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................... 105.8 83.6 91.8 78.7 71.6
------ ----- ----- ----- -----
Gross profit (loss)............................... (5.8) 16.4 8.2 21.3 28.4
------ ----- ----- ----- -----
Operating expenses:
Research and development........................ 188.8 41.1 41.1 71.3 29.5
Selling, general and administrative............. 51.1 33.5 36.8 27.1 28.9
Amortization and writedown of goodwill and
intangibles.................................. 2.4 1.0 5.2 2.2 3.2
Amortization of deferred compensation........... 0.5 0.2 -- -- 1.0
------ ----- ----- ----- -----
Total operating expenses................ 242.8 75.8 83.1 100.6 62.6
------ ----- ----- ----- -----
Loss from operations.............................. (248.6) (59.4) (74.9) (79.3) (34.2)
Other (expense) income, net..................... (5.7) (1.0) 21.1 84.0 (4.2)
------ ----- ----- ----- -----
Net (loss) income................................. (254.3)% (60.4)% (53.8)% 4.7% (38.4)%
====== ===== ===== ===== =====
</TABLE>
20
<PAGE> 26
QUARTER ENDED APRIL 4, 1999 COMPARED WITH QUARTER ENDED MARCH 29, 1998
Revenue. Revenue in the quarter ended April 4, 1999 was $10.5 million, a
decrease of $101,000, compared with $10.6 million in the quarter ended March 29,
1998. This decrease was the result of a significant decrease in revenue from one
of our large OEMs. This OEM experienced performance issues with our GBIC
transceivers and, as a result, reduced its purchases of these products. This
decrease in revenue partially was offset by an increase in revenue from sales of
our switch and hub products.
Gross profit. Cost of revenue includes the cost to manufacture finished
products, as well as provisions for warranty costs and other expenses related to
inventory management, manufacturing quality and order fulfillment. Gross profit
in the quarter ended April 4, 1999 was $3.0 million, an increase of $735,000,
compared with $2.3 million in the quarter ended March 29, 1998. Gross profit as
a percentage of revenue was 28.4% in the quarter ended April 4, 1999, and was
21.3% in the quarter ended March 29, 1998. The increases in both absolute
dollars and percentage of revenue reflects a change in our product mix, as sales
of switch and hub products increased while sales of transceivers declined. Our
switch and hub products generally have higher gross margins than our transceiver
products.
Research and development expenses. Research and development expenses
consist primarily of salaries and related expenses for personnel engaged in the
design, development and sustaining engineering of our products, consulting and
outside service fees, costs for prototype and test units and other expenses
related to the design, development, testing and enhancements of our products.
Research and development expenses in the quarter ended April 4, 1999 were $3.1
million, a decrease of $4.5 million compared with $7.6 million in the quarter
ended March 29, 1998. Included in the 1998 amount is a $5.1 million write-off of
in-process research and development related to our acquisition of Arcxel
Technologies in February 1998. Excluding this one-time charge, research and
development expenses in the quarter ended March 29, 1998 were $2.5 million. The
increase in research and development expenses in the quarter ended April 4, 1999
compared with the quarter ended March 29, 1998 was primarily the result of
adding personnel to our ASIC and switch development teams.
Selling, general and administrative expenses. Selling, general and
administrative expenses consist primarily of salaries, commissions and related
expenses for personnel engaged in marketing, sales, finance and information
technology support functions, as well as trade shows and other marketing
activities. Selling, general and administrative expenses in the quarter ended
April 4, 1999 were $3.0 million, an increase of $171,000, compared with $2.9
million in the quarter ended March 29, 1998. This increase was primarily the
result of hiring additional sales-related personnel during fiscal 1998,
partially offset by the expenses associated with the relocation of a member of
our management team during the quarter ended March 29, 1998.
Amortization and writedown of goodwill and intangibles. Amortization of
goodwill and intangibles in the quarter ended April 4, 1999 was $340,000, an
increase of $110,000, compared with $230,000 in the quarter ended March 29,
1998. This increase was the result of amortization of goodwill and intangibles
resulting from our acquisition of Arcxel Technologies in February 1998.
Amortization of deferred compensation. Amortization of deferred
compensation in the quarter ended April 4, 1999 was $103,000 as a result of
stock options granted in that quarter for which we recorded deferred
compensation of $1.0 million. We incurred no amortization of deferred
compensation in the quarter ended March 29, 1998.
Other (expense) income, net. Other (expense) income, net, consists of the
gain on the sale of business divisions or product lines, interest income,
interest expense and other miscellaneous income or expense. Other expense, net,
in the quarter ended April 4, 1999 was $443,000, compared with other income,
net, of $8.9 million in the quarter ended March 29, 1998. Other income, net, in
the quarter ended March 29, 1998, included a one-time $9.1 million gain on the
sale of our laser diode fabrication laboratory and gigabit Ethernet transceiver
product line to Cielo Communications.
21
<PAGE> 27
FISCAL YEARS ENDED JANUARY 3, 1999, DECEMBER 28, 1997 AND DECEMBER 29, 1996
Revenue. We generated revenue of $39.4 million, $22.8 million and $6.9
million in fiscal 1998, 1997 and 1996, respectively. The 73.1% increase in
fiscal 1998 compared with fiscal 1997 primarily was the result of an increase in
revenue generated from all of our products. This increase also reflected the
introduction of our switch and managed hub products in fiscal 1998. The 228.2%
increase in fiscal 1997 compared with fiscal 1996 was the result of an increase
in revenue generated from our entry-level hubs and transceivers.
Gross profit. Gross profit (loss) was $3.2 million, $3.7 million and
$(401,000) in fiscal 1998, 1997 and 1996, respectively, representing 8.2%, 16.4%
and (5.8)% of revenue, respectively. The lower gross profit percentage in fiscal
1998 compared with fiscal 1997 was the result of recording an increase in our
warranty provisions during fiscal 1998 for our GBIC transceivers and a writedown
in the fourth quarter of fiscal 1998 of developed technologies capitalized as
part of our purchase of Arcxel Technologies. The increase in our warranty
provisions in fiscal 1998 related to the estimated costs to repair or replace
our transceiver products that contain lasers that are showing signs of faster
deterioration than we historically have experienced. The improvement in gross
profit as a percentage of revenue in fiscal 1997 compared with fiscal 1996 was
primarily due to efficiencies achieved from an increased volume of product
shipped.
Research and development expenses. Research and development expenses were
$16.2 million, $9.4 million and $13.1 million in fiscal 1998, 1997 and 1996,
respectively, representing 41.1%, 41.1% and 188.8% of revenue, respectively.
Research and development expenses in fiscal 1998 and 1996 included
acquisition-related write-offs of in-process research and development of $5.1
million and $8.6 million, respectively. Excluding these in-process research and
development write-offs, research and development expenses in fiscal 1998 and
1996 were $11.1 million and $4.5 million, respectively. The increase in research
and development expenses in fiscal 1998 compared with fiscal 1997 primarily was
due to increased development costs relating to our management software, switch
and managed hub products. This increase partially was offset by the reduction in
research and development expenses as a result of the sale of our laser diode
fabrication facility and gigabit Ethernet transceiver product line to Cielo
Communications in February 1998. Excluding the in-process research and
development write-off, research and development expenses in fiscal 1997 and 1996
were $9.4 million and $4.5 million, respectively. This increase primarily was
the result of increased costs relating to the development of our hub products.
Selling, general and administrative expenses. Selling, general and
administrative expenses were $14.5 million, $7.6 million and $3.5 million in
fiscal 1998, 1997 and 1996, respectively, representing 36.8%, 33.5% and 51.1% of
revenue, respectively. The increases in absolute dollars in fiscal 1998 compared
with fiscal 1997 and fiscal 1997 compared with fiscal 1996 were primarily
related to increases in sales, marketing and administrative personnel to support
our revenue growth. In addition, fiscal 1998 expenses increased in absolute
dollars and as a percentage of revenue as compared with fiscal 1997 as a result
of expenses we recognized in fiscal 1998 in connection with our defense and
settlement of certain patent lawsuits.
Amortization and writedown of goodwill and intangibles. Amortization and
writedown of goodwill and intangibles in fiscal 1998, 1997 and 1996 were $2.1
million, $220,000 and $167,000, respectively, representing 5.2%, 1.0% and 2.4%
of revenue, respectively. The increase in fiscal 1998 compared with fiscal 1997
primarily was the result of amortization of goodwill and intangibles resulting
from our acquisition of Arcxel Technologies in February 1998. In addition, the
increase in fiscal 1998 compared with fiscal 1997 was the result of the
write-off of goodwill associated with capitalized developed technology written
down in fiscal 1998. The amounts amortized in fiscal 1997 and 1996 related to
goodwill and intangibles resulting from our acquisition of the Fibre Channel hub
and transceiver product lines from Western Digital in the first quarter of
fiscal 1996.
Amortization of deferred compensation. Amortization of deferred
compensation in fiscal 1997 and 1996 was $50,000 and $36,000, respectively,
which we recognized as a result of stock option grants to nonemployees. There
was no amortization of deferred compensation recognized in fiscal 1998.
22
<PAGE> 28
Other (expense) income, net. Other income, net, was $8.3 million in fiscal
1998. Other expense, net, was $234,000 and $392,000 in fiscal 1997 and 1996,
respectively. Other income, net, in fiscal 1998 included a one-time $9.1 million
gain on the sale of our laser diode fabrication laboratory and gigabit Ethernet
transceiver product line to Cielo Communications.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth statement of operations data for the nine
quarters ended April 4, 1999, as well as the percentage of our revenue
represented by each item. This information has been derived from our unaudited
financial statements. The unaudited quarterly information has been prepared on
the same basis as our audited financial statements and includes all adjustments,
consisting only of normal recurring accruals, that our management considers
necessary for a fair presentation of such information when read in conjunction
with our annual audited financial statements and notes thereto appearing
elsewhere in this prospectus. Operating results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 28, MARCH 29, JUNE 28, SEPT. 27, JAN. 3, APRIL 4,
1997 1997 1997 1997 1998 1998 1998 1999 1999
--------- -------- --------- -------- --------- -------- --------- -------- --------
(IN THOUSANDS, UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue.................... $ 3,060 $ 5,015 $ 6,548 $ 8,160 $10,623 $10,611 $ 7,868 $ 10,343 $10,522
Cost of revenue............ 3,006 4,119 5,320 6,602 8,365 8,367 6,487 12,980 7,529
------- ------- ------- ------- ------- ------- ------- -------- -------
Gross profit (loss)........ 54 896 1,228 1,558 2,258 2,244 1,381 (2,637) 2,993
------- ------- ------- ------- ------- ------- ------- -------- -------
Operating expenses:
Research and
development............ 2,078 2,371 2,015 2,896 7,578 2,789 2,813 3,048 3,101
Selling, general and
administrative......... 1,488 1,796 1,959 2,386 2,874 3,363 2,942 5,342 3,045
Amortization and
writedown of goodwill
and intangibles........ 56 55 57 54 230 381 369 1,077 340
Amortization of deferred
compensation........... 12 12 13 13 -- -- -- -- 103
------- ------- ------- ------- ------- ------- ------- -------- -------
Total operating
expenses......... 3,634 4,234 4,044 5,349 10,682 6,533 6,124 9,467 6,589
------- ------- ------- ------- ------- ------- ------- -------- -------
Operating loss............. (3,580) (3,338) (2,816) (3,791) (8,424) (4,289) (4,743) (12,104) (3,596)
Other income (expense),
net...................... 130 68 7 (439) 8,926 (143) (158) (298) (443)
------- ------- ------- ------- ------- ------- ------- -------- -------
Net (loss) income.......... $(3,450) $(3,270) $(2,809) $(4,230) $ 502 $(4,432) $(4,901) $(12,402) $(4,039)
======= ======= ======= ======= ======= ======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
---------------------------------------------------------------------------------------------------
MARCH 30, JUNE 29, SEPT. 28, DEC. 28, MARCH 29, JUNE 28, SEPT. 27, JAN. 3, APRIL 4,
1997 1997 1997 1997 1998 1998 1998 1999 1999
--------- -------- --------- -------- --------- -------- --------- ------- --------
<S> <C> <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% 100.0%
Cost of revenue............. 98.2 82.1 81.2 80.9 78.7 78.9 82.4 125.5 71.6
------ ----- ----- ----- ----- ----- ----- ------ -----
Gross profit (loss)......... 1.8 17.9 18.8 19.1 21.3 21.1 17.6 (25.5) 28.4
------ ----- ----- ----- ----- ----- ----- ------ -----
Operating expenses:
Research and
development............. 67.9 47.3 30.8 35.5 71.3 26.3 35.8 29.5 29.5
Selling, general and
administrative.......... 48.6 35.8 29.9 29.2 27.1 31.7 37.4 51.6 28.9
Amortization and writedown
of goodwill and
intangibles............. 1.8 1.1 0.9 0.7 2.2 3.6 4.7 10.4 3.2
Amortization of deferred
compensation............ 0.4 0.2 0.2 0.2 -- -- -- -- 1.0
------ ----- ----- ----- ----- ----- ----- ------ -----
Total operating
expenses.......... 118.7 84.4 61.8 65.6 100.6 61.6 77.9 91.5 62.6
------ ----- ----- ----- ----- ----- ----- ------ -----
Operating loss.............. (116.9) (66.5) (43.0) (46.5) (79.3) (40.5) (60.3) (117.0) (34.2)
Other income (expense),
net....................... 4.2 1.4 0.1 (5.4) 84.0 (1.3) (2.0) (2.9) (4.2)
------ ----- ----- ----- ----- ----- ----- ------ -----
Net (loss) income........... (112.7)% (65.1)% (42.9)% (51.9)% 4.7% (41.8)% (62.3)% (119.9)% (38.4)%
====== ===== ===== ===== ===== ===== ===== ====== =====
</TABLE>
23
<PAGE> 29
Our revenue increased each quarter from the quarter ended March 30, 1997
through the quarter ended March 29, 1998, when our revenue reached $10.6
million. These increases in revenue were primarily the result of increased sales
to existing customers, sales to new customers and sales of our entry-level hub
first introduced in the second half of fiscal 1996. During the quarter ended
September 27, 1998, our revenue declined to $7.9 million compared with $10.6
million in the preceding quarter, primarily as a result of decreases in
purchases by two OEMs during that quarter. Since September 27, 1998, revenue has
increased each quarter, primarily as a result of increases in purchases by
several OEMs.
Gross profit dollars and gross profit as a percentage of revenue increased
each quarter from the quarter ended March 30, 1997 to the quarter ended March
29, 1998, primarily as a result of volume efficiencies associated with increased
revenue during these periods. Our gross profit was negative in the quarter ended
January 3, 1999 as a result of recording a warranty provision during the quarter
for transceiver products shipped in prior quarters and in-process research and
development writeoffs. The increase in our warranty provision was for
anticipated costs to repair or replace transceivers that contain lasers that are
showing signs of faster deterioration than expected.
Research and development expenses generally have increased during the nine
quarters presented as a result of increases in the number of personnel devoted
to these activities. Quarterly fluctuations in research and development expenses
have occurred primarily as a result of the timing of prototype purchases and
outside contracting fees related to the development and testing of new products
at various times. The significant increase in research and development expenses
in the quarter ended March 29, 1998 reflects the write-off of $5.1 million of
in-process research and development in connection with our acquisition of Arcxel
Technologies in February 1998.
Selling, general and administrative expenses increased in each quarter from
the quarter ended March 30, 1997 through the quarter ended June 28, 1998,
primarily due to higher levels of staffing for sales, marketing and
administrative functions to support our revenue growth. These expenses decreased
in the quarter ending September 27, 1998, primarily as a result of decreased
sales in that period. The substantial increase in selling, general and
administrative expenses in the quarter ended January 3, 1999 reflects the cost
of settling patent lawsuits and the cost related to the recruitment, relocation
and termination of executive management personnel.
Other income, net, in the quarters ending March 30, 1997, June 29, 1997 and
September 28, 1997 resulted primarily from interest income on invested cash
received from the sale of series E preferred stock in the fourth quarter of
1996. Other income, net, in the quarter ending March 29, 1998, included a one-
time $9.1 million gain on the sale of our laser diode fabrication facility and
gigabit Ethernet transceiver product line. Other expenses, net, in each of the
quarters of fiscal 1998 and the quarter ending April 4, 1999 primarily consisted
of interest expense.
Amortization and writedown of goodwill and intangibles increased in the
quarter ended January 3, 1999 as a result of the writedown of goodwill
associated with our decision to discontinue manufacturing a product acquired
through our purchase of Arcxel Technologies.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity at April 4, 1999 consisted of $596,000
in cash and cash equivalents, $3.6 million in investments, a $2.5 million
capital equipment lease line of credit and a working capital credit facility
with a borrowing limit of the lesser of $7.5 million or 80.0% of eligible
accounts receivable. As of April 4, 1999, we had utilized $217,000 under the
capital equipment lease line. Borrowings under the capital equipment lease line
of credit bear interest at 8.25% per annum, are payable ratably over a 36 month
term and are secured by the fixed assets that we lease under the line of credit.
As of April 4, 1999, no borrowings were outstanding under the working capital
credit facility. This working capital credit facility expires on September 30,
2000 and bears interest at LIBOR, plus 4.75%. At April 4, 1999, we had
outstanding a $7.5 million note payable to a bank. This note is due on September
30, 2000 and bears interest at LIBOR, plus 4.75% (9.69% as of April 4, 1999).
24
<PAGE> 30
Since inception, we have financed our operations primarily through the sale
of common stock and preferred stock with aggregate proceeds of approximately
$33.1 million. Additionally, we have financed our operations through capital
equipment lease lines, working capital credit facilities, notes payable and $6.9
million in cash received from the sale of our laser diode fabrication facility
and gigabit Ethernet product line.
Cash utilized by operating activities was $1.7 million in the quarter ended
April 4, 1999, $9.2 million in fiscal 1998, $13.6 million in fiscal 1997 and
$7.3 million in fiscal 1996. The cash utilized in each of these periods was due
to net losses, as well as working capital required to fund our increased
operations. Cash used in investing activities primarily consisted of capital
expenditures of $1.7 million, $1.0 million and $535,000 in fiscal 1998, 1997 and
1996, respectively, and $1.3 million paid as part of the acquisition of Western
Digital assets in fiscal 1996.
We will use $2.0 million of the net proceeds to repay a promissory note and
accrued interest due to Western Digital. We believe that after the repayment of
this amount, the remaining 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 our future
revenue, the timing and extent of spending to support product development
efforts and expansion of sales, general and administrative activities, the
timing of introductions of new 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 commonly are referred to as the "year 2000 problem." We define
year 2000 compliant as the ability of computers, software and other equipment
to:
- correctly handle date information needed for the December 31, 1999 to
January 1, 2000, February 28, 2000 to February 29, 2000 to March 1, 2000,
and December 31, 2000 to January 1, 2001 date changes;
- function according to the product documentation provided for this date
change, without changes in operation resulting from the advent of a new
century, assuming correct configuration;
- respond to two-digit date input in a way that resolves the ambiguity as
to century in a disclosed, defined and predetermined manner;
- pass through date information in ways that are unambiguous as to century
if the date elements in interfaces and data storage specify the century;
and
- recognize the year 2000 as a leap year.
Products. We designed our current products to have no effect on date
sensitive data and we believe they are year 2000 compliant when configured and
used in accordance with the related documentation, provided that the host
machine's underlying operating system and any other software used with or in the
host machine or our products are year 2000 compliant. We continue to respond to
customer questions about our products on a case-by-case basis.
We have tested our products and their third-party components for year 2000
compliance, but cannot warrant the overall installation of our solutions because
we cannot guarantee the compliance of other vendors' products. We have obtained
and continue to seek assurances from developers of products incorporated into
our products that their products are year 2000 compliant. Despite these
assurances, however, our products may contain undetected errors or defects
associated with year 2000 date functions.
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<PAGE> 31
Nevertheless, we believe all critical components of our products obtained from
third-party suppliers are year 2000 compliant, and expect that we will be able
to resolve any significant year 2000 problems in these components with them. We
cannot assure you, however, 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.
Internal information technology systems. We expect to complete testing,
modifying, upgrading and replacing existent critical internal information
technology systems, including our own software products and third-party software
and hardware technology, by November 1999. To the extent that we are not able to
test the technology provided by third-party vendors, we have obtained and
continue to seek assurances from these vendors that their systems are year 2000
compliant. We currently are not aware of any significant operational issues or
costs associated with preparing our internal information technology systems for
the year 2000; however, we may experience significant unanticipated problems and
costs caused by undetected errors or defects.
Systems other than information technology systems. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, telephone switches, security systems and other common devices, may
be affected by year 2000 problems. We are assessing the potential effect and
costs of remediating the year 2000 problem on our office equipment and
facilities, but are not aware of any significant operational year 2000 issues or
costs associated with our non-information technology systems. However, we may
experience significant unanticipated problems and costs caused by undetected
errors or defects in the technology used in these systems.
Most likely consequences of the year 2000 problem. 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 simply are too numerous. In addition, no one accurately can
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 by our
OEMs, resellers and their customers due to year 2000 problems; 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.
We have funded our year 2000 plan from cash balances and separately have
accounted for these costs. To date, these costs have not been significant. We
will incur additional costs related to the year 2000 plan for administrative
personnel to manage the project, outside contractor assistance, technical
support for our products, product engineering and customer satisfaction. We
estimate that the total cost to us of completing any required modifications,
upgrades or replacements of our internal systems will not exceed $280,000,
almost all of which we believe will be or has been incurred during fiscal 1999.
Contingency Plans. We are 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
November 1999. Depending on the systems affected, these plans could be costly
and might include:
- accelerated replacement of affected equipment or software;
- short to medium-term use of backup equipment and software;
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<PAGE> 32
- 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 include forward-looking statements. Our ability to achieve year
2000 compliance and the amount of necessary additional costs could be adversely
affected by the availability and cost of programming and testing resources,
third party suppliers' ability to modify proprietary software and unanticipated
problems identified in our ongoing compliance review.
RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1 (SOP 98-1), "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which establishes
guidelines for the accounting for the costs of all computer software developed
or obtained for internal use. We are required to adopt SOP 98-1 for the fiscal
year beginning on January 4, 1999. Our adoption of SOP 98-1 is not expected to
have a material impact on our financial statements.
As of December 29, 1997, we adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income," which establishes standards
for reporting and displaying comprehensive income and its components in a full
set of general-purpose financial statements. We had no material components of
comprehensive income. The adoption of this statement has had no impact on our
financial position, stockholders' equity (deficit), results of operations or
cash flows. Accordingly, our comprehensive loss for fiscal 1998 is equal to our
reported loss.
The Financial Accounting Standards Board issued Statement No. 131,
"Disclosures about Segments of an Enterprise and Related Information," which
establishes standards for the way business enterprises report information in
annual statements and interim financial reports regarding operating segments,
products and services, geographic areas and major customers. This statement is
effective for financial statements for fiscal years beginning after December 15,
1997. The adoption of this statement did not have a material impact on the way
we report information in our 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.
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<PAGE> 33
BUSINESS
OVERVIEW
Vixel Corporation is a leading provider of comprehensive Fibre Channel
interconnect solutions for use in storage area networks, or SANs. Our portfolio
of products includes SAN management software, fabric switches, arbitrated loop
hubs and transceivers. Supporting a range of SAN configurations, from simple
point-to-point connections to more complex high-performance networks, our Fibre
Channel products are designed to work in concert and scale as needed to address
a wide variety of data and storage needs. Our SAN InSite management software
works across our products and provides an integrated SAN management solution
that we believe increases the performance and functionality of our customers'
SANs. By offering and supporting the key components necessary to connect servers
and storage, we enable our customers to turn to one vendor for their SAN
interconnect needs. To date, we have shipped products representing over 500,000
ports to more than 30 OEMs and resellers, including Compaq Computer,
Hewlett-Packard, IBM and Sun Microsystems.
INDUSTRY BACKGROUND
Significant growth in enterprise data requirements
In recent years there has been a significant increase in the volume of data
created, processed and accessed throughout the enterprise. This growth has been
fueled by the rapid expansion of the Internet, measured both by the number of
users as well as the number of web-based corporate initiatives which require
continuous access to critical business information 24 hours a day, seven days a
week. Rapid growth of data-intensive applications, such as online transaction
processing, e-commerce, Web hosting, data warehousing, data mining, enterprise
resource management and the sharing of multimedia-based information, has
dramatically increased the need for high-capacity, high-performance storage
devices and systems. This demand is compounded when organizations create
redundant sources of data to enable continuous error-free access to data. The
growth in stored data has been facilitated by the continued decline in the cost
per unit of storage capacity. In September 1998, International Data Corporation,
or IDC, an independent research firm, estimated that the worldwide volume of
stored data would grow from over 10,000 terabytes in 1994 to approximately
116,000 terabytes in 1998 and would grow to approximately 1.4 million terabytes
in 2002, representing a compound annual growth rate of over 85%.
The need to support ever-increasing storage requirements presents
enterprises with a number of significant challenges. As employees, customers and
suppliers depend increasingly on data for fundamental business processes,
storage systems and servers must handle greater volumes of input and output
transactions, or I/Os. Additionally, many of the mission-critical applications
utilized in the enterprise today require rapid access to massive amounts of
data. These requirements have placed significant stress on current storage
technology and software applications, many of which were not designed to handle
large volumes of dispersed data. Also, as the number of storage devices
increases, management of data becomes more complex. Organizations have attempted
to address these storage challenges by devoting additional financial and
personnel resources.
Traditional server-to-storage connection solutions are inadequate and
expensive
Enterprises traditionally have attempted to support and manage storage
requirements by linking single servers to dedicated storage devices through
storage interfaces such as the small computer system interface, or SCSI.
However, the most commonly-used SCSI-based storage architecture has significant
constraints: it can connect a single server with only 15 devices; it supports
transmission distances of only 25 meters; and it typically permits data
transmission speeds of only 40 or 80 megabytes per second, or MBps. Furthermore,
SCSI-based storage devices are dependent on the servers to which they are
attached, creating captive pockets of storage behind each server. This
architecture increases the stress on the server through which all data must pass
and results in loss of access to data if the server goes down. Some
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<PAGE> 34
enterprises have responded to the limitations of SCSI by deploying more servers
and more storage devices, but this response increases the complexity and cost of
maintaining such storage systems.
Development of Fibre Channel technology and storage area networks
To address the limitations of traditional server-to-storage connections, a
family of Fibre Channel standards was developed in the early 1990s to facilitate
high-performance storage connectivity solutions. Fibre Channel technology
enables data to be transferred from one network device to another, allowing any
server to access any storage device on the network. The technology combines the
connectivity and distance features of networking with the simplicity and
reliability benefits of the channel, or the dedicated circuit that carries
information to and from data storage devices. Merging network and channel
technologies, Fibre Channel can carry storage as well as network traffic over
the same physical connection. Furthermore, Fibre Channel is capable of
supporting up to 15.5 million devices and transferring data across distances of
10 kilometers at speeds of 200 MBps. Fibre Channel also supports multiple
protocols, including SCSI and Internet Protocol, or IP.
Since first receiving American National Standards Institute, or ANSI,
approval in 1994, the family of Fibre Channel standards has acquired broad
industry support and has been implemented in network configurations known as
storage area networks, or SANs. In a SAN, one or more storage devices are
attached through connection points, known as ports, to an interconnecting
device, commonly referred to as an interconnect. These interconnect devices
include switches, hubs and transceivers. As shown below, typical Fibre Channel
SAN configurations include point-to-point connections between two devices, an
arbitrated loop for up to 126 devices or a switched network, or fabric, which
can enable the connection of millions of devices.
Image:
The image consists of three components.
Component 1:
Title: The "Switched Fabric" title is in the top right corner of the image.
Description: Beneath the title is an image of a switch, through which runs a
series of lines connecting the switch to a device labeled "Disks," two devices
each labeled "Storage Array," one device labeled a "Tape Library" and one device
labeled a "Server." The Server is connected by a line to a local area network,
labeled a "LAN."
Component 2:
Title: The "Arbitrated Loop" title is located in approximately the middle of the
image.
Description: Beneath the title is a hub. The hub is connected by three lines to
three devices labeled "Storage Arrays", by one line to a device labeled "Tape
Library" and by one line to a server, which is connected by a line to a local
area network, labeled a "LAN."
Component 3:
Title: The "Point to Point" title is located in the lower left corner of the
image.
Description: The image depicts one device labeled a "Storage Array" and one
device labeled a "Server", which are connected by a line. Connecting the Storage
Array to the line is a GLM transceiver, which is labeled as such. Connecting the
Server to the line is a GLM transceiver, which is labeled as such. Beneath the
line are the words "Optical Fiber."
These configurations allow SANs to meet a wide variety of storage and
network requirements, from the smallest server-to-storage configuration to
complex enterprise networks. By bringing networking capabilities into the
storage environment, a SAN offers storage flexibility, fault tolerance, ease of
management and a lower cost of ownership. In January 1999, IDC estimated that
worldwide revenue from
29
<PAGE> 35
SAN products would grow from approximately $2.5 billion in 1998 to over $13.3
billion in 2002, representing a compound annual growth rate of over 50%.
Need for a comprehensive SAN solution
Fibre Channel standards have been in place for over five years and the
technology has been adopted by a broad customer base. However, the deployment of
Fibre Channel-based SANs is still at an early stage. In order to meet exploding
data requirements, enterprises typically have turned to multiple Fibre Channel
vendors with point, or single, products. Furthermore, enterprises commonly have
installed multiple SAN configurations provided by different solutions providers
in different areas of their network. These mixed solutions and point products
typically are managed by multiple, disparate software applications.
These partial solutions offer some but not all of the benefits associated
with Fibre Channel. They are often difficult to deploy and manage as a complete
system and may not interoperate with other Fibre Channel devices. Also, the
additional time needed to test and qualify these fragmented solutions results in
delayed implementation. Furthermore, it may be difficult to integrate these
systems with other enterprise management software and applications. As a result,
enterprises that implement fragmented solutions may not be able to realize the
full benefits of SANs. To handle increased data and performance requirements as
well as growing network complexity, organizations are seeking comprehensive,
integrated SAN management solutions that address a wide variety of data and
storage needs. SAN solutions must accommodate a range of interconnect products
that can interoperate with other products, be deployed easily and scale as the
SAN grows, be managed under one management software solution and be robust
enough to support mission-critical networks.
OUR FIBRE CHANNEL SAN SOLUTION
We are a leading provider of comprehensive SAN interconnect solutions. We
offer a broad product portfolio, which includes our SAN management software,
fabric switches, arbitrated loop hubs and transceivers. Our portfolio of Fibre
Channel products is fully interoperable and designed to perform in concert to
address a wide variety of data and storage needs. We offer a comprehensive
management software umbrella, SAN InSite, that optimizes the functionality of
our fabric switches, managed hubs and transceivers. Our comprehensive SAN
interconnect solutions address the difficulties customers may encounter when
they assemble SAN components from multiple suppliers. Further, we offer
customers the convenience of dealing with a single full-service vendor, allowing
them to avoid the time-consuming and costly process of qualifying and certifying
multiple SAN interconnect vendors.
Image:
The image consists of four components. The first two components are placed
completely within a line forming the shape of an oval, the third component
intersects the line forming the shape of an oval, and the fourth component falls
outside the line forming the shape of an oval.
Component 1:
Title: The "Switched Fabric" title and the component are in approximately
the 1:00 position within the oval.
Description: Beneath the title is a device labeled "Vixel Switch", which is
at the center of a hub and spoke configuration. The Vixel switch connects by one
line to a device labeled "Disks", by a second line to a device labeled "Storage
Array", by a third line to a device depicting a storage array, by a fourth line
to a device labeled "Tape Library" and by a fifth line to a device labeled
"Server." The Server connects by a line to three additional lines intersecting
at ninety degree angles, depicting a local area network, labeled a "LAN."
Additionally, the Vixel switch connects by a line to an oval-shaped image
labeled "Vixel Hubs." This image consists of a hub, which connects by four lines
to four devices labeled "Storage Arrays", and by one line to a device labeled a
"Server."
30
<PAGE> 36
Component 2:
Title: The "Arbitrated Loop" title and the component are in approximately
the 7:00 position within the oval.
Description: Beneath the title is an oval-shaped image labeled "Vixel
Hubs." This image consists of a hub which connects by three lines to three
devices labeled "Storage Arrays", by one line to a device labeled "Tape Library"
and by one line to a server. The server connects by a line to three additional
lines intersecting at ninety degree angles, depicting a local area network,
labeled a "LAN."
Component 3:
Title: The "Vixel SAN Management" title and the component are in
approximately the 5:00 position, partially inside and partially outside the
oval.
Description: The image is of a computer monitor sitting on top of a desktop
computer. Within the computer monitor is the SAN InSite logo, which consists of
the words "SAN InSite" placed within an oval.
Component 4:
Title: The "Point to Point" title and the component are in approximately
the 7:00 position, placed completely outside the oval.
Description: Beneath the title is an image labeled "Vixel Transceivers",
and beneath those words, in smaller font, are the words "Fiber Optical." The
image depicts two devices, set opposite one another, labeled a "Storage Array"
and "Server", respectively. The Storage Array and Server are connected by a
line. At the point of intersection of the Storage Array and the line is a
gigabit link module, labeled "GLM." At the point of intersection of the Server
and the line is a gigabit link module, labeled "GLM."
Our SAN interconnect solutions provide customers with the following key
benefits:
Our broad product portfolio addresses a wide spectrum of storage
requirements. We offer a wide range of high-performance Fibre Channel
interconnect products, including fabric switches that support scalable Fibre
Channel device connections, managed and entry-level hubs that support arbitrated
loop SAN configurations and transceivers that enhance data transport and device
connectivity through the SAN. Our switches, managed hubs and transceivers are
proactively managed from a single platform by our SAN InSite interconnect
management software and support a wide range of SAN configurations. Because we
design our own ASICs that drive the performance capabilities of our products, we
are able to rapidly develop solutions that meet varying data storage
requirements.
Our software provides comprehensive SAN management. Our SAN InSite software
is a unified platform that offers a single system view from one computer screen
down to the port level of our fabric switches, managed hubs and transceivers.
Our SAN InSite software provides comprehensive status, control and diagnostics
for fabric switches, arbitrated loop hubs and transceivers under a single
management software umbrella. It is also designed to seamlessly integrate with
other enterprise software applications, such as storage management and network
management platforms. As a result, storage network management functions, such as
proactive monitoring, reporting, policy management, security and fault
tolerance, can be integrated and optimized across our devices in the SAN. We
believe this comprehensive network management solution enhances SAN performance,
offers high rates of data availability, promotes network stability and reduces
enterprise information technology staffing, training and support requirements.
Interoperability of our products optimizes SAN deployment and
functionality. We design standards-based interoperability into our products from
the beginning of the design cycle. Our fabric switches, hubs, transceivers and
SAN management software are engineered to perform in concert to handle the
rigorous requirements of enterprise networks and enable highly-available,
scalable and manageable SANs. Furthermore, because our products adhere to Fibre
Channel ANSI standards, they are compatible with other Fibre Channel
standards-based products. Also, our SAN InSite software has been designed to
interoperate with other enterprise management applications. We believe our
enhanced interoperability
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<PAGE> 37
allows our OEMs and resellers to streamline the testing and qualification
process and increase their time to market. We also believe the interoperability
of our products reduces end users' deployment time and enhances the
functionality and performance of their SANs.
Our range of solutions support cost-effective scaling. Because we offer the
essential building blocks for SAN interconnects, our solutions can be
efficiently scaled as users' data and storage requirements expand. Our solutions
enable seamless additions of devices and ports to the SAN, regardless of the
installed Fibre Channel configuration. Our advanced fabric switch design allows
our switches to be easily installed and to immediately interact with existing
equipment, enabling legacy arbitrated loop configurations to scale to full
fabric switched SANs. Furthermore, our single management software platform can
support the management of our products that are part of or added to SAN
configurations. We believe our interoperable products supported by our SAN
InSite software reduce personnel and financial resource requirements, providing
our end users with a more cost-effective storage solution.
STRATEGY
Our objective is to expand our position as a leading developer and supplier
of comprehensive SAN interconnect solutions. Key elements of our strategy
include the following:
Offer customers a full Fibre Channel interconnect product portfolio. We are
committed to offering a complete, high-performance SAN interconnect solution
consisting of a full portfolio of switches, hubs, transceivers and management
software. We are focused on selling our SAN solutions to new customers as well
as extending our full product portfolio to existing customers who may be using
only some of our products. To date we have shipped products representing over
500,000 Fibre Channel ports to more than 30 OEMs and resellers which we believe
is more ports than any other Fibre Channel interconnect vendor has shipped. We
plan to leverage our existing customer base and spectrum of hardware and
software products to move beyond single product sales and aggressively offer and
market complete SAN interconnect solutions. With the adoption of our full
portfolio of products, a customer realizes the increased performance and cost
benefits of our interoperable, integrated SAN solution.
Leverage our technology platforms and expertise to address rapidly evolving
market demands. We seek to leverage our proven Fibre Channel expertise to
continually develop an expanding range of products in key areas of the SAN
interconnect, including fabric switches, hubs, transceivers and the software
that manages SAN interconnects. As a comprehensive SAN interconnect solutions
provider, we have accumulated extensive Fibre Channel expertise in all SAN
configurations, including point-to-point, arbitrated loop and fabric.
Furthermore, we have taken an active leadership role in Fibre Channel standards
boards that drive the development of Fibre Channel standards. We believe our
extensive Fibre Channel expertise, our internally-developed ASICs, and our
experienced engineering teams enable us to rapidly develop and market products
that address evolving market demands. To enhance our technological advantage, we
plan to continue to invest significant engineering resources in product
development.
Extend our SAN interconnect management software leadership. We believe we
offer the most comprehensive SAN interconnect management software solution. We
intend to extend our leadership position by developing new management tools,
offering additional functionality and enabling further interoperability with
other storage and systems management platforms. We believe these enhanced SAN
interconnect management solutions will increase SAN reliability and
functionality while decreasing total costs of ownership.
Partner with major storage solutions providers. We intend to continue to
expand our relationships with key strategic partners, including major storage
system and server OEMs, resellers, other leading Fibre Channel component and
device vendors, and storage and systems solutions providers. To date we have
established strategic relationships with leading storage solutions providers,
including EMC, Legato and Veritas. We plan to leverage existing and to establish
new strategic relationships to promote Fibre Channel solutions and
interoperability, and to enhance the functionality of our products. We will also
continue to seek opportunities to participate in joint technology development
with key strategic partners in order to offer our customers robust,
interoperable solutions. We seek to accelerate time to market and simplify
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deployment of our solutions by continuing to expand our test and verification
lab, the Vixel Verification Lab, or the V(2) Lab, and by initiating
pre-certification programs with additional storage solutions providers.
Expand our distribution channels. We plan to extend our comprehensive
portfolio of product offerings to existing OEMs as well as sell to new OEMs.
Currently, our major OEMs include Amdahl, Avid Sports, Compaq, Emulex,
Hewlett-Packard, IBM, Interphase and Sun Microsystems. As we expand our OEM
base, we plan to introduce new products, develop new markets and leverage the
systems and service capabilities of industry-leading OEMs. As end-user awareness
of Fibre Channel benefits increases, we believe that resellers, including
distributors and VARs, have the potential to become significant sources of
revenue. We intend to establish relationships with, and increase sales to,
resellers in order to increase our market presence. We also are actively working
to expand our breadth of internationally-based resellers, particularly those in
Europe and Asia.
Promote the Vixel brand. We plan to continue building awareness of the
Vixel brand in order to position ourselves as the leading provider of
high-performance, cost-effective SAN interconnect solutions. We believe an
established brand will become increasingly important as our distribution
channels expand to include resellers. To promote our brand, we plan to increase
our investments in a range of marketing programs, including trade show
participation, advertising in print publications, direct marketing, public
relations and web-based marketing.
OUR PRODUCTS
We offer a comprehensive portfolio of SAN interconnect products, including
SAN management software, high-performance fabric switches, managed and
entry-level hubs, and transceivers including gigabaud link modules, or GLMs, and
gigabit interface converters, or GBICs. Our broad family of interoperable
products enables customers to easily deploy a wide variety of SAN
configurations, from simple point-to-point connections to more complex
high-performance networks built with a combination of managed arbitrated loop
hubs and fabric switches. Furthermore, by offering and supporting the key
components necessary to connect servers and storage, we enable our customers to
turn to one vendor for their SAN interconnect needs. We began commercial
shipments of our SAN products in 1996, and as of April 4, 1999, we had shipped
switches, hubs and transceivers representing over 500,000 Fibre Channel ports.
SAN InSite Interconnect Management Software
Our SAN InSite interconnect management software provides comprehensive
management functionality across our Fibre Channel fabric switches, managed hubs
and transceivers. SAN InSite provides status and control of the devices that
transport data in a SAN interconnect, and it includes management tools that
proactively detect, isolate and recover from storage networking and data access
problems. We believe our SAN InSite solution is the only management application
in the industry that provides proactive management of fabric switches,
arbitrated loop hubs and transceivers from a single management workstation. The
first version of our interconnect management software was available to customers
in early 1998. Our current version, SAN InSite, is installed in mission-critical
accounts which require a high level of visibility and control over the storage
network. Key features of our SAN InSite interconnect management software
solution include the following:
- Single system view. Utilizing a simple graphical user interface and a
single computer screen, SAN InSite offers a complete view of all managed
devices in one or more SAN clusters.
- Built-in fault management. Leveraging the unique architecture and
embedded software of our fabric switches and managed hubs, SAN InSite is
able to recognize when a port is bypassed due to a malfunctioning storage
or server device. When these problems occur, SAN InSite either reports
that the problem has been automatically corrected or notifies the
administrator of the need to take corrective action.
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- Monitoring and reporting. SAN InSite automatically monitors the status of
each SAN interconnect device and keeps track of its activity in an
electronic record. With a suite of color-coded icons and legends
displayed on a single computer screen, users can easily monitor and
quickly identify any changes to the SAN environment. SAN InSite also
provides special traffic performance monitoring for our Vixel 8100 fabric
switch. This feature facilitates capacity planning and is displayed
through on-screen traffic meters.
- Advanced device configuration management and diagnostics. A rich set of
advanced diagnostic tools allows support personnel to test and verify
communications with new server or storage devices. Using SAN InSite's
intuitive graphical user interfaces, the user can quickly configure our
switches and hubs for specific application requirements. We believe this
simplified interface minimizes training and staffing requirements,
presents a consistent look and feel across our product set and gives
customers cost-effective, flexible options for configuring a variety of
SAN applications.
- Integrated with other leading functional storage software. We actively
partner with storage management software vendors in order to facilitate
the integration of SAN InSite's powerful tools into other enterprise
management applications. For example, SAN InSite can be launched by
Veritas' Storage Manager and Hewlett-Packard's HP OpenView, and our
switches and managed hubs can be configured to send notifications to
other management platforms.
Vixel 4000 and Vixel 8100 Fibre Channel Switches
Fibre Channel switches connect a wide range of server and storage devices
and provide a high level of performance and flexibility in building large
configurations in a SAN. We began commercial shipment of our first switch
product, the Vixel 4000, in February 1998. The eight port Vixel 4000 offered
distinct advantages over other switches available at that time, including
support for non-fabric arbitrated loop devices. Our next generation eight port
Vixel 8100 Fibre Channel switch was made commercially available in June 1999,
and extends our technology leadership in the switch arena. We believe our Vixel
8100, with its patent-pending architecture, is one of the highest performing,
most cost-effective fabric switches in the industry. In addition to supporting
basic fabric switch functionality, our Vixel 8100 has the following significant
features:
- High speed and high bandwidth. Our Vixel 8100 supports full speed, which
is 1.0625 gigabits per second, or Gbps, in transmit and receive
directions per port. In addition, our Vixel 8100 architecture supports
wire-speed full bandwidth, which is 100 MBps, in both directions per
port. Unlike other commercially available switch products, our Vixel 8100
provides consistent 100 MBps bandwidth between any two ports, which
enables reliable high-speed traffic in any configuration.
- Support for non-fabric arbitrated loop devices in a fabric switch. A
large number of devices currently deployed in SANs cannot communicate
with fabric configurations. Our patent-pending capability of our Vixel
8100 enables these devices to benefit from their attachment to a fabric
SAN.
- Support for arbitrated loop or fabric-attached topologies by the same
fabric port hardware. The flexible port architecture of the Vixel 8100
supports both arbitrated loop and fabric configurations and offers
significant flexibility and interoperability when building SANs.
- Hardware-based zoning. With hardware-based zoning capabilities, our Vixel
8100 allows potentially conflicting operating systems, such as Unix and
Windows NT, to co-exist in a single SAN environment.
- Full fabric software support services. Our Vixel 8100 supports
ANSI-defined fabric services such as the simple name server and state
change notification. Devices attached to a fabric configuration use these
services in order to create a full-functioning switched SAN.
- Scalable architecture. Multiple Vixel 8100 fabric switches can be
interconnected without sacrificing performance, enabling the creation of
large, complex SANs.
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- Extensive port buffering. Because of the extensive port buffering
capabilities designed into our Vixel 8100, data can be efficiently
transported through our switch.
Vixel 2000 and Vixel 2006 Managed Hubs
Our managed hubs connect devices in a SAN arbitrated loop configuration and
monitor the status of loop and port activity through auto-recovery functionality
and advanced diagnostic capabilities. Our managed hubs were made commercially
available in November 1997 and are designed to enhance customer uptime by
proactively responding to conditions that otherwise would disrupt system
availability. Key features of our managed hubs include:
- Six and 12 port configurations using removable GBICs. Our managed hubs
give customers the flexibility to deploy small or large arbitrated loop
installations. Because our managed hubs include full GBIC support,
customers can mix different transceiver types on the same hub and install
additional GBICs as needed.
- Loop status indicators. An indicator light on the front of our hub
product continuously reports to the operator whether the SAN arbitrated
loop is operating properly. Loop status also is reported through SAN
InSite's graphical user interface on a management work station. These
loop status information features accelerate problem detection and
resolution.
- Loop integrity and auto-recovery. Our managed hubs automatically detect
and bypass malfunctioning ports. An alert is posted to the operator via
SAN InSite, or another management application, so that further corrective
action can be taken. In addition, our managed hubs have a recovery
routine that can correct problems without disrupting ongoing loop
operations. Without this feature, the network would be down until an
administrator could manually reset each device.
- Full console interface and event logging. In addition to the SAN InSite
graphical user interface, our managed hubs support the full command line
interface favored by some Unix users. This interface facilitates remote
support of our product by OEMs, resellers or third-party support
organizations. Our hubs also support time-stamped event logging, a useful
tool for monitoring SAN status during unattended operation.
Vixel 1000 Entry-Level Hub
Our Vixel 1000 entry-level hub provides a cost-effective solution that
addresses SAN interconnect requirements, linking low and middle range servers
with storage devices. By enhancing functionality and reducing costs for
entry-level products, we are well positioned to address a broad segment of the
SAN interconnect market. Introduced in October 1996, our Vixel 1000 has been
tested and proven in a wide range of demanding, mission-critical networks and
continues to be a popular choice for cost-conscious, entry-level SAN
installations. Our Vixel 1000 hub supports full gigabit data transfer speeds and
automatically bypasses failed or unused ports in a SAN. Its GBIC-based design
allows customers to add, move or delete storage capacity and Fibre Channel
devices on the SAN as needed. The flexible design of our entry-level hub also
enables different combinations of copper, short-wave optical and longwave
optical transceiver types in a single SAN solution.
Transceivers
Our transceivers provide fiber optic connectivity between devices installed
in a SAN. Our fiber optic transceivers include GLMs, which are attachable
modular interfaces for Fibre Channel host bus adapters and disk controllers, and
GBICs, which are removable transceivers for switches, hubs, host bus adapters
and disk controllers. We have been shipping gigabit GLMs since September 1996
and we are supplying full-speed GLMs to a variety of customers for use in host
bus adapters and disk controllers.
As one of the original authors of the GBIC Specification, we have played a
strategic role in enabling modular, high-speed transceivers for Fibre Channel
environments. We have been shipping GBICs to customers since September 1996. Our
current optical GBIC employs state-of-the-art vertical cavity surface
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emitting laser, or VCSEL, technology specifically designed for high-speed data
transport among disk controllers, arbitrated loop hubs and fabric switches. Our
GBICs support Serial ID, allowing host enclosures to solicit asset information,
including manufacturer, date of manufacture, serial number and batch number
directly from the GBIC. With our integrated product portfolio, this GBIC Serial
ID information can be read by our managed hubs and fabric switches and reported
to the user via SAN InSite. This feature allows a network administrator to track
inventory information from a single management platform, regardless of where the
GBIC is installed in a fabric switch or managed hub.
OUR TECHNOLOGY
We believe that our Fibre Channel expertise across a wide range of Fibre
Channel products and SAN configurations has enabled us to develop and ship in
volume leading high-performance SAN interconnect solutions. Key components of
our technology platform include the following:
Leadership in SAN interconnect management software. We have a core
competency in the development of SAN interconnect management software which, we
believe, provides us with a significant competitive advantage. We have leveraged
our knowledge of SAN interconnect components such as fabric switches, managed
and entry-level hubs, and transceivers to develop software that enables a
comprehensive solution to SAN interconnect management.
Fabric switch architecture. We have developed a full-featured and
high-performance architecture for our fabric switches. Our fabric switches
incorporate advanced features, such as extensive port buffering, to offer high
performance in a low-cost architecture. In addition, our switch architecture is
scalable, facilitating development of new generations of switches, including our
Vixel 8100 switch, that support more ports and faster transmission speeds. We
have several patents pending covering our switch architecture.
ASIC design expertise. We employ state-of-the-art ASIC design methodologies
and have demonstrated a successful track record of achieving short design cycles
for high-performance, complex ASICs. We use our own internally developed ASICs
in our Fibre Channel products which enables us to maximize our products'
reliability, functionality and interoperability while minimizing time to market.
Fabric switch and managed hub embedded software. Our embedded software
expertise covers a wide range of SAN interconnect devices, including our fabric
switches and managed hubs. We believe we are the only company that designs,
develops and markets a full range of SAN interconnect components. As a result,
we believe we are uniquely positioned to further develop embedded software that
maximizes interoperability and functionality of all of these SAN components
while supporting ANSI and Internet standards.
Designed-in interoperability. We design standards-based interoperability
into our products from the beginning of the design cycle and thoroughly validate
interoperability throughout the product release process. Our products also are
extensively tested with other vendors' products to ensure cross-vendor
interoperability. In January 1998, we launched our V(2) Lab to facilitate robust
interoperability testing and analysis of our products within a multi-vendor
system environment. We believe that our investment of personnel and capital
equipment in this facility has enhanced interoperability and time to market for
our OEMs and resellers. We also use this lab to certify specific SAN
configurations and reduce the need for our distribution partners to undergo
costly and timely testing processes.
CUSTOMERS
Our primary customers are OEMs and resellers who sell to end users and
VARs. Following is a list of our customers who have purchased more than $500,000
of our products since the beginning of fiscal 1998:
<TABLE>
<S> <C>
Amdahl Hewlett-Packard
Avid Sports IBM
Bell Microproducts Interphase
Compaq Computer Nissho Electronics
Emulex Sun Microsystems
</TABLE>
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In some cases, we sell our products to our customers' contract
manufacturers who in turn sell them to our customers. Sun Microsystems, Compaq
Computer and Hewlett-Packard represented 39.6%, 15.7% and 14.3% of our revenue,
respectively, for the quarter ended April 4, 1999. In fiscal 1998, Sun
Microsystems and Hewlett-Packard represented 54.4% and 12.3% of our revenue,
respectively.
CUSTOMER SERVICE AND SUPPORT
We emphasize customer service and support in order to provide our customers
and their end users with the knowledge and resources necessary to successfully
implement and integrate comprehensive, high-performance Fibre Channel solutions.
We offer a variety of support options for our products, including 24 hours a
day, seven days a week support and immediate parts replacement that enables
continuous customer response and rapid replacement of products at end-user
locations. Our customer service and systems engineering teams provide extensive
pre- and post-sale customer support, including consultation, network design and
in-depth training on SAN technology and product implementation.
In October 1998, we launched our Vixel Care Services program to further
enhance the support we provide to our OEMs and resellers. This program includes
comprehensive education and training for our products and Fibre Channel SANs,
telephone support, customized remote support contracts and onsite installation
consulting services. We also have an initiative with our OEMs and resellers to
extend train-the-trainer techniques so they may quickly develop their own
service organizations to support SAN installations that include our products and
SAN InSite management software. We intend to continue providing a high level of
education and service to further support and optimize SANs deployed at end-user
sites.
SALES AND MARKETING
We sell our SAN solutions, including SAN interconnect management software,
fabric switches, hubs and transceivers, to OEMs and select resellers. We
primarily sell to OEMs of specific operating systems-based servers including
Unix and Windows NT, as well as to OEMs of high-end disk and tape storage
subsystems. Our OEMs utilize our products to deliver to end users complete
factory-configured solutions, which are installed and field-serviced by OEMs'
technical support organizations.
As the markets for Fibre Channel products and SAN solutions evolve and as
end-user awareness of the benefits of Fibre Channel increases, we believe an
increasing volume of sales will occur through alternative distribution channels,
including resellers and systems integrators. To support our reseller channel, we
recently introduced our Premier Value Added Reseller program that provides
select resellers with the advanced technical training and sales support
necessary to successfully begin designing, installing and supporting complete,
integrated SAN solutions. As the SAN market continues to develop, we plan to
establish additional relationships with select domestic and international
resellers to reach additional markets and increase our geographic coverage. By
serving the needs of both OEMs and resellers, we can leverage the strengths of
our range of customers to further develop the Fibre Channel market and enhance
our ability to address a large end-user base.
We currently distribute our products in Japan though our relationship with
Nissho Electronics Corporation. We intend to continue expanding internationally
by partnering with additional OEMs and resellers who have a strong international
presence and are capable of selling and installing complex SAN solutions.
Our marketing efforts are focused on increasing awareness of our Fibre
Channel products and our Vixel brand, promoting SAN-based solutions in general,
and advocating industry-wide standards and interoperability. Key components of
our marketing efforts include:
- extending our strategic alliances with other Fibre Channel, SAN storage
management and enterprise vendors to promote standardization and enhance
interoperability;
- promoting our SAN solutions under the Vixel brand name to strengthen
sales through distribution and VAR channels;
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- continuing our active participation in industry associations and
standards committees to promote and further enhance Fibre Channel
technology and increase our visibility as industry experts;
- leveraging major trade show events and SAN conferences to promote our
comprehensive solution and to continue our leading role in educating
customers on the value of SANs;
- expanding our web-based marketing program to provide both product and
sales information; and
- in cooperation with other vendors, certifying and packaging complete SAN
solutions with proven interoperability between SAN interconnects, devices
and applications.
MANUFACTURING
We outsource our manufacturing which reduces our need to make costly
investments in capital equipment and manufacturing facilities. K*TEC
Electronics, a division of Kent Electronics, and Solectron Corporation currently
manufacture our products. They are responsible for nearly all material
procurement, assembly and testing, packaging and shipment of our products. Our
switches, hubs and GBIC transceiver products are manufactured at K*TEC, and our
GLM transceivers are manufactured at Solectron; however, we are in the process
of transitioning our GLM manufacturing to K*TEC. We currently do not have a
long-term supply contract with K*TEC or Solectron. Therefore, they are not
obligated to manufacture products for us, except as may be provided in
particular purchase orders that they have accepted. We place purchase orders
with our manufacturers based on periodic forecasts. In the future, we may need
to add new manufacturing partners to achieve higher production volumes and/or
lower costs.
While our manufacturing partners are responsible for all facets of the
manufacturing process, we are directly involved in qualifying our vendors and
the key components that are used in our products. Most of our product components
can be obtained from multiple qualified manufacturers. While most of the
materials used in our products are standard, some are proprietary or sole
sourced and require extended lead times. Our supply management team works
closely with strategically important suppliers who offer proprietary or
sole-sourced products. In addition, our operations team is focused on production
test equipment development, manufacturability, effective transfer of products
from development to production, and monitoring of supplier performance and
quality.
RESEARCH AND DEVELOPMENT
We focus our research and development efforts on developing products that
meet the evolving needs of the SAN market. We are developing our SAN
interconnect management software to provide higher levels of management
capabilities for our products and others, including the ability of SAN InSite to
manage other vendors' devices. We also are developing interfaces that interact
with leading systems management software in order to more effectively manage
data transport and data storage throughout the enterprise. Our switches and hub
development efforts are focused on enhancing functionality through the
development of higher-level ASICs, increasing the number of ports and
transmission speed capabilities, and enhancing interoperability with other
vendors' devices. In addition to the development of our core technologies, we
plan to continue to partner with other leading providers of SAN technologies,
products and services to jointly develop high performance SAN products and
support industry standards.
Our research and development expenses were $3.1 million in the quarter
ended April 4, 1999 and $16.2 million in fiscal 1998. We believe that our
research and development efforts are key to our ability to maintain technical
competitiveness and to deliver innovative products that address the needs of the
market. However, our product development efforts may not result in commercially
viable products, and our products may be made obsolete by changing technology or
new product announcements by us or our competitors.
COMPETITION
The SAN interconnect market has become increasingly competitive. New
SAN-enabled products are being offered by a growing number of server, storage,
tape and storage management vendors. Because we
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offer a broad product portfolio, each of our products competes with a different
set of competitors. For fabric switch sales, we compete primarily with Ancor,
Brocade and McDATA. For hub sales, we compete primarily with Emulex and Gadzoox.
For transceiver sales, we compete primarily with Cielo, Finisar, Hewlett-Packard
and IBM. Although we do not believe that any other vendor offers comprehensive
SAN interconnect management software that directly competes with ours, other
vendors, such as Brocade and Gadzoox, provide single point-device managers for
either hub or fabric switch products, but not across multiple devices, including
fabric switches, hubs and transceivers. As the market for SAN interconnect
products grows, we may face competition from traditional networking companies
and other manufacturers of networking equipment. These networking companies may
enter the SAN interconnect market by introducing their own products or by
acquiring or entering into an alliance with an existing SAN interconnect
provider. It also is possible that our OEMs could develop and introduce products
competitive with our product offerings.
We believe the primary competitive factors in the SAN interconnect market
are the following:
- product performance and features;
- product reliability and interoperability;
- the size of installed customer base;
- price;
- strength of distribution channel;
- ability to meet delivery schedules; and
- customer service and technical support.
We believe we compete favorably with our competitors based on these
factors. However, because many of our existing and potential competitors have
longer operating histories, greater name recognition, larger customer bases and
substantially greater financial, technical, sales and marketing resources, they
may have larger distribution channels, access to more customers and a larger
installed customer base than we do. These competitors may be able to undertake
more extensive marketing campaigns and adopt more aggressive pricing policies
than we can. To remain competitive, we believe we must, among other things,
invest significant resources in expanding our distribution channels, developing
new products and enhancing our current products. If we fail to do so, our
products will not compete favorably with those of our competitors which will
significantly harm our business.
INTELLECTUAL PROPERTY
Our success depends on our proprietary technology. We attempt to protect
our technology through a combination of patents, copyrights, trade secret laws,
trademarks and contractual obligations. There can be no assurance that our
intellectual property protection measures will be sufficient to prevent
misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology. In addition, the laws of many foreign countries do not
protect our intellectual property rights to the same extent as the laws of the
United States. Our failure to protect our proprietary information could have a
material adverse effect on our business, financial condition and results of
operations.
We have been awarded one patent and have four pending patent applications
in the United States and selected countries abroad. The patent and applications
cover a broad scope of SAN technology including our SAN management capabilities
and switch and hub architecture. However, it is possible that patents may not be
issued for the pending applications and that our issued patent may not
adequately protect our technology from infringement or prevent others from
claiming our technology infringes that of third parties. Our software products
are protected by copyright laws and we have been awarded several trademarks.
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We may need to initiate litigation in the future to enforce our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Litigation could result
in substantial costs and diversion of our resources and could materially harm
our business. From time to time we have received, and may receive in the future,
notice of infringement claims of other parties' proprietary rights. For
instance, a competing supplier of transceivers sued us, claiming that features
of our GBIC products infringed its patents. This lawsuit was settled in May
1999. We incurred significant costs in defending and settling such claims.
Infringement or other claims could be asserted or prosecuted against us in the
future, and it is possible that past or future assertions or prosecutions could
harm our business. Any such claims, with or without merit, could be
time-consuming, result in costly litigation and diversion of technical and
management personnel, cause delays in the development and release of our
products, or require us to develop non-infringing technology or enter into
royalty or licensing arrangements. Such royalty or licensing arrangements, if
required, may not be available on terms acceptable to us, or at all. For these
reasons, infringement claims could materially harm our business.
EMPLOYEES
As of May 31, 1999, we had 166 employees, 164 of who were full-time. Of our
employees, 76 were engaged in research and development, 35 in sales and
marketing, 34 in operations and 21 in finance, administration and information
services. None of our employees are represented by a labor union. We have not
experienced any work stoppages and consider our relations with our employees to
be good.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
FACILITIES
Our corporate headquarters are located in Bothell, Washington and occupy
approximately 43,000 square feet. Our lease for this facility expires in January
2002. In addition, we have a research and development and sales facility located
in Irvine, California that occupies approximately 13,000 square feet. Our lease
for this facility expires in November 2002. We believe these existing facilities
will be adequate to meet our needs for the next 12 months. If our growth
continues, we will need larger facilities after that time. We cannot assure you
that suitable additional facilities will be available as needed on commercially
reasonable terms. We also lease five domestic sales offices in San Jose,
California, Columbia, Maryland, Gloucester, Massachusetts, Nashua, New Hampshire
and Houston, Texas.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages as of May 31, 1999 are
as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James M. McCluney......................... 48 President, Chief Executive Officer and Director
Kurtis L. Adams........................... 44 Chief Financial Officer, Vice President of Finance,
Secretary and Treasurer
Stuart B. Berman.......................... 42 Chief Technology Officer
Richard G. Helgeson....................... 47 Vice President of Worldwide Sales
Jay R. O'Donald........................... 56 Vice President of Operations
Stanley H. Reese.......................... 58 Vice President of Product Development
Donald P. Wenninger....................... 49 Vice President of Information Technology
Gregory R. Olbright....................... 43 Chairman of the Board of Directors
Kevin A. Fong(1).......................... 45 Director
Charles A. Haggerty(2).................... 57 Director
Juan A. Rodriguez......................... 58 Director
Timothy M. Spicer(1)...................... 49 Director
Werner F. Wolfen(2)....................... 69 Director
</TABLE>
- -------------------------
(1) Member of the audit committee.
(2) Member of the compensation committee.
James M. McCluney has served as our president, chief executive officer and
director since April 1999. From October 1997 to January 1999, he served as
president and chief executive officer of Crag Technologies, formerly Ridge
Technologies, a storage system manufacturer. From October 1994 to September
1997, Mr. McCluney served in various positions at Apple Computer, including
senior vice president of worldwide operations and vice president of European
operations.
Kurtis L. Adams has served as our chief financial officer and vice
president of finance since September 1998. From December 1995 to September 1998,
he was chief financial officer and vice president of finance of Health Systems
Technologies, Inc., a software company. Mr. Adams was the corporate controller
from November 1989 to March 1991 and the corporate controller and chief
accounting officer from April 1991 to October 1995 for Chipcom Corporation, a
networking company.
Stuart B. Berman has served as our chief technology officer since February
1998. In July 1996, he co-founded Arcxel Technologies, Inc., a networking
company, and through February 1998 served as its chairman and chief technology
officer. From February 1993 to June 1996, Mr. Berman was a Fibre Channel
architect for Emulex Corporation, a networking company.
Richard G. Helgeson has served as our vice president of worldwide sales
since January 1998. From May 1997 to January 1998, he served as vice president
of sales for Atreiva Corporation, an Internet services company. From June 1995
to May 1997, Mr. Helgeson was vice president of sales at CNT Corporation, a
networking company. From June 1990 to May 1995, Mr. Helgeson held various senior
sales positions at Wellfleet Communications, Inc., a networking company.
Jay R. O'Donald has served as our vice president of operations since
February 1998. In July 1996, Mr. O'Donald co-founded Arcxel Technologies, and
through February 1998, he served as its president and chief executive officer
and director. From April 1993 to July 1995, Mr. O'Donald was the vice president
of engineering at Emulex Corporation.
Stanley H. Reese has served as our vice president of product development
since January 1999. From July 1997 to January 1999, he was the vice president of
research and development at VitalCom Corpora-
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<PAGE> 47
tion, a medical systems company. From December 1989 to July 1997, Mr. Reese was
the vice president of research and development at Cubix Corporation, a computer
company.
Donald P. Wenninger has served as our vice president of information
technology since November 1997, and as our director of information systems since
December 1996. From April 1986 to November 1996, Mr. Wenninger served in various
positions in operations and information systems at Intermec Technologies
Corporation, an automated data collection and mobile computing systems provider.
Gregory R. Olbright founded Vixel and has served as a director since our
inception in 1991. From June 1991 to January 1999, he was our president and
chief executive officer. Since May 1999, Mr. Olbright has served as our chairman
of the board of directors. Mr. Olbright currently acts as a part-time employee
for us.
Kevin A. Fong has served as one of our directors since October 1995. He has
served as a general partner with the Mayfield Fund, a venture capital fund, from
1998, and has been a general partner of several venture capital funds affiliated
with Mayfield since 1990. Mr. Fong is a member of the board of directors of
Legato Systems, Inc., a publicly held network storage management company, and
Prism Solutions, Inc., a publicly held data warehousing company.
Charles A. Haggerty has served as one of our directors since March 1996.
Since July 1993, he has been chairman, president and chief executive officer of
Western Digital Corporation, a publicly held data storage company.
Juan A. Rodriguez has served as one of our directors since 1994 and as our
chairman of the board of directors from January 1995 to May 1999. Since May
1996, he has been chairman and chief executive officer of Ecrix Corporation, a
data storage company. From September 1993 to March 1994, Mr. Rodriguez was the
chairman and chief executive officer for Datasonix, a data storage company. He
has also been a professor at the University of Colorado, Boulder, since 1992.
Timothy M. Spicer has served as a one of our directors since February 1998,
and served as our interim chief executive officer from February 1999 to April
1999. He has been the president and chief operating officer of San Francisco
Sentry Investment Group, a registered investment advisor, since 1993. Mr. Spicer
serves as a director of Union Bank of Switzerland.
Werner F. Wolfen has served as one of our directors since July 1994. He is
a retired partner of the law firm of Irell & Manella where he was co-chairman of
the firm's executive committee from 1982 to 1992. Mr. Wolfen is a member of the
board of directors of Broadcom Corporation, a publicly held networking company.
BOARD COMPOSITION
We currently have authorized seven directors. Upon the closing of this
offering, the terms of office of our directors will be divided into three
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, Class II, whose term
will expire at the annual meeting of stockholders to be held in 2001 or special
meeting held in lieu thereof and Class III, whose term will expire at the annual
meeting of stockholders to be held in 2002 or special meeting held in lieu
thereof. The Class I directors are Messrs. ________ and ________, the Class II
directors are Messrs. ________ and ________ and the Class III directors are
Messrs. ________, ________ and ________. 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 third annual meeting
following election or special meeting held in lieu thereof. In addition, our
certificate of incorporation will provide 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 three classes so that, as nearly as possible, each
class will consist of one-third of the directors. This classification of the
board of directors may have the effect of delaying or preventing changes in
control or management of Vixel, although our
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<PAGE> 48
directors may be removed for cause by the affirmative vote of the holders of a
majority of our common stock.
BOARD COMPENSATION
The chairman of our board of directors, Gregory Olbright, receives $50,000
per year for serving in this capacity. We do not currently provide our other
directors with cash compensation for their services as members of the board of
directors, although we reimburse our directors for reasonable expenses they
incur in connection with attendance at board and committee meetings. Directors
are eligible to participate in our stock option plan. See "-- 1995 Stock Option
Plan." In May 1999, the board of directors granted each director who was not an
employee, a fully vested option to purchase 25,000 shares of common stock at a
price of $4.00 per share. Each director immediately exercised the option to
purchase 25,000 shares of common stock and delivered to us a $100,000
full-recourse promissory note. In April 1999, the board of directors granted a
special option to purchase 40,000 shares of common stock at a price of $2.05 per
share to Timothy Spicer, one of our directors, and paid Mr. Spicer $40,000 for
his service as our interim chief executive officer from February through April
1999.
BOARD COMMITTEES
The board of directors has an audit committee and a compensation committee.
The audit committee meets with our independent auditors at least annually
to review the results of the annual audit. The audit committee also recommends
to the board the independent accountants to be retained and reviews the
accountants' comments as to controls, adequacy of staff and management
performance and procedures in connection with our audit and financial controls.
The audit committee is composed of two non-employee directors, Messrs. Fong and
Spicer.
The compensation committee makes recommendations to the board concerning
salaries and incentive compensation, awards stock options to employees and
consultants under our stock option plans and performs other functions regarding
compensation as delegated by the board. The compensation committee is composed
of two non-employee directors, Messrs. Haggerty and Wolfen.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of our compensation committee is or has been, at any
time since our formation, an officer or employee of Vixel. No member of our
compensation committee and none of our executive officers serves as a member of
the board of directors or compensation committee of any entity that has one or
more executive officers serving as a member of our board of directors or
compensation committee.
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<PAGE> 49
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by, or
paid by us during the fiscal year ended January 3, 1999 to (A) our current chief
executive officer and president, (B) our president and chief executive officer
during the fiscal year ended January 3, 1999, and (C) our four most highly
compensated executive officers, other than the chief executive officer, whose
salary and bonus for the fiscal year exceeded $100,000 and who served as an
executive officer of Vixel during such year collectively, these individuals are
referred to as "Named Executive Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- ---------------------
ALL OTHER SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS(#)
--------------------------- -------- ------- ------------ ---------------------
<S> <C> <C> <C> <C>
James M. McCluney(1)......................... -- -- -- --
President and Chief Executive Officer
Richard G. Helgeson(2)....................... $127,212 $80,000 $ 2,181 240,000
Vice President of Worldwide Sales
Jay R. O'Donald(3)........................... 130,481 -- 50,686 124,254
Vice President of Operations
Former Executive Officers
Gregory R. Olbright.......................... 249,039 -- 823,577 2,100,000
President and Chief Executive Officer(4)
Marlu E. Allan............................... 133,923 -- 25,535 --
Vice President of Business Development(5)
Karen L. Howard.............................. 129,808 -- 50,491 --
Vice President of Human Resources(6)
</TABLE>
- -------------------------
(1) Mr. McCluney joined Vixel in April 1999.
(2) Bonus consists of commissions and bonuses related to sales activities. Other
compensation consists of 401(k) plan matching contributions.
(3) Other compensation includes $42,857 in relocation payments and $7,829 in
401(k) plan matching contributions.
(4) Mr. Olbright resigned as president and chief executive officer of Vixel in
February 1999. Other compensation includes $473,643 in relocation expenses,
$250,000 in accrued severance, $90,334 in interest forgiveness and $9,600 in
401(k) matching contributions. With respect to securities underlying
options, an option to purchase 1,050,000 shares of common stock was
exercised in April 1998, and the shares acquired upon exercise were
repurchased by us at cost in October 1998.
(5) Ms. Allan resigned as an executive officer of Vixel in February 1999. Other
compensation includes $17,500 in accrued severance and $8,035 in 401(k)
matching contributions.
(6) Ms. Howard resigned as an executive officer of Vixel in January 1999. Other
compensation includes $42,703 in accrued severance and $7,788 in 401(k)
matching contributions.
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<PAGE> 50
The following table shows certain information regarding stock options
granted to the Named Executive Officers during fiscal 1998. No stock
appreciation rights were granted in fiscal 1998. All options granted to these
executive officers in the last fiscal year were granted under our 1995 stock
option plan. Unless otherwise noted, options vest 25% on the anniversary of the
vesting commencement date and monthly thereafter in 36 equal installments. The
percentage of total options set forth below is based on options for 5,879,110
shares granted to employees in fiscal 1998. All options are granted at the fair
market value as determined by the board of directors on the date of grant.
Potential realizable values are net of exercise price, but before associated
taxes based on the term of the option at the time of grant. The 5% and 10%
assumed annual rates of compounded stock price appreciation are mandated by the
SEC and do not represent our estimate or projection of the future common stock
price. 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. The assumed 5% and 10% rates of stock appreciation are based on the
assumed offering price of $ per share.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT
TOTAL ASSUMED ANNUAL RATES OF
OPTIONS EXERCISE STOCK PRICE APPRECIATION
NUMBER OF SHARES GRANTED PRICE FOR OPTION TERM
UNDERLYING TO PER EXPIRATION ------------------------------
NAME OPTIONS GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ---------------- ---------- --------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James M. McCluney......... -- -- -- -- $ $
Richard G. Helgeson....... 240,000 4.5% $3.06 01/26/08
Jay R. O'Donald(1)........ 124,254 2.3 0.07 09/29/07
Gregory R. Olbright(2).... 1,050,000 19.5 3.33 03/03/08
1,050,000 19.5 2.05 12/08/08
Marlu E. Allan............ -- -- -- --
Karen L. Howard........... -- -- -- --
</TABLE>
- -------------------------
(1) This option was substituted for an option originally granted by Arcxel.
Except for 4,285 shares which had vested at the time of substitution, the
option vests at the rate of 4,285 shares per month for 28 months.
(2) The March 3, 1998 option was exercised for a promissory note in April 1998.
The shares acquired upon exercise were repurchased by us at cost in October
1998 in exchange for cancellation of the note. A new option was issued in
December 1998. With respect to the December 1998 option, 237,506 shares were
immediately vested, 312,510 shares vest monthly ratably over the first 15
months, 87,504 shares vest ratably over the next 12 months, 378,125 shares
vest ratably over the next 11 months and 34,355 shares vest in the last
month. In connection with Mr. Olbright's resignation as our president and
chief executive officer, options for 427,064 shares were cancelled in April
1999. At that time, Mr. Olbright exercised his option in full for the
remaining 622,936 shares. These shares are subject to a right of repurchase
in favor of Vixel which lapses according to the schedule above.
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<PAGE> 51
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 fiscal 1998, and the number and value of the shares of common stock
underlying unexercised options held by the Named Executive Officers as of
January 3, 1999. The value of unexercised in-the-money options is based on the
fair market value of our common stock as of January 3, 1999, which was $2.05 per
share, as determined by our board of directors, less the exercise price,
multiplied by the number of shares underlying the option. All options were
granted under our 1995 stock option plan. These options generally vest 25% on
the anniversary of the vesting commencement date and monthly thereafter in 36
equal installments.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT JANUARY 3, 1999 JANUARY 3, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James M. McCluney............ -- -- -- -- -- --
Richard G. Helgeson.......... -- -- -- 240,000 -- --
Jay R. O'Donald.............. -- -- 47,135 77,119 $93,238 $152,549
Gregory R. Olbright.......... 1,350,000 $810,000 258,340 791,660 -- --
Marlu E. Allan............... 75,020 241,933 18,411 106,569 32,219 186,496
Karen L. Howard.............. 54,715 221,596 14,605 105,680 23,368 169,088
</TABLE>
EMPLOYEE BENEFIT PLANS
1995 Stock Option Plan
The 1995 stock option plan, the 1995 Plan, was adopted by our board of
directors and approved by our stockholders in February 1995. Effective upon the
completion of this offering, we will have a total of shares reserved for
issuance under the 1995 Plan. The 1995 Plan provides for grants of incentive
stock options that qualify under Section 422 of the Internal Revenue Code of
1986, to our employees, including officers and employee directors or the
employees of any of our affiliates. Nonstatutory stock options, rights to
acquire restricted stock, and stock bonuses may be granted to our employees,
including officers, directors and consultants of us or any of our affiliates.
The 1995 Plan may be administered by the board of directors or a committee
appointed by the board of directors; references herein to the board of directors
shall include any such committee. After this offering, it is intended that the
1995 Plan will be administered by the compensation committee, which consists of
Messrs. Haggerty and Wolfen, who are "non-employee directors" under applicable
securities laws and outside directors, as defined under the Internal Revenue
Code. The board of directors has the authority to determine to whom awards are
granted, the terms of such awards, including the type of awards to be granted,
the exercise price, the number of shares subject to the awards and the vesting
and exercisability of the awards.
The term of a stock option granted under the 1995 Plan generally may not
exceed 10 years. The exercise price of options granted under the 1995 Plan is
determined by the board of directors, but, in the case of an incentive stock
option, cannot be less than 100% of the fair market value of the common stock on
the date of grant. Options granted under the 1995 Plan vest at the rate
specified in the option agreement. Except as expressly provided by the terms of
a nonstatutory stock option agreement, no option may be transferred by the
optionee other than by will or the laws of descent or distribution or, in
certain limited instances, pursuant to a qualified domestic relations order,
provided that an optionee may designate a beneficiary who may exercise the
option following the optionee's death. An optionee whose relationship with us or
any of our affiliates ceases for any reason, other than due to death or
permanent and total disability, may generally exercise vested options in the
three month period following such cessation, unless such options terminate or
expire sooner by their terms or in such longer or shorter period as may be
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<PAGE> 52
determined by the board and set forth in the option agreement. Vested options
may generally be exercised during the 12-month period after an optionee's
relationship with us or any of our affiliates ceases due to death or disability.
No incentive stock option may be granted to any person who, at the time of
the grant, owns or is deemed to own common stock possessing more than 10% of the
total combined voting power of Vixel or any of our affiliates, unless the option
exercise price is at least 110% of the fair market value of the stock subject to
the option on the date of grant and the term of the option does not exceed five
years from the date of grant. In addition, the aggregate fair market value,
determined at the time of grant, of the shares of common stock with respect to
options, which become exercisable by an optionee during any calendar year, may
not exceed $100,000. Any options, or portions thereof, which exceed this limit
are treated as nonstatutory options.
If we become subject to Section 162(m) of the Internal Revenue Code, which
denies a deduction to publicly held corporations for certain compensation paid
to specific employees in a taxable year to the extent that the compensation
exceeds $1,000,000, no person may be granted options under the 1995 Plan
covering more than shares of common stock in any calendar year.
Shares subject to stock awards that have lapsed or terminated, without having
been exercised in full, and any shares repurchased by us pursuant to a
repurchase option provided under the 1995 Plan may again become available for
the grant of awards under the 1995 Plan.
Rights to acquire restricted stock granted under the 1995 Plan may be
granted subject to a repurchase option in favor of us that will expire pursuant
to a vesting schedule. The purchase price of these awards will be at least 85%
of the fair market value of the common stock on the date of grant. Stock bonuses
may be awarded in consideration for past services without the payment of a
purchase price. Rights under a stock bonus or restricted stock bonus agreement
may not be transferred other than by will, the laws of descent and distribution
or a qualified domestic relations order while the stock awarded pursuant to an
agreement remains subject to the agreement, provided that a holder of these
rights may designate a beneficiary who may exercise the right following the
holder's death.
Upon a change in control of Vixel, all outstanding stock awards under the
1995 Plan may be assumed by the surviving entity or replaced with similar stock
awards granted by the surviving entity. If the surviving entity does not assume
these awards or provide substitute awards, then with respect to persons whose
service with us or an affiliate has not terminated prior to the change in
control, the awards shall become fully vested and will terminate if not
exercised prior to the change in control.
In December 1998, the board authorized the exchange of all outstanding
options under the 1995 Plan with an exercise price in excess of $2.25 for new
stock options. As a result, optionholders were given the opportunity to receive
repriced options at $2.05 per share. The repriced options had a new vesting
schedule, under which electing optionees received credit toward the vesting of
their new option equal to one-half of the time elapsed under their old option.
Options for 813,205 shares of common stock were repriced and exchanged for new
options issued in December 1998.
As of May 31, 1999, there were 3,189,002 shares of common stock under the
1995 Plan, held by 166 employees and at a weighted average exercise price of
$1.52. The 1995 Plan will terminate in [July 2009], unless terminated sooner by
the board of directors.
Employee Stock Purchase Plan
Effective upon the completion of this offering, we will implement an
employee stock purchase plan. A total of shares of common stock
have been reserved for issuance under this purchase plan. [Each year, the number
of shares reserved for issuance under the 1995 Plan will automatically be
increased by [ %] of the total number of shares of common stock then
outstanding or, if less, by [ ] shares.] The purchase plan is
intended to qualify as an employee stock purchase plan within the meaning of
section 423 of the Internal Revenue Code. Under the purchase plan, the board of
directors or a committee comprised of at least two members of the board of
directors may authorize
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<PAGE> 53
participation by eligible employees, including officers, in periodic offerings
following the commencement of the purchase plan. The initial offering under the
purchase plan will commence on the effective date of this offering and terminate
on [April 2, 2000].
Unless otherwise determined by the board of directors, employees are
eligible to participate in the purchase plan only if they are customarily
employed by us or one of our subsidiaries designated by the board of directors
for at least 20 hours per week and five months per calendar year. Employees who
participate in an offering may have up to 15% of their earnings withheld
pursuant to the purchase plan. The amount withheld is then used to purchase
shares of the common stock on specified dates determined by the board of
directors. The price of common stock purchased under the purchase plan will be
equal to 85% of the lower of the fair market value of the common stock at the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in an offering at any time during that
offering, and their participation will end automatically on termination of their
employment with us or one of our subsidiaries.
In the event of a merger, reorganization, consolidation or liquidation
involving Vixel, the board of directors has discretion to provide that each
right to purchase common stock will be assumed or an equivalent right
substituted by the successor corporation or the board of directors may provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to a merger or other transaction. The board of directors has
the authority to amend or terminate the purchase plan, provided, however, that
no action may adversely affect any outstanding rights to purchase common stock.
401(k) Plan
In January 1997, the board of directors adopted the Vixel Corporation
401(k) plan, which is intended to be a tax qualified employee savings retirement
plan, covering our employees who are at least 21 years of age, have at least six
months of service with us and work a minimum of 1,000 hours during the plan
year. Eligible employees may make pre-tax contributions to the 401(k) plan of up
to 15% of their eligible earnings, subject to a statutorily determined annual
limit. In addition, eligible employees may make roll-over contributions to the
401(k) plan from a tax-qualified retirement plan. The 401(k) plan allows us to
make discretionary matching and additional profit sharing contributions to an
employee's account.
EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
In April 1999, we entered into an employment agreement with James M.
McCluney, our president and chief executive officer. Mr. McCluney will be paid
an annual base salary of $300,000 during his first year of employment, after
which time his base salary will be reviewed, and potentially adjusted, by the
compensation committee. The agreement also requires us to pay Mr. McCluney an
annual incentive bonus of up to 100% of his base salary rate then in effect,
with a target payout rate of 50%, subject to his satisfaction of performance
criteria to be determined by the compensation committee and so long as he serves
as our president and chief executive officer for the year and during the first
quarter of the following calendar year. Mr. McCluney may defer all or any
portion of his annual incentive bonus. We also agreed to reimburse Mr. McCluney
for his relocation expenses associated with moving his family to Washington. In
the event that Mr. McCluney is terminated without cause, he will be entitled to
severance in the amount of one year's base salary at the rate then in effect,
any deferred incentive bonuses and continued vesting of his stock options for
one year.
We also granted Mr. McCluney an option to purchase up to 1,500,000 shares
of our common stock at an exercise price of $2.05 per share. This option vests
with respect to 375,000 shares on April 26, 2000, and then monthly thereafter in
36 equal installments. Under the terms of the option agreement, Mr. McCluney may
exercise unvested options; however, Vixel has a right to repurchase any of his
unvested shares. If there is a change in control of Vixel, Mr. McCluney's
options will accelerate and vest immediately on the occurrences and in the
amounts as follows:
(1) 750,000 shares if there is a change of control before April 26, 2000
and his options are not assumed or replaced by substantially equivalent
options;
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<PAGE> 54
(2) the greater of 375,000 or half the unvested shares if there is a change
of control on or after April 26, 2000; and
(3) if his employment is terminated involuntarily, other than for cause, by
a successor company then as set forth above in (1) or (2) depending on
the date.
In December 1998, we entered into an employment agreement with Stanley H.
Reese, our vice president of product development. Mr. Reese is paid an annual
base salary of $150,000. He is also eligible to receive additional compensation
including a bonus linked to performance of up to $65,000 and additionally any
amounts that the compensation committee, in its sole discretion, may determine.
We granted Mr. Reese an option to purchase up to 325,000 shares of our common
stock at an exercise price of $2.05 per share. This option vests with respect to
81,250 shares on January 20, 2000, and then monthly thereafter in 36 equal
installments. If we terminate Mr. Reese prior to May 31, 2000 without cause, he
is entitled to receive $150,000 plus all accrued bonus that he has earned as of
the termination date.
In November 1998, we entered into an employment agreement with Gregory
Olbright, in connection with Mr. Olbright's transition from our president and
chief executive officer to chairman of the board. Under the terms of his
employment agreement, Mr. Olbright receives an annual base salary of $50,000
while serving as our chairman. We granted Mr. Olbright an option for 1,050,000
shares of common stock at an exercise price of $2.05 per share. Under the terms
of the option agreement, Mr. Olbright may exercise unvested options; however,
Vixel has a right to repurchase any of his unvested shares. This agreement also
provides that Mr. Olbright will act as a part-time employee, for which he will
receive an annual salary of $25,000.
In August 1998, we entered into an employment agreement with Kurtis L.
Adams, our chief financial officer and vice president of finance. He is paid an
annual base salary of $140,000. Mr. Adams also is eligible to receive additional
compensation, bonus and benefits, in the sole discretion of the compensation
committee of our board of directors. We also granted Mr. Adams an option to
purchase up to 200,000 shares of our common stock at an exercise price of $4.50
per share. On the first anniversary of the grant, options for 43,750 shares will
vest. The remainder vest in monthly increments of 3,646 over the next 24 months
and then 5,729 per month until fully vested. Under the terms of the option
agreement, Mr. Adams may exercise unvested options; however, Vixel has a right
to repurchase any of his unvested shares. [As of May 31, 1999, Mr. Adams had
exercised options for 144,102 shares, all of which are subject to a right to
repurchase in favor of Vixel.] If there is a change in control of Vixel at any
time prior to September 21, 1999 and Mr. Adams is terminated without cause or
there is a significant change in his responsibilities, vesting of his options
will accelerate by 12 months. In addition, following a change in control of
Vixel subsequent to September 21, 1999, if Mr. Adams is terminated without cause
or there is a significant change in his responsibilities, all his options
immediately will vest the greater of one half of any unvested shares or 12
months of accelerated vesting.
In February 1998, we entered into employment agreements with Stuart B.
Berman, our chief technology officer, and Jay R. O'Donald, our vice president of
operations, in connection with our acquisition of Arcxel Technologies. These
employment agreements set the annual base salary for Mr. O'Donald at $147,500
and for Mr. Berman at $145,000. Their employment agreements provide, that if
either employee voluntarily terminates his employment with Vixel, is terminated
for cause, or in the event of a merger of Vixel in which his options are not
assumed or substituted by the acquiring entity with new options, we have the
right to repurchase any unvested shares then held by the employee. Mr.
O'Donald's agreement allows Vixel to repurchase up to 284,854 shares. This
number is reduced by 10,647 shares for each month of his employment from
February 28, 1998 until January 31, 2000, after which the number is reduced at a
rate of 5,868 shares per month. Mr. Berman's agreement allows Vixel to
repurchase up to 477,992 shares. This number is reduced by 19,024 shares for
each month of his employment from February 28, 1998 until January 31, 2000,
after which the remaining balance is reduced at a rate of 4,288 shares per
month. Both employment agreements may be terminated at any time by either party.
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<PAGE> 55
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 that individual's fiduciary duties as a director except for liability (A) for
any breach of the director's duty of loyalty to the company or to its
stockholders, (B) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (C) for unlawful payments
of dividends or unlawful stock repurchases or redemptions as provided in section
174 of the Delaware General Corporation Law or (D) 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 fullest extent
not prohibited 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 Vixel upon an undertaking by
him or her to repay any advances if it is ultimately determined that he or she
is not entitled to indemnification.
We intend to enter into separate indemnification agreements with our
directors and officers. These agreements will require us to, among other things,
indemnify the director or officer against expenses, including attorney's fees,
judgements, fines and settlements paid by the individual in connection with any
action, suit or proceeding arising out of the individual's status or service as
a director or officer of Vixel, other than liabilities arising from willful
misconduct or conduct that is knowingly fraudulent or deliberately dishonest,
and to advance expenses incurred by the individual in connection with any
proceeding against him or her individual with respect to which he or she
individual may be entitled to indemnification by us. We believe that our
certificate of incorporation 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 Vixel 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
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers or persons controlling Vixel,
we have been informed that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
50
<PAGE> 56
CERTAIN TRANSACTIONS
Certain stock option grants to our directors and executive officers are
described in this prospectus under the caption "Management -- Board
Compensation" and "-- Executive Compensation."
WESTERN DIGITAL
In March 1996, we issued 2,000,000 shares of series D preferred stock and a
secured promissory note in the amount of $2.0 million to Western Digital
Corporation in connection with our purchase of certain assets. In March 1999, we
issued to Western Digital Corporation a warrant to purchase 16,490 shares of
series E preferred stock at an exercise price of $10.00 a share in connection
with an extension of the secured promissory note. Within two days of the closing
of this offering, we must pay off all outstanding principal and accrued interest
on the note, which currently totals $2.0 million. In connection with our
purchase of assets from Western Digital, Charles A. Haggerty, the chairman,
president and chief executive officer of Western Digital, joined our board of
directors.
SERIES E PREFERRED STOCK FINANCING
In October 1996, we issued, in a private placement transaction, 4,529,221
shares of series E preferred stock at a price of $4.50 per share. The following
table summarizes the shares of preferred stock purchased by Named Executive
Officers, directors and 5% stockholders, and persons and entities associated
with them:
<TABLE>
<CAPTION>
SERIES E
INVESTOR PREFERRED STOCK
-------- ---------------
<S> <C>
Kevin A. Fong/Entities affiliated with Mayfield Fund........ 202,222
Entities affiliated with Menlo Ventures..................... 202,222
Werner F. Wolfen............................................ 38,889
</TABLE>
CIELO COMMUNICATIONS
In February 1998, we sold our laser diode fabrication facility and gigabit
Ethernet transceiver product line to Cielo Communications for $6.9 million in
cash. In connection with this sale, Cielo assumed a portion of our liabilities.
Immediately prior to the asset purchase, Cielo sold $10.0 million of stock in a
private placement to investors including Herb Alpert and investment entities
managed by Mayfield Fund and Menlo Ventures, each a beneficial owner of more
than 5% of our capital stock. Gregory R. Olbright received, for services
rendered in connection with the formation of Cielo, 500,000 shares of Cielo and
an option to purchase 500,000 shares of Cielo at an exercise price of $0.20 per
share. Mr. Olbright is our chairman of the board of directors and, at the time
of this transaction, was our president and chief executive officer.
ARCXEL TECHNOLOGIES
In February 1998, we acquired Arcxel Technologies in exchange for 1,539,788
shares of common stock and 1,759,303 shares of series F preferred stock. In
connection with this acquisition, Timothy M. Spicer, a director of Arcxel,
joined our board of directors and Stuart B. Berman and Jay R. O'Donald, the
co-founders of Arcxel, became executive officers of Vixel. The following table
summarizes the shares of series F preferred stock and common stock issued to our
Named Executive Officers, directors and 5% stockholders, and persons and
entities associated with them in connection with the Arcxel acquisition:
<TABLE>
<CAPTION>
SERIES F COMMON
INVESTOR PREFERRED STOCK STOCK
-------- --------------- -------
<S> <C> <C>
Stuart B. Berman............................................ 979,692
Jay R. O'Donald............................................. 544,804
Entities affiliated with Timothy M. Spicer.................. 1,744,011
</TABLE>
51
<PAGE> 57
DIRECTOR AND OFFICER PROMISSORY NOTES
Between April 1998 and May 1999, Messrs. Olbright, McCluney and Adams
delivered promissory notes to us to finance their purchase of common stock upon
exercise of stock options. All of the notes are full-recourse, secured by the
shares purchased, bear interest at a rate of 5.75% and are due and payable upon
the earlier of four years from issuance or six months after the termination of
the officer's employment. In April 1998, Gregory R. Olbright, the chairman of
our board of directors, delivered to us a $3.5 million full-recourse promissory
note to purchase 1,050,000 shares of common stock. We repurchased these shares
in exchange for cancellation of the note in October 1998. In April 1999, in
connection with the exercise of a stock option for 622,936 shares of our common
stock, Mr. Olbright delivered to us a $1.3 million full-recourse promissory
note. In April 1999, in connection with the exercise of a stock option for
1,500,000 shares of our common stock, James M. McCluney, our president and chief
executive officer, delivered to us a $3.1 million full-recourse promissory note.
In May 1999, in connection with the exercise of stock options to purchase
181,602 shares of our common stock, Kurtis L. Adams, our chief financial
officer, delivered to us a $372,000 full-recourse promissory note.
In May 1999, in connection with the exercise of stock options by each of
our non-employee directors to purchase 25,000 shares of our common stock, these
directors delivered to us a $100,000 promissory note. All of the notes are
full-recourse, secured by the shares purchased, bear interest at a rate of 5.75%
and are due and payable the earlier of the date which is four years from
issuance or six months after the termination of the director's service to us.
In April 1999, we loaned $62,000 to Stuart B. Berman, our chief technology
officer. This loan is secured by the pledge of 979,692 shares of our common
stock held by Mr. Berman. This loan has similar terms as the other director and
officer notes except that it is due and payable on April 15, 2000.
INDEMNIFICATION AGREEMENTS
We intend to enter into separate indemnification agreements with our
executive officers and directors. These agreements will require us to, among
other things, indemnify the officer or director against liabilities that may
arise by reason of their status or service as an officer or director, other than
liabilities arising from willful misconduct of a culpable nature, and to advance
his or her expenses incurred as a result of any proceeding against them as to
which they could be indemnified.
REGISTRATION RIGHTS AGREEMENTS
A number of holders of common stock and warrants have registration rights
with respect to their shares of common stock and common stock issuable upon
exercise or conversion of their warrants.
CONFLICT OF INTEREST POLICY
We believe that all transactions with affiliates described above were made
on terms no less favorable to us than could have been obtained from unaffiliated
third parties. Our policy is to require that a majority of the independent and
disinterested outside directors on our board of directors approve all future
transactions between us and our officers, directors, principal stockholders and
their affiliates. These transactions will continue to be on terms no less
favorable to us than we could obtain from unaffiliated third parties.
52
<PAGE> 58
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of our common stock as of May 31, 1999, and as adjusted to
reflect the sale of common stock offered hereby, as to (A) each person (or group
of affiliated persons) known by us to own beneficially more than 5% of our
outstanding common stock, (B) each of our directors, (C) each of the Named
Executive Officers and (D) all directors and executive officers of Vixel as a
group.
Unless otherwise indicated, the address for each of the named individuals
is c/o Vixel Corporation, 11911 Northcreek Parkway South, Bothell, Washington
98011. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of common stock held by them.
Beneficial ownership is determined in accordance with the rules of the SEC.
Shares of common stock subject to options or warrants that are exercisable or
will become exercisable within 60 days of May 31, 1999, are deemed outstanding
for the purpose of computing the percentage of ownership of the person or entity
holding options or warrants but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person or entity. Percentage
of shares beneficially owned is based on 26,826,570 shares of common stock
outstanding as of May 31, 1999 and shares of common stock to be outstanding upon
the consummation of this offering.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY
OWNED
SHARES ------------------------
BENEFICALLY BEFORE AFTER
NAME AND ADDRESS OWNED OFFERING OFFERING
---------------- ----------- ---------- ----------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
James M. McCluney................................... 1,500,000 5.6%
Richard G. Helgeson(1).............................. 90,000 *
Jay R. O'Donald(2).................................. 613,357 2.3
Marlu E. Allan(3)................................... 100,119 *
Karen L. Howard(4).................................. 72,940 *
Gregory R. Olbright(5).............................. 2,478,125 9.2
Kevin A. Fong(6).................................... 2,268,947 8.5
Charles A. Haggerty(7).............................. 2,116,490 7.9
Juan A. Rodriguez(8)................................ 171,629 *
Timothy M. Spicer(9)................................ 1,809,011 6.7
Werner F. Wolfen(10)................................ 233,832 *
5% STOCKHOLDERS
Herb Alpert......................................... 3,105,637 11.6
360 N. La Cienega Boulevard
Los Angeles, CA 90048-1925
Mayfield Fund(11)................................... 2,243,947 8.4
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025-7076
Menlo Ventures(12).................................. 2,243,947 8.4
3000 Sand Hill Road, Building Four, Suite 100
Menlo Park, CA 94025-7116
Western Digital Corporation(13)..................... 2,016,490 7.5
8105 Irvine Center Drive
Irvine, CA 92718
AVI/Arcxel Investors L.P.(14)....................... 1,744,011 6.5
100 Pine Street, Suite 2700
San Francisco, CA 94111-5213
ALL EXECUTIVE OFFICERS AND DIRECTORS AS A
GROUP(15)......................................... 12,507,493 46.1
</TABLE>
53
<PAGE> 59
- -------------------------
* Represents beneficial ownership of less than 1%
(1) All of these shares are subject to options exercisable within 60 days of
May 31, 1999.
(2) Includes 68,553 shares subject to options exercisable within 60 days of May
31, 1999.
(3) Ms. Allan resigned as an executive officer of Vixel in February 1999.
(4) Ms. Howard resigned as an executive officer of Vixel in January 1999.
(5) Includes 408,164 shares held by Olbright LLC.
(6) Includes 2,243,947 shares held by the entities listed in note 11 below. Mr.
Fong is a general partner of the Mayfield Fund. Mr. Fong disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest therein.
(7) Includes 2,016,490 shares held by Western Digital Corporation and 75,000
shares held by Haggerty, Charles A. & Carleen R. Haggerty Trust. Mr.
Haggerty is president, chief executive officer and chairman of Western
Digital Corporation.
(8) Includes 100,000 shares held by the Juan A. Rodriguez Irrevocable Trust.
(9) Includes 1,744,011 shares held by the entities listed in note 14 below and
40,000 shares subject to options exercisable with 60 days of May 31, 1999.
Mr. Spicer is a general manager of San Francisco Sentry Investment Group,
the general partner for the entities listed in note 4.
(10) Includes 208,832 shares held in trust for the current and former partners
of Irell and Manella LLP. Mr. Wolfen disclaims beneficial ownership of the
shares held in trust except to the extent of his pecuniary interest
therein. Excludes shares held by Herb Alpert and Jerome Moss for which Mr.
Wolfen has a general power of attorney. Mr. Wolfen disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.
(11) Includes 2,131,750 shares held by Mayfield VII, a California limited
partnership, and 112,197 shares held by Mayfield Associates Fund II, a
California limited partnership. Kevin A. Fong, one of our directors, is a
general partner of the Mayfield Fund. Mr. Fong disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
therein.
(12) Includes 33,206 shares held by Menlo Entrepreneurs Fund VI, L.P. and
2,210,741 held by Menlo Ventures VI L.P.
(13) Includes 16,490 shares issuable upon the exercise of a warrant. Charles A.
Haggerty, a director of Vixel, is chairman, chief executive officer and
chairman of Western Digital Corporation. Mr. Haggerty disclaims beneficial
ownership of the shares held by Western Digital.
(14) Of these shares, 860,217 shares are held by AVI/Arcxel Investors A, L.P.,
669,058 shares are held by AVI/Arcxel Investors B, L.P., and 214,736 shares
are held by AVI/Arcxel Investors C, L.P. The general partner of AVI/Arcxel
Investors A, L.P., AVI/Arcxel Investors B, L.P. and AVI/Arcxel Investors C,
L.P. is San Francisco Sentry Investment Group. Timothy M. Spicer, one of
our directors, is a general manager of San Francisco Sentry Investment
Group. Mr. Spicer disclaims beneficial ownership of these shares except to
the extent of his pecuniary interest therein.
(15) Includes 270,923 shares subject to options exercisable within 60 days of
May 31, 1999.
54
<PAGE> 60
DESCRIPTION OF CAPITAL STOCK
On the closing of this offering, our authorized capital stock will consist
of 65,000,000 shares of common stock, $.001 par value, and 5,000,000 shares of
preferred stock, $.001 par value, after giving effect to the amendment and
restatement of our certificate of incorporation to delete references to series
A, series B, series C, series D, series E and series F preferred stock, which
will occur upon conversion of the preferred stock into common stock upon the
closing of this offering, and the subsequent authorization of shares of
undesignated preferred stock, as described below.
COMMON STOCK
As of April 4, 1999, there were 23,410,701 shares of common stock
outstanding that were held of record by approximately 180 stockholders after
giving effect to the exercise of warrants to purchase up to 894,333 shares of
series A preferred stock and the conversion of all of our outstanding preferred
stock into common stock at a one-to-one ratio. There will be
shares of common stock outstanding after giving effect to the sale of the shares
of common stock to the public 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 all dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available therefor. In
the event of the liquidation, dissolution or winding up of Vixel, the holders of
our common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution 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 applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
issued upon completion of this offering will be fully paid and nonassessable.
PREFERRED STOCK
On the closing of this offering, our certificate of incorporation will
authorize 5,000,000 shares of preferred stock. The board of directors has the
authority to issue the preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series or the designation of any series, without 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 Vixel without further
action by the stockholders. For example, the board of directors could issue
preferred stock that has the power to prevent a change of control transaction.
The issuance of preferred stock with voting and conversion rights may adversely
affect the voting power of the holders of common stock, including the loss of
voting control to others. We currently have no plans to issue any of the
preferred stock.
WARRANTS
Upon completion of this offering, we will have outstanding warrants to
purchase up to 404,798 shares of common stock. Some of these warrants were
originally to purchase preferred stock, but upon the closing of the offering,
they will automatically become warrants to purchase shares of our common stock.
The numbers of shares, exercise prices and dates of these warrants are
summarized below:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
- ---------------- -------------- ---------------
<C> <C> <S>
175,714 $ 3.50 Five years after the closing of this offering
69,261 5.63 October 16, 2001
25,000 5.62 One year after the closing of this offering
Up to 18,333 7.50 December 18, 2003
116,490 10.00 November 25, 2003 to March 31, 2004
</TABLE>
55
<PAGE> 61
REGISTRATION RIGHTS OF CERTAIN HOLDERS
After this offering, the holders of 15,180,320 shares of common stock and
warrants to purchase up to 404,798 shares of common stock will be entitled to
rights with respect to the registration of such shares under the Securities Act
of 1933. The holders of registration rights are those investors, including some
former officers and a founder that hold shares of our preferred stock and
warrants to purchase shares of our series C preferred stock and series E
preferred stock. Under the terms of the agreements between us and the holders of
these securities, the holders of 50% of these securities may require, on two
occasions at any time after October 1, 1999, that Vixel use its best efforts to
register these securities for public resale, provided the proposed aggregate
offering price is at least $15.0 million and the offering is for at least 20% of
the shares entitled to be registered then outstanding. Further, if we propose to
register any of our securities under the Securities Act, either for our own
account or for the account of other security holders exercising registration
rights, these holders are entitled to notice of the registration and are
entitled to include shares of common stock in these registration, subject to the
ability of the underwriters to limit the number of shares included in the
offering. Further, holders may require us to file additional registration
statements on Form S-3 subject to certain limitations. All fees and expenses of
these registrations, other than underwriting discounts and commissions, will be
borne by us.
ANTITAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
DELAWARE LAW
CERTIFICATE OF INCORPORATION
On the closing of this offering, our certificate of incorporation will
provide that all stockholder actions must be effected at a duly called meeting
and not by a consent in writing. This provision could discourage potential
acquisition proposals and could delay or prevent a change of control of Vixel.
ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to various exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder, unless: (A) prior to that date, the board of directors
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder; (B) upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (1)
by persons who are directors and also officers and (2) by employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (C) on or subsequent to that date, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combination to include: (A) any merger or
consolidation involving the corporation and the interested stockholder; (B) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (C) subject to various
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (D)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (E) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
56
<PAGE> 62
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American
Securities Transfer & Trust Company.
LISTING
We have applied to list our common stock on the Nasdaq National Market of
the Nasdaq Stock Market, Inc., under the trading symbol "VIXL."
57
<PAGE> 63
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 those shares are held by "Affiliates" of Vixel, as that term is
defined in Rule 144 under the Securities Act.
The remaining shares of common stock held by existing
stockholders as of , will, upon completion of this offering, be
"restricted securities" as that term is defined under Rule 144. We issued and
sold these restricted securities in private transactions in reliance on
exemptions from registration under the Securities Act. These restricted
securities 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 executive officers, directors
and stockholders of Vixel, who collectively hold shares, have
agreed not to offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any of these shares for a period of 180 days from the date
of this prospectus.
Upon expiration of the lock-up agreements, 180 days after the effective
date of the prospectus, 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 up to 404,798 shares will be
outstanding, which, if exercised pursuant to net-exercise provisions, would be
immediately salable without restriction upon the expiration of the 180 day
lock-up period. If those warrants were to be otherwise exercised, they would be
salable 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
Vixel are aggregated, who has beneficially owned those shares for at least one
year, including the holding period of any prior owner who is not an Affiliate of
Vixel, 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 those sale. Sales under Rule 144 are also subject to manner of sale and
notice requirements and to the availability of current public information about
Vixel. Under Rule 144(k), a person who is not deemed to have been an Affiliate
of Vixel 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
Vixel, is entitled to sell those shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Of the options to purchase shares of common stock outstanding as
of , on the date 180 days following the assumed effective date of
this offering, options to purchase shares of common stock will be
fully exercisable and saleable pursuant to Rule 701 or registration on Form S-8.
We intend to file, within 180 days of effective date of this offering, a
registration statement on Form S-8 to register approximately
shares of common stock reserved for issuance under our 1995 stock option and
employee stock purchase plans. The registration statement will become effective
automatically upon filing. Shares issued under these plans, after the filing of
the registration statement on Form S-8, may be sold in the open market, subject,
in the case of certain holders, to the Rule 144
58
<PAGE> 64
limitations applicable to Affiliates, the above-referenced lock-up agreements
and vesting restrictions imposed by us.
In addition, following this offering, the holders of 15,180,320 shares of
common stock and warrants to purchase up to 404,798 shares of common stock, or
their transferees, will have rights to require us to register their shares for
future sale.
59
<PAGE> 65
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc. and Needham &
Company, Inc., have severally agreed with us, subject to the terms and
conditions set forth in the underwriting agreement, to purchase from us the
numbers of shares of common stock set forth opposite their names below. The
underwriters are committed to purchase and pay for all these shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Bear, Stearns & Co. Inc.....................................
Needham & Company, Inc......................................
--------
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
that 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 from us. 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 the 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 by this prospectus. If
purchased, the 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 the option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered hereby. If the option is exercised in full, the total public offering
price and proceeds to us will be $ and $ , respectively.
The following table summarizes the compensation to be paid to the
underwriters by us:
<TABLE>
<CAPTION>
TOTAL
----------------------
WITHOUT WITH
PER OVER- OVER-
SHARE ALLOTMENT ALLOTMENT
-------- --------- ---------
<S> <C> <C> <C>
Underwriting Discounts and Commissions payable by us....... $ $ $
</TABLE>
We estimate that expenses payable by us in connection with this offering,
other than the underwriting discounts and commissions referred to above, will be
approximately $850,000.
Indemnity. The underwriting agreement contains covenants of indemnity
between 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. All our executive officers, directors, stockholders of
record, optionholders and warrantholders have agreed with BancBoston Robertson
Stephens, for a period of 180 days after the date
60
<PAGE> 66
of this prospectus and 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 stock, any option or warrant 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 stockholders 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 and
without the prior written consent of BancBoston Robertson Stephens:
- Consent to the disposition of any shares held by stockholders 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,
and (3) our issuance of stock options under our existing stock option and
purchase plans. 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 "VIXL."
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 these
negotiations are prevailing market conditions, certain of our financial
information, market valuations of other companies that we and the underwriters
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 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 that underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by the underwriter or syndicate
member. The representatives have advised us that these transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discounted at any time.
Directed share program. At our request, the underwriters have reserved up
to five percent of common stock offered by us for sale, at the initial public
offering price, to our directors, officers, employees, business associates and
related persons. The number of shares of common stock available for sale to the
general public will be reduced to the extent these individuals purchase the
reserved shares. Any reserved shares which are not so purchased will be offered
by the underwriters to the general public on the same basis as the other shares
offered hereby.
61
<PAGE> 67
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Cooley Godward LLP, Kirkland, Washington. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by Gray Cary Ware & Freidenrich LLP, Palo Alto, California.
EXPERTS
The financial statements of Vixel Corporation as of December 28, 1997 and
January 3, 1999 and for each of the three-years in the period ended January 3,
1999 included in this prospectus have been so included in reliance on the report
of PricewaterhouseCoopers LLP, independent accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of Arcxel Technologies, Inc. as of December 31,
1997 and for the year then ended included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Arcxel Technologies, Inc. as of December 31,
1996 and for the period from June 18, 1996 (inception) to December 31, 1996
included in this prospectus have been so included in reliance upon the report of
KPMG LLP, independent certified public accountants and upon the authority of
said firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act that registers the shares of our common stock to be sold in this
offering. The registration statement, including the attached exhibits and
schedules, contain additional relevant information about us and our capital
stock. The rules and regulations of the SEC allow us to omit certain information
included in the registration statement from this document.
In addition, upon completion of this offer, we will become subject to the
reporting and information requirements of the Securities Exchange Act and,
accordingly, will file periodic reports, proxy statements and other information
with the SEC. You may read and copy this information at the following public
reference rooms of the SEC:
<TABLE>
<S> <C> <C>
Washington, D.C. New York, New York Chicago, Illinois
450 Fifth Street, N.W., 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. You may obtain information on the operation of
the public reference rooms by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an internet website that contains reports, proxy
statements and other information about issuers, like Vixel, who file
electronically with the SEC. The address of that Web site is http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing
audited financial statements, and make available to our stockholders quarterly
reports for the first three quarters of each fiscal year containing unaudited
interim financial information.
62
<PAGE> 68
INDEX TO FINANCIAL STATEMENTS
VIXEL CORPORATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheet as of December 28, 1997, January 3, 1999, and
April 4, 1999 (unaudited)................................. F-3
Statement of Operations for the fiscal years ended December
29, 1996, December 28, 1997 and January 3, 1999, and for
the quarters ended March 29, 1998 and April 4, 1999
(unaudited)............................................... F-4
Statement of Changes in Stockholders' Equity (Deficit) for
the fiscal years ended December 29, 1996, December 28,
1997 and January 3, 1999.................................. F-5
Statement of Cash Flows for the fiscal years ended December
29, 1996, December 28, 1997 and January 3, 1999 and for
the quarters ended March 29, 1998 and April 4, 1999....... F-6
Notes to Financial Statements............................... F-7
</TABLE>
ARCXEL TECHNOLOGIES, INC.
<TABLE>
<S> <C>
Reports of Independent Accountants.......................... F-23
Balance Sheet as of December 31, 1996 and 1997.............. F-25
Statement of Operations for the periods from June 18, 1996
(inception) to December 31, 1996, the year ended December
31, 1997 and the period from June 18, 1996 (inception) to
December 31, 1997......................................... F-26
Statement of Changes in Stockholders' Equity (Deficit) for
the period from June 18, 1996 (inception) to December 31,
1996 and the year ended December 31, 1997................. F-27
Statement of Cash Flows for the period from June 18, 1996
(inception) to December 31, 1996, the year ended December
31, 1997 and the period from June 18, 1996 (inception) to
December 31, 1997......................................... F-28
Notes to Financial Statements............................... F-29
Unaudited Pro Forma Combined Statement of Operations........ F-36
</TABLE>
F-1
<PAGE> 69
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Vixel Corporation
In our opinion, the accompanying balance sheet and the related statements
of operations, of changes in stockholders' equity (deficit) and of cash flows
present fairly, in all material respects, the financial position of Vixel
Corporation at December 28, 1997 and January 3, 1999, and the results of its
operations and its cash flows for the three years in the period ended January 3,
1999, in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Seattle, Washington
May 19, 1999, except for paragraph 3 of Note 8
which is as of June 22, 1999.
F-2
<PAGE> 70
VIXEL CORPORATION
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DEFICIT AT
DECEMBER 28, JANUARY 3, APRIL 4, APRIL 4,
1997 1999 1999 1999
------------ ---------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents................................. $ 3,776 $ 3,841 $ 596
Investments............................................... -- 2,490 3,635
Accounts receivable, net of allowance for doubtful
accounts of $36, $231 and $255 (unaudited),
respectively............................................ 5,604 6,032 5,223
Inventory................................................. 861 1,546 1,245
Prepaid expenses and other current assets................. 495 616 801
-------- -------- -------- --------
Total current assets...................................... 10,736 14,525 11,500
Property and equipment, net............................... 7,569 7,378 7,284
Goodwill and intangibles, net............................. 1,007 5,579 5,075
Other assets.............................................. 622 683 562
-------- -------- -------- --------
Total assets......................................... $ 19,934 $ 28,165 $ 24,421
======== ======== ======== ========
LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
Current liabilities
Current portion of long-term debt and capital leases...... $ 3,457 $ 1,564 $ 1,585
Accounts payable.......................................... 2,571 4,821 4,645
Accrued liabilities....................................... 2,356 7,855 8,123
-------- -------- -------- --------
Total current liabilities.......................... 8,384 21,568 21,738
Long-term debt and capital leases......................... 4,254 5,528 5,525
Short-term note payable................................... -- 7,328 7,385
Other long-term liabilities............................... 1,803 1,000 1,000
-------- -------- -------- --------
Total liabilities.................................... 14,441 28,096 28,263
-------- -------- -------- --------
Commitments and contingencies (Note 10)
Mandatorily redeemable convertible preferred stock Series E;
$.001 par value; 4,623,482 shares authorized; 4,529,221
shares issued and outstanding; redemption and liquidation
value of $20,382, plus unpaid dividends................... 19,523 19,993 20,042 $ --
-------- -------- -------- --------
Stockholders' deficit
Convertible preferred stock (Note 12)....................... 12 14 14 --
Common stock, $.001 par value; 30,000,000 shares authorized;
1,517,178, 4,347,569 and 4,385,703 (unaudited) shares
issued and outstanding, respectively; 24,275,034
(unaudited) shares issued and outstanding pro forma....... 2 5 5 24
Additional paid-in capital.................................. 21,015 36,349 37,343 58,497
Deferred compensation....................................... (915) (915)
Treasury stock, at cost; 100,000 shares..................... (50) (50) (50) (50)
Accumulated deficit......................................... (35,009) (56,242) (60,281) (60,281)
-------- -------- -------- --------
Total stockholders' deficit.......................... (14,030) (19,924) (23,884) $ (2,725)
-------- -------- -------- --------
Total liabilities, mandatorily redeemable convertible
preferred stock and stockholders' deficit.......... $ 19,934 $ 28,165 $ 24,421 --
======== ======== ======== ========
</TABLE>
See accompanying notes to the financial statements.
F-3
<PAGE> 71
VIXEL CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED QUARTER ENDED
----------------------------------------- -------------------------
DECEMBER 29, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4,
1996 1997 1999 1998 1999
------------ ------------ ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue.......................... $ 6,941 $ 22,783 $ 39,445 $ 10,623 $ 10,522
Cost of revenue.................. 7,342 19,047 36,199 8,365 7,529
-------- ---------- ----------- ----------- -----------
Gross profit (loss).............. (401) 3,736 3,246 2,258 2,993
-------- ---------- ----------- ----------- -----------
Research and development......... 13,107 9,360 16,228 7,578 3,101
Selling, general and
administrative................. 3,549 7,629 14,521 2,874 3,045
Amortization and writedown of
goodwill and intangibles....... 167 222 2,057 230 340
Amortization of deferred
compensation................... 36 50 -- -- 103
-------- ---------- ----------- ----------- -----------
Total operating expenses....... 16,859 17,261 32,806 10,682 6,589
-------- ---------- ----------- ----------- -----------
Loss from operations............. (17,260) (13,525) (29,560) (8,424) (3,596)
Interest expense................. (610) (920) (1,256) (273) (527)
Interest income.................. 461 620 414 150 79
Gain on sale of division......... -- -- 9,061 9,061 --
Other (expense) income, net...... (243) 66 108 (12) 5
-------- ---------- ----------- ----------- -----------
Net (loss) income................ $(17,652) $ (13,759) $ (21,233) $ 502 $ (4,039)
======== ========== =========== =========== ===========
Net (loss) income available to
common stockholders............ $(17,693) $ (13,955) $ (21,424) $ 449 $ (4,088)
======== ========== =========== =========== ===========
Basic net (loss) income per
share.......................... $ (37.91) $ (12.60) $ (6.88) $ .28 $ (.94)
======== ========== =========== =========== ===========
Diluted net (loss) income per
share.......................... $ (37.91) $ (12.60) $ (6.88) $ .03 $ (.94)
======== ========== =========== =========== ===========
Weighted-average shares
outstanding.................... 466,664 1,107,477 3,113,017 1,601,479 4,368,908
======== ========== =========== =========== ===========
Weighted-average shares
outstanding, assuming
dilution....................... 466,664 1,107,477 3,113,017 15,189,663 4,368,908
======== ========== =========== =========== ===========
Pro forma net loss available to
common stockholders
(unaudited).................... $ (21,233) $ (4,039)
=========== ===========
Pro forma basic and diluted net
loss per share (unaudited)..... $ (.97) $ (.17)
=========== ===========
Pro forma weighted-average shares
outstanding (unaudited)........ 21,828,455 23,363,906
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
F-4
<PAGE> 72
VIXEL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TREASURY STOCK
------------------- ------------------ PAID-IN ---------------- DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL SHARES AMOUNT COMPENSATION
---------- ------ --------- ------ ---------- ------- ------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995......... 10,706,474 $10 335,378 $1 $12,702 100,000 $(50) $ (86)
Stock issued upon acquisition of
Western Digital assets........... 2,000,000 2 7,998
Detachable stock warrants issued
with note and capital lease
agreements....................... 319
Stock options exercised............ 230,650 58
Amortization of deferred
compensation..................... 36
Accretion of mandatorily redeemable
convertible preferred stock...... (41)
Net loss...........................
---------- --- --------- -- ------- ------- ---- -------
Balance, December 29, 1996......... 12,706,474 12 566,028 1 21,036 100,000 (50) (50)
Stock options exercised............ 951,150 1 136
Stock options granted to third
parties.......................... 39
Amortization of deferred
compensation..................... 50
Accretion of mandatorily redeemable
convertible preferred stock...... (196)
Net loss...........................
---------- --- --------- -- ------- ------- ---- -------
Balance, December 28, 1997......... 12,706,474 12 1,517,178 2 21,015 100,000 (50) --
Stock issued upon acquisition of
Arcxel Technologies, Inc......... 1,759,303 2 1,539,788 2 12,115
Stock options assumed upon
acquisition of Arcxel
Technologies, Inc................ 2,566
Shares repurchased above fair
value............................ 251
Stock options exercised............ 1,290,603 1 378
Stock options granted to third
parties.......................... 215
Accretion of mandatorily redeemable
convertible preferred stock...... (191)
Net loss...........................
---------- --- --------- -- ------- ------- ---- -------
Balance, January 3, 1999........... 14,465,777 14 4,347,569 5 36,349 100,000 (50) --
Stock options exercised
(unaudited)...................... 38,134 11
Stock options granted to third
parties (unaudited).............. 14
Deferred compensation
(unaudited)...................... 1,018 (1,018)
Amortization of deferred
compensation (unaudited)......... 103
Accretion of mandatorily redeemable
convertible preferred stock
(unaudited)...................... (49)
Net loss (unaudited)...............
---------- --- --------- -- ------- ------- ---- -------
Balance, April 4, 1999
(unaudited)...................... 14,465,777 $14 4,385,703 $5 $37,343 100,000 $(50) $ (915)
========== === ========= == ======= ======= ==== =======
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY (DEFICIT)
----------- ----------------
<S> <C> <C>
Balance, December 31, 1995......... $ (3,598) $ 8,979
Stock issued upon acquisition of
Western Digital assets........... 8,000
Detachable stock warrants issued
with note and capital lease
agreements....................... 319
Stock options exercised............ 58
Amortization of deferred
compensation..................... 36
Accretion of mandatorily redeemable
convertible preferred stock...... (41)
Net loss........................... (17,652) (17,652)
-------- --------
Balance, December 29, 1996......... (21,250) (301)
Stock options exercised............ 137
Stock options granted to third
parties.......................... 39
Amortization of deferred
compensation..................... 50
Accretion of mandatorily redeemable
convertible preferred stock...... (196)
Net loss........................... (13,759) (13,759)
-------- --------
Balance, December 28, 1997......... (35,009) (14,030)
Stock issued upon acquisition of
Arcxel Technologies, Inc......... 12,119
Stock options assumed upon
acquisition of Arcxel
Technologies, Inc................ 2,566
Shares repurchased above fair
value............................ 251
Stock options exercised............ 379
Stock options granted to third
parties.......................... 215
Accretion of mandatorily redeemable
convertible preferred stock...... (191)
Net loss........................... (21,233) (21,233)
-------- --------
Balance, January 3, 1999........... (56,242) (19,924)
Stock options exercised
(unaudited)...................... 11
Stock options granted to third
parties (unaudited).............. 14
Deferred compensation
(unaudited)......................
Amortization of deferred
compensation (unaudited)......... 103
Accretion of mandatorily redeemable
convertible preferred stock
(unaudited)...................... (49)
Net loss (unaudited)............... (4,039) (4,039)
-------- --------
Balance, April 4, 1999
(unaudited)...................... $(60,281) $(23,884)
======== ========
</TABLE>
See accompanying notes to the financial statements.
F-5
<PAGE> 73
VIXEL CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED QUARTERS ENDED
---------------------------------------- ----------------------
DECEMBER 29, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4,
1996 1997 1999 1998 1999
------------ ------------ ---------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income.................................... $(17,652) $(13,759) $(21,233) $ 502 $(4,039)
Adjustments to reconcile net (loss) income to net
cash used in operating activities:
Depreciation....................................... 1,094 1,962 2,334 529 559
Acquired in-process technology..................... 8,633 -- 5,118 5,118 --
Amortization of goodwill and intangibles........... 337 449 3,061 401 504
Writedown of impaired assets....................... -- -- 1,564 -- --
Amortization of debt discount...................... 216 77 192 112 57
Amortization of deferred compensation.............. 36 50 -- 103
Compensation expense related to stock options...... 39 303 52 14
Loss (gain) on disposal of property and
equipment........................................ 32 (264) -- -- --
Gain on sale of division........................... -- -- (9,061) (9,061) --
Changes in:
Accounts receivable, net......................... (1,431) (3,069) (857) (5,355) 809
Inventory........................................ (110) (470) (667) 77 301
Prepaid expenses and other assets................ (77) (752) (82) 551 (68)
Accounts payable and accrued liabilities......... 1,610 2,156 10,100 1,978 92
-------- -------- -------- ------- -------
Net cash used in operating activities.......... (7,312) (13,581) (9,228) (5,096) (1,668)
-------- -------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of short term investments................... -- -- (2,490) (4,477) (1,145)
Purchase of property and equipment................... (535) (1,022) (1,663) (171) (51)
Proceeds from disposal of property and equipment..... -- 92 -- -- --
Cash paid for acquisition of Arcxel Technologies,
Inc................................................ -- -- (16) (16) --
Cash paid for acquisition of Western Digital
assets............................................. (1,302) -- -- -- --
Proceeds from sale of division....................... -- -- 6,865 6,865 --
-------- -------- -------- ------- -------
Net cash (used in) provided by investing
activities................................... (1,837) (930) 2,696 2,201 (1,196)
-------- -------- -------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit, net.................... -- -- -- 1,763 --
Proceeds from issuance of short-term note payable.... -- -- 7,500 -- --
Proceeds from issuance of long term debt............. 3,500 -- -- -- --
Principal payments on long-term debt and capital
leases............................................. (1,605) (1,743) (1,308) (674) (396)
Amortization of debt issuance costs.................. -- 10 27 7 4
Proceeds from issuance of preferred stock, net....... 19,210 -- -- -- --
Proceeds from issuance of common stock, net.......... 44 137 378 61 11
-------- -------- -------- ------- -------
Net cash provided by (used in) financing
activities................................... 21,149 (1,596) 6,597 1,157 (381)
-------- -------- -------- ------- -------
Net increase (decrease) in cash and cash equivalents... 12,000 (16,107) 65 (1,738) (3,245)
Cash and cash equivalents, beginning of period......... 7,883 19,883 3,776 3,776 3,841
-------- -------- -------- ------- -------
Cash and cash equivalents, end of period............... $ 19,883 $ 3,776 $ 3,841 $ 2,038 $ 596
======== ======== ======== ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest................................. $ 319 $ 397 $ 922 $ 239 $ 475
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Equipment purchased under capital leases............... $ 1,233 $ 3,839 $ 3,187 $ 1,707 $ 409
Transfers of property.................................. $ -- $ 326 $ -- $ -- $ --
Issuance of detachable stock warrants.................. $ 319 $ 89 $ 279 $ -- $ --
Accretion of mandatorily redeemable stock.............. $ 41 $ 196 $ 191 $ 53 $ 49
Acquisitions (Note 2)
Sale of division (Note 3)
</TABLE>
See accompanying notes to the financial statements.
F-6
<PAGE> 74
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Vixel Corporation (the "Company") is a leading provider of comprehensive
interconnect solutions for use in storage area networks, or SANS. Its products
include SAN management software, fabric switches, arbitrated loop hubs and
transceivers. The Company currently sells its products primarily to
manufacturers as well as resellers in the United States.
FISCAL YEAR
The Company has a 52 or 53-week fiscal year ending on the Sunday closest to
December 31. The fiscal years ended December 29, 1996, December 28, 1997 and
January 3, 1999 were 52, 52 and 53 weeks, respectively.
REVENUE RECOGNITION
Revenue is recognized at the time of product shipment, unless we have
future obligations for installation, or we ship product demonstration units. An
allowance is provided for estimated future warranty costs and sales returns.
During the fiscal years ended December 29, 1996 and December 28, 1997, revenue
from government funded research and development arrangements was recognized and
recorded as an offset to the related research and development expenses at the
time specified milestones were met. The Company did not perform any government
funded research and development during the year ended January 3, 1999. The
Company recorded government funded research and development of $2,250,000 and
$993,000 during the fiscal years ended December 29, 1996 and December 28, 1997,
respectively.
CONCENTRATION OF MANUFACTURING AND CREDIT RISK AND SALES TO MAJOR CUSTOMERS
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily accounts receivable and cash
equivalents. The Company performs ongoing credit evaluations of its commercial
customers' financial condition and requires no collateral from these customers.
The Company maintains an allowance for doubtful accounts receivable based upon
its historical experience and the expected collectibility of all accounts
receivable. Credit losses to date have been within the Company's estimates. The
Company has a cash investment policy which generally restricts investments to
ensure preservation of principal and maintenance of liquidity.
The Company's customers primarily include original equipment manufacturers
representing approximately 76%, 96% and 99% of revenue during the years ended
December 29, 1996, December 28, 1997 and January 3, 1999, respectively. Four
original equipment manufacturers represent 68%, 78% and 78% of revenue during
the years ended December 29, 1996, December 28, 1997 and January 3, 1999,
respectively. Two customers represented 46% and 35% of revenue for the year
ended December 29, 1996. Four customers represented 50%, 13%, 12% and 10% of
revenue for the year ended December 28, 1997. Three customers represented 40%,
16% and 14% of revenues for the year ended January 3, 1999. Original equipment
manufacturers comprised 99% of the accounts receivable balance at both December
28, 1997 and January 3, 1999.
The Company's inventory is produced by two contract manufacturers. The
Company believes that alternative manufacturing sources could be obtained and
qualified to supply its products.
F-7
<PAGE> 75
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
investments, accounts receivable, accounts payable, accrued liabilities,
short-term notes payable, long-term debt and capital leases and mandatorily
redeemable convertible preferred stock. Except for long-term debt, capital
leases and mandatorily redeemable convertible preferred stock, the carrying
amounts of financial instruments approximate fair value due to their short
maturities. The fair value of long-term debt and capital leases at December 28,
1997 and January 3, 1999 is not materially different from the carrying amount,
based on interest rates available to the Company for similar types of
arrangements. The Company considers the fair value of the mandatorily redeemable
convertible preferred stock to be the liquidation value plus unpaid dividends.
CASH AND CASH EQUIVALENTS
Highly liquid investments purchased with original maturities of three
months or less are considered to be cash equivalents.
INVESTMENTS
Investments consist of highly rated commercial paper and corporate bonds
which have original maturities between three and six months. These investments
are classified as available-for-sale and are recorded at market value, which
approximates cost. There were no material unrealized gains or losses at January
3, 1999.
INVENTORY
Inventory is stated at the lower of cost or market, cost being determined
by the first-in, first-out cost flow assumption.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using
straight-line and accelerated methods over the estimated useful lives of the
respective assets as follows:
<TABLE>
<S> <C>
1 - 3
Test equipment.............................................. years
Furniture and office equipment.............................. 5 years
Computer equipment and software............................. 3 years
</TABLE>
Leasehold improvements are amortized over the shorter of their useful lives
or the term of the related lease. Maintenance and repairs, which neither
materially add to the value of the asset nor prolong its life, are charged to
expense as incurred. Gains or losses on dispositions of property and equipment
are included in operations.
GOODWILL AND INTANGIBLES
Intangibles include goodwill, which represents costs in excess of net
assets of businesses acquired, acquired technology and other intangible assets
(Note 6). Goodwill and intangibles are being amortized over periods ranging from
three to five years, using the straight-line method. Amortization of developed
technology is recorded as cost of sales. All other amortization is recorded as
amortization of goodwill and intangibles in the statement of operations.
F-8
<PAGE> 76
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
IMPAIRMENT OF LONG-LIVED ASSETS
The Company continually reviews the carrying value of long-lived assets
including, but not limited to, property and equipment and goodwill and
intangibles to determine whether impairment has occurred. The carrying value of
long-lived assets is considered impaired when the anticipated undiscounted cash
flow from such asset is less than its carrying value. In that event, a loss is
recognized for the amount by which the carrying value exceeds the fair value of
the long-lived asset. Fair value is determined primarily using the anticipated
cash flows discounted at a rate commensurate with the risk involved.
During the fiscal year ended January 3, 1999 the Company identified an
impairment in the value of developed technology acquired in the purchase of
Arcxel Technologies, Inc. (Note 2). The impairment arose as a result of
management's decision to discontinue manufacturing an acquired product.
Accordingly, the carrying values of both the developed technology and the
portion of goodwill allocated to the developed technology have been written down
to their fair value. Impairment losses of $1,564,000 and $691,000 have been
recorded in cost of sales and amortization expense, respectively, in the
statement of operations.
INCOME TAXES
The Company accounts for income taxes under the liability method, which
requires recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. If it is more likely than not that
some portion of a deferred tax asset will not be realized, a valuation allowance
is recorded.
WARRANTY
Estimated future warranty obligations related to certain products are
provided by charges to operations in the period in which the related revenue is
recognized. These estimates are based on historical warranty experience and
other relevant information of which the Company is aware. During the years ended
December 29, 1996, December 28, 1997 and January 3, 1999 warranty expense was
$0, $298,000 and 4,333,000, respectively.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
NET (LOSS) INCOME PER SHARE AND PRO FORMA NET (LOSS) INCOME PER SHARE
Basic net (loss) income per share represents net (loss) income available to
common stockholders divided by the weighted-average number of common shares
outstanding during the period. Diluted net (loss) income per share represents
net (loss) income available to common stockholders divided by the
weighted-average number of common shares outstanding including the potentially
dilutive impact of common stock options and warrants and convertible preferred
stock. Common stock options and warrants are converted using the treasury stock
method. Convertible preferred stock is converted using the if-converted method.
Basic and diluted net (loss) income per share are equal for the periods
presented, except for the quarter ended March 29, 1998, because the impact of
common stock equivalents is anti-dilutive. Potentially dilutive securities
totaling 905,410, 13,960,511 and 13,122,044 shares for the fiscal years ended
December 29, 1996, December 28, 1997 and January 3, 1999, respectively, and
11,720,299 shares (unaudited) for the quarter ended April 4, 1999, respectively,
were excluded from diluted net loss per share due to their anti-dilutive effect.
F-9
<PAGE> 77
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
Pro forma net loss per share is computed using the weighted-average number
of common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's convertible preferred stock into shares of the
Company's common stock effective upon the closing of the Company's initial
public offering as if such conversion occurred on the date the shares were
originally issued.
The following table sets forth the computation of the numerators and
denominators in the basic, diluted and pro forma net loss per share calculations
for the periods indicated (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED QUARTER ENDED
----------------------------------------- -------------------------
DECEMBER 29, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4,
1996 1997 1999 1998 1999
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Numerator:
Net (loss) income.......... $(17,652) $ (13,759) $ (21,233) $ 502 $ (4,039)
Accretion of mandatorily
redeemable Convertible
preferred stock......... (41) (196) (191) (53) (49)
-------- ---------- ----------- ----------- -----------
Net (loss) income available
to common
stockholders............ $(17,693) $ (13,955) (21,424) $ 449 (4,088)
======== ========== ===========
Effect of pro forma
conversion of
securities:
Accretion of mandatorily
redeemable convertible
preferred stock......... 191 49
----------- -----------
Pro forma net loss
available to common
stockholders............ $ (21,233) $ (4,039)
=========== ===========
Denominator:
Weighted-average shares
outstanding............. 466,664 1,107,477 3,113,017 1,601,479 4,368,908
Dilutive effect of stock
options, warrants and
convertible preferred
stock................... 13,588,184
-------- ---------- ----------- ----------- -----------
Weighted-average shares
outstanding, assuming
dilution................ 466,664 1,107,477 3,113,017 15,189,663 4,368,908
======== ========== ===========
Dilutive effect of pro forma
securities:
Preferred stock -- Series
A....................... 4,891,239 4,891,239
Preferred stock -- Series
B....................... 5,243,806 5,243,806
Preferred stock -- Series
C....................... 571,429 571,429
Preferred stock -- Series
D....................... 2,000,000 2,000,000
Preferred stock -- Series
E....................... 4,529,221 4,529,221
Preferred stock -- Series
F....................... 1,479,743 1,759,303
----------- -----------
Pro forma weighted average
shares outstanding
(unaudited)................ 21,828,455 23,363,906
=========== ===========
</TABLE>
F-10
<PAGE> 78
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
STOCK OPTIONS
The Company's stock option plan is subject to the provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (FAS 123). Under the provisions of this statement, employee
stock-based compensation expense is measured using either the intrinsic-value
method as prescribed by Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25), or the fair value method described in
FAS 123. Companies choosing the intrinsic-value method are required to disclose
the pro forma impact of the fair value method on net income. The Company has
elected to continue accounting for its employee and director stock-based awards
under the provisions of APB 25. The Company is required to implement FAS 123 for
stock-based awards to other than employees and directors.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates. Amounts in the
financial statements which are particularly susceptible to changes in estimates
include the allowance for doubtful accounts receivable and product warranty
costs.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This statement is effective
for the Company beginning January 4, 1999 and establishes accounting standards
for costs incurred in the acquisition or development and implementation of
computer software. These new standards require capitalization of certain
software implementation costs relating to software acquired or developed and
implemented for the Company's use. This statement is not expected to have a
significant effect on the Company's financial position or results of operations.
The Financial Accounting Standards Board (FASB) recently issued FAS No.
130, "Reporting Comprehensive Income" (FAS 130). FAS 130 establishes standards
for reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity during a period
from non-owner sources. The Company adopted FAS 130 on December 29, 1997. To
date, the Company has not had any significant transactions that are required to
be reported as other comprehensive income other than its net (loss) income.
The FASB recently issued FAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (FAS 131). FAS 131 supersedes FAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," replacing the
"industry segment" approach with the "management approach." The management
approach designates the internal organization that is used by management for
making operating decisions and assessing performance as the source of the
Company's reportable segments. FAS 131 also requires disclosures about products
and services, geographic areas and major customers. The Company adopted FAS 131
on January 3, 1999. The Company has determined that it does not have any
separately reportable business or geographic segments.
UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim financial data as of April 4, 1999 and for the quarters ended
March 29, 1998 and April 4, 1999 is unaudited; however, in the opinion of
management, the interim data includes all adjustments
F-11
<PAGE> 79
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
consisting only of normal recurring adjustments necessary to present fairly the
Company's financial position as of April 4, 1999 and the results of its
operations and cash flows for the quarters ended March 29, 1998 and April 4,
1999.
RECLASSIFICATIONS
Certain items in the December 29, 1996 and December 28, 1997 financial
statements have been reclassified to conform to the January 3, 1999
presentation.
2. ACQUISITIONS
In March 1996, the Company purchased certain assets and assumed certain
liabilities from Western Digital Corporation (WDC). The acquisition has been
accounted for using the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations" (APB 16).
A summary of the purchase price is as follows (in thousands):
<TABLE>
<S> <C>
Consideration
Cash...................................................... $ 1,200
Value of Series D preferred stock......................... 8,000
Note payable.............................................. 2,000
Acquisition costs......................................... 102
-------
$11,302
=======
</TABLE>
A summary of assets acquired and liabilities assumed at the date of the
acquisition, as determined in accordance with APB 16, is presented below (in
thousands):
<TABLE>
<S> <C>
Inventory................................................... $ 135
Property and equipment...................................... 1,141
Acquired in-process technology.............................. 8,633
Goodwill and intangibles.................................... 1,793
Liabilities................................................. (400)
-------
$11,302
=======
</TABLE>
On February 17, 1998, the Company acquired Arcxel Technologies, Inc.
(Arcxel), a manufacturer of fibre channel switches. The Company acquired all
outstanding shares of Arcxel's common stock and Series A preferred stock in
exchange for 1,539,788 shares of the Company's common stock and 1,759,303 shares
of the Company's Series F preferred stock. The acquisition has been accounted
for using the purchase method of accounting.
A summary of the purchase price paid is as follows (in thousands):
<TABLE>
<S> <C>
Consideration:
Value of common stock..................................... $ 5,081
Value of preferred stock.................................. 7,037
Fair value of assumed stock options....................... 2,566
Acquisition costs......................................... 157
-------
$14,841
=======
</TABLE>
F-12
<PAGE> 80
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
A summary of assets acquired and liabilities assumed at the date of the
acquisition, as determined in accordance with APB 16, is presented below (in
thousands):
<TABLE>
<S> <C>
Cash........................................................ $ 141
Accounts receivable......................................... 53
Inventory................................................... 216
Prepaid expenses and other current assets................... 63
Property and equipment...................................... 404
Acquired in-process technology.............................. 5,118
Goodwill and intangibles.................................... 9,198
Other assets................................................ 161
Accounts payable............................................ (170)
Accrued liabilities......................................... (87)
Capital leases.............................................. (256)
-------
$14,841
=======
</TABLE>
The acquired in-process technology of WDC and Arcxel had not yet reached
technological feasibility and had no alternative future use. The acquired
in-process technology was recorded as research and development expense at the
time of acquisition. The valuation of the acquired in-process technology was
based upon estimates by the Company and a valuation by a third-party appraiser.
Given that the valuation of the acquired in-process technology was an estimate,
actual results may change. If the estimate of the in-process technology were to
decrease, the value assigned to goodwill and intangibles would increase.
Included in intangibles are developed technology (products), core technology and
other intangible assets.
The results of operations of WDC and Arcxel are included in the financial
statements from the dates of acquisition. Unaudited pro forma results as if WDC
and Arcxel had been included in the financial results since the beginning of the
year prior to their acquisition are as follows (dollars in thousands):
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
------------------------------------------
DECEMBER 29, DECEMBER 28, JANUARY 3,
1996 1997 1999
------------ ------------ ----------
(UNAUDITED)
<S> <C> <C> <C>
Revenue......................................... $ 8,924 $ 22,783 $ 39,497
Net loss........................................ (18,052) (17,836) (21,875)
Basic and diluted net loss per share............ (38.68) (16.11) (7.03)
</TABLE>
The unaudited pro forma results are not necessarily indicative of the
results of operations that would have been reported had the acquisitions
occurred prior to the beginning of the periods presented. In addition, they are
not intended to be indicative of future results.
3. SALE OF DIVISION
On February 13, 1998, the Company sold substantially all of the laser diode
fabrication facility and gigabit Ethernet Transceiver Product line of its
Colorado division for cash proceeds of $7,250,000. The Company recorded a gain
of approximately $9,061,000 related to the sale. In connection with the sale,
certain employees of the division elected to receive accelerated vesting of
their stock options. The Company recorded an expense of $163,000 related to this
accelerated vesting. Revenue and net loss of the Colorado division were $133,000
and $7,530,000, respectively, for the fiscal year ended December 28, 1997. For
the period from December 29, 1997 through February 13, 1998, revenue and net
loss of the division were $120,000 and $1,047,000, respectively. These amounts
are included in the Company's statement of operations.
F-13
<PAGE> 81
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
4. INVENTORY
Inventory consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4,
1997 1999 1999
------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................... $ 301 $ 606 $1,008
Work in process.................................. 211 -- 56
Finished goods................................... 642 1,423 422
Less: Writedown to expected realizable value..... (293) (483) (241)
----- ------ ------
$ 861 $1,546 $1,245
===== ====== ======
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4,
1997 1999 1999
------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Test equipment................................... $ 7,467 $ 5,034 $ 5,154
Furniture and office and computer equipment...... 2,669 3,414 3,577
Software......................................... 1,034 1,763 1,755
Leasehold improvements........................... 459 233 233
------- ------- -------
11,629 10,444 10,719
Less: Accumulated depreciation................... (4,060) (3,066) (3,435)
------- ------- -------
$ 7,569 $ 7,378 $ 7,284
======= ======= =======
</TABLE>
Assets underlying capital leases included above are $5,384,000, $7,408,000
and $7,631,000 (unaudited) at December 28, 1997, January 3, 1999 and April 4,
1999, respectively, and accumulated amortization thereon aggregates $800,000,
$2,038,000 and $2,236,000 (unaudited) at December 28, 1997, January 3, 1999 and
April 4, 1999, respectively.
6. GOODWILL AND INTANGIBLES
Goodwill and intangibles consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4,
1997 1999 1999
------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill......................................... $ 946 $ 4,917 $ 4,917
Developed technology............................. 681 3,344 3,344
Core technology.................................. -- 2,183 2,183
Covenants not to compete......................... 166 166 166
Workforce........................................ -- 381 381
------ ------- -------
1,793 10,991 10,991
Less: Accumulated amortization................... (786) (3,156) (3,660)
Less: Impairment write-down...................... -- (2,256) (2,256)
------ ------- -------
$1,007 $ 5,579 $ 5,075
====== ======= =======
</TABLE>
F-14
<PAGE> 82
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
7. ACCRUED LIABILITIES
Accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3, APRIL 4,
1997 1999 1999
------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued warranty costs........................... $ 306 $4,390 $4,374
Accrued payroll and related benefits............. 819 1,152 1,412
Accrued business taxes........................... 115 301 307
Accrued interest................................. 121 334 386
Accrued professional fees........................ 300 272 217
Accrued legal costs.............................. 153 600 600
Other............................................ 542 806 827
------ ------ ------
$2,356 $7,855 $8,123
====== ====== ======
</TABLE>
8. LINE OF CREDIT AND SHORT-TERM NOTE PAYABLE
In October 1998, the Company renewed its $5,000,000 line of credit facility
with a bank which matures on September 30, 1999 and bears interest at LIBOR
(5.108% at January 3, 1999) plus 4.75%. The outstanding principal balance cannot
exceed 80% of the Company's eligible accounts receivable. At January 3, 1999, no
borrowings were outstanding under this facility.
Concurrent with the renewal of the line of credit facility, the Company
entered into a $7,500,000 note payable to the bank due September 30, 1999. The
note bears interest at LIBOR (5.108% at January 3, 1999) plus 4.75% and is
collateralized by inventory, equipment, receivables, intangibles and deposit
accounts of the Company. The note is recorded net of an unamortized discount of
$172,000 at January 3, 1999.
Subsequent to year end the company extended its line of credit facility to
$7,500,000. Additionally, on June 22, 1999 the company extended the $7,500,000
note payable to September 30, 2000.
9. LONG-TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1997 1999
------------ ----------
<S> <C> <C>
Note payable, interest rate of 8.69%, due the earlier of
March 31, 2000 or the occurrence of certain corporate
events; collateralized by certain assets acquired from
Western Digital Corporation............................... $ 1,649 $ 1,649
Note payable, interest rate of 8.09%, monthly payments of
$60,000 through September 1999; net of unamortized
discount of $74,000; collateralized by certain
manufacturing and research and development equipment...... 1,233
Capital lease obligations, net of unamortized discount of
$106,000 and $34,000, respectively........................ 4,829 5,443
------- -------
7,711 7,092
Less: Current portion....................................... (3,457) (1,564)
------- -------
$ 4,254 $ 5,528
======= =======
</TABLE>
On February 17, 1998, the 8.09% note payable was assumed by the purchaser
of the Colorado division.
F-15
<PAGE> 83
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
Maturities of long-term debt and capital leases at January 3, 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
<S> <C>
1999.......................................... $1,564
2000.......................................... 3,401
2001.......................................... 1,576
2002.......................................... 585
------
7,126
Less: Unamortized discount.................... (34)
------
$7,092
======
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company has commitments under long-term operating leases, principally
for building space and office equipment. These leases require payment of
property taxes and include escalation clauses and options to extend the lease
terms for three to five years. The following table summarizes the future minimum
lease payments under all noncancelable operating lease obligations at January 3,
1999 (in thousands).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
<S> <C>
1999.............................................. $ 632
2000.............................................. 639
2001.............................................. 658
2002.............................................. 220
------
$2,149
======
</TABLE>
Total rent expense was approximately $446,000, $897,000 and $1,235,000
during the fiscal years ended December 29, 1996, December 28, 1997 and January
3, 1999, respectively, and $252,000 and $210,000 (unaudited) during the quarters
ended March 29, 1998 and April 4, 1999, respectively.
CAPITAL LEASES
The Company also leases certain equipment under capital lease agreements.
Future minimum lease payments under capital leases at January 3, 1999 are as
follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------
<S> <C>
1999............................................. $ 2,224
2000............................................. 2,191
2001............................................. 1,766
2002............................................. 612
-------
Total minimum lease payments..................... 6,793
Less: Portion representing interest.............. (1,316)
Less: Unamortized discount....................... (34)
-------
Present value of capital lease obligations....... 5,443
Less: Current portion............................ (1,564)
-------
Capital leases, net of current portion........... $ 3,879
=======
</TABLE>
F-16
<PAGE> 84
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
LEGAL PROCEEDINGS
During the fiscal year ended December 28, 1997, the Company was named as
the defendant in two patent infringement actions and was conducting the defense
of another patent infringement action brought against one of its contract
manufacturers, for which the Company was an indemnitor. Two of the patent
infringement actions, including the action brought against the contract
manufacturer, were dismissed without prejudice during the fiscal year ended
January 3, 1999. During the fiscal year ended January 3, 1999, the Company was
named as defendant in another patent infringement action filed by the plaintiff
in the remaining action.
In May 1999, the Company entered into a settlement agreement with the
plaintiff in these remaining patent infringement actions. Under the settlement
agreement, the Company is obligated to make certain future payments which have
been included in accrued liabilities and long-term liabilities at January 3,
1999.
11. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Company's Series E convertible preferred stock includes a provision
whereby, beginning in October 2001, holders of a majority of such stock have the
right to require the Company to repurchase the shares at a redemption price of
$4.50 per share plus any declared and unpaid dividends. The Company shall redeem
up to one-third of the Series E stock outstanding in October 2001, up to an
additional one-third in October 2002 and up to the remaining one-third in
October 2003.
The following is a summary of the number of shares, redemption price and
earliest redemption dates:
<TABLE>
<CAPTION>
EARLIEST
REDEMPTION REDEMPTION
SHARES PRICE DATE
------ ---------- ------------
<S> <C> <C>
1,509,741......................... $ 6,794 October 2001
1,509,740......................... 6,794 October 2002
1,509,740......................... 6,794 October 2003
-------
$20,382
=======
</TABLE>
The redemption value of the mandatorily redeemable convertible preferred
stock is being accreted over the period from issuance to the applicable earliest
redemption date using the effective interest method.
The Series E preferred stock is convertible, on a one-for-one basis, into
common stock at any time at the option of the holders. In the event of a
liquidation of the Company, the holders of Series E preferred stock will be
entitled to be paid out of the assets, prior and in preference to any payment of
Series A, Series B, Series C, Series D and Series F convertible preferred stock
(Note 12). The payment shall be an amount per share equal to the sum of $4.50
for each outstanding share of Series E preferred stock plus an amount per share
equal to all declared but unpaid dividends on each such share.
F-17
<PAGE> 85
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
12. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
Convertible Preferred Stock consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 29, DECEMBER 28, JANUARY 3, APRIL 4,
1996 1997 1999 1999
------------ ------------ ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Series A, $.001 par value, $1.25 liquidation
value; 5,785,573 shares authorized, 4,891,239
shares issued and outstanding................... $ 4 $ 4 $ 4 $ 4
Series B, $.001 par value, $1.75 liquidation
value; 5,243,806 shares authorized, issued and
outstanding..................................... 5 5 5 5
Series C, $.001 par value, $1.75 liquidation
value; 747,143 shares authorized, 571,429 shares
issued and outstanding.......................... 1 1 1 1
Series D, $.001 par value, $4.00 liquidation
value; 2,000,000 shares authorized, issued and
outstanding..................................... 2 2 2 2
Series F, $.001 par value, $4.00 liquidation
value; 1,760,000 shares authorized, 1,759,303
shares issued and outstanding................... 2 2
--- --- --- ---
$12 $12 $14 $14
=== === === ===
</TABLE>
Shares of Convertible Preferred Stock have dividend rights, voting rights
and liquidation preferences, and are convertible, on a one-for-one basis, into
common stock at any time at the option of the holders. The holders of
Convertible Preferred Stock are entitled to receive cash dividends when and if
declared by the Company's Board of Directors. There have been no declared but
unpaid dividends to date.
The holders of the Series A and Series B preferred stock, each voting
separately as a class, are entitled to elect two members of the Board of
Directors of the Company, and the holders of the Series D and Series F preferred
stock, each voting separately as a class, are entitled to elect one member of
the Board of Directors of the Company. Additional members of the Board of
Directors, if any, will be elected by the holders of shares of common stock,
Series E convertible preferred stock and Convertible Preferred Stock, voting
together as a single class.
Upon liquidation, the preferred shareholders are entitled to distributions
in order of their liquidation preferences. The holders of the Convertible
Preferred Stock will be entitled to be paid out of the assets of the Company an
amount per share equal to the sum of the per share liquidation amounts shown
above plus an amount equal to all declared but unpaid dividends on each
outstanding share. The Series A, Series B, Series C, Series D, and Series F
preferred stock will rank on a parity as to the receipt of the respective
preferential amounts for each such series.
STOCK OPTIONS
The Company has a stock option plan which provides for the grant of
incentive and non-qualified stock options to directors, employees and
consultants to purchase common stock of the Company. At January 3, 1999,
7,699,996 shares of common stock have been reserved for issuance to plan
participants and 596,131 shares remained reserved and available for grant under
the Plan. In April 1999, an additional 1,500,004 shares were reserved for
issuance under the plan to plan participants.
F-18
<PAGE> 86
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
Incentive stock options are granted at an exercise price not less than the
fair market value of the common stock on the date of grant, as determined by the
Board of Directors. Incentive stock options and non-qualified stock options for
employees generally vest over four or five years. Such options expire ten years
after the date of grant. Non-qualified stock options for non-employees generally
vest immediately and expire five years after the date of grant.
On December 14, 1998, certain option holders were given the opportunity to
cancel existing options and receive new options. In each case, the new option
price was equal to the fair value of the underlying stock on the date of grant,
as determined by the Board of Directors, and the expiration schedules were the
same as for any new grant. 50% of any vested options associated with the
canceled grant was carried over as part of the new grant upon election of
repricing.
During the fiscal year ended January 3, 1999, the Company issued to its
president a stock subscription note receivable of $3,497,000 or $3.33 per share
for a total of 1,050,000 vested and unvested common shares under the Company's
stock option plan. In October 1998, the Company canceled the portion of the note
receivable related to 854,162 unvested shares. Upon cancellation of the portion
of the note for the 195,838 vested shares, the Company recognized compensation
expense of $251,000 for the excess of the initial stock subscription price over
the fair value of the common stock.
The following table summarizes stock option activity for the three fiscal
years in the period ended January 3, 1999:
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
EXERCISE FAIR
SHARES PRICE VALUE
---------- --------- ----------
<S> <C> <C> <C>
Outstanding at December 31, 1995............... 2,003,633 $0.15
Granted:
Exercise price equal to fair value........ 2,281,200 0.21 $0.06
Exercised.................................... (230,650) 0.18
Canceled..................................... (232,083) 0.08
----------
Outstanding at December 29, 1996............... 3,822,100 0.20
Granted:
Exercise price equal to fair value........ 2,038,426 1.32 0.38
Exercised.................................... (951,150) 0.17
Canceled..................................... (1,068,847) 0.23
----------
Outstanding at December 28, 1997............... 3,840,529 0.80
Granted:
Exercise price in excess of fair value.... 1,801,315 3.28 0.26
Exercise price equal to fair value........ 2,746,442 2.71 0.64
Exercise price less than fair value....... 831,353 0.30 $2.67
Exercised.................................... (1,290,603) 1.66
Canceled..................................... (3,632,952) 2.44
----------
Outstanding at January 3, 1999................. 4,296,084 $1.51
==========
Options exercisable at:
December 29, 1996............................ 668,042 $0.15
December 28, 1997............................ 774,452 $0.24
January 3, 1999.............................. 968,921 $1.07
</TABLE>
F-19
<PAGE> 87
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
The following summarizes information about stock options outstanding and
exercisable at January 3, 1999:
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.07 - $0.20 680,712 8.19 $0.11 302,992 $0.13
$0.30 - $0.65 1,039,333 8.44 $0.49 305,718 $0.50
$2.05 - $2.90 2,215,942 9.57 $2.14 348,614 $2.28
$3.06 - $4.50 360,097 9.08 $3.18 11,597 $4.50
--------- -------
4,296,084 968,921
========= =======
</TABLE>
During the fiscal years ended December 28, 1997 and January 3, 1999, the
Company recorded $39,000 and $52,000, respectively of compensation expense
related to the issuance of stock options for services provided by consultants.
The Company did not issue any stock options to consultants during the fiscal
year ended December 29, 1996.
Had the Company determined compensation expense based on the fair value of
the option at the grant date for all stock options issued to employees, the
Company's net loss and net loss per share would have been increased to the pro
forma amounts indicated below (dollars in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 29, DECEMBER 28, JANUARY 3,
1996 1997 1999
------------ ------------ ----------
<S> <C> <C> <C>
Net loss
As reported........................... $(17,652) $(13,759) $(21,233)
Pro forma............................. (17,690) (13,837) (21,487)
Basic and diluted net loss per share
As reported........................... (37.83) (12.42) (6.82)
Pro forma............................. (37.91) (12.49) (6.90)
</TABLE>
In accordance with the guidance provided under FAS 123, fair values are
based on minimum values. The fair value of each employee option grant is
estimated on the date of grant using the minimum value option-pricing model
using the following weighted-average assumptions.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
DECEMBER 29, DECEMBER 28 JANUARY 3,
1996 1997 1999
-------------- -------------- --------------
<S> <C> <C> <C>
Expected term...................... 5 years 5 years 5 years
Risk-free interest rate............ 6.07% - 7.76% 5.71% - 6.75% 4.22% - 5.64%
Dividend yield..................... 0% 0% 0%
Volatility......................... 0% 0% 0%
</TABLE>
Pro forma net loss amounts reported above reflect only options granted in
1995 through 1998. The full impact of calculating compensation expense for stock
options based on fair value at the grant date is not reflected in the pro forma
net loss amounts because compensation expense is reflected over the options'
vesting period. In addition, because the determination of the fair value of all
options granted after such time as the Company may become a public entity will
include an expected volatility factor in addition to the factors described
above, the above results may not be representative of future periods.
F-20
<PAGE> 88
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
The December 14, 1998 option-repricing event is considered a modification
of an existing option. For determination of the pro forma amounts, this
modification is treated as if a new option had been issued and any additional
incremental value recorded in the year of repricing is immediately recognized
for unvested options and amortized over the remaining vesting period for
nonvested options.
STOCK WARRANTS
In conjunction with the Series B preferred stock offering, the Company
issued warrants to purchase 654,333 shares of Series A preferred stock. The
warrants have an exercise price of $1.25 per share and expire on October 6,
2000. In conjunction with the Series E preferred stock offering in October 1996,
the Company issued warrants to purchase 69,261 shares of Series E preferred
stock. The warrants have an exercise price of $5.63 per share and expire on
October 16, 2001. As of January 3, 1999, the Company also had outstanding a
warrant to purchase 240,000 shares of Series A preferred stock at an exercise
price of $1.25 per share which expires on July 6, 1999.
During January and February 1996, the Company issued warrants to purchase
175,714 shares of Series C preferred stock at an exercise price of $3.50 per
share and terms ranging from eight to ten years. These warrants were issued in
conjunction with the Company's 8.09% note payable and a capital lease obligation
described in Note 9. These warrants were recorded at their fair value of
$319,000, which was recorded as an original issue discount and is being
amortized over the term of the note payable and a capital lease obligation. The
8.09% note and related debt discount was transferred to the acquirer of the
Colorado division (see Note 3).
During May 1997, the Company issued warrants to purchase 25,000 shares of
Series E preferred stock with an exercise price of $5.62 per share. These
warrants are exercisable through the earlier of (i) May 31, 2002, (ii) the
one-year anniversary of the effective date of an initial public offering of the
Company's common stock or (iii) the effective date of a merger of the Company or
sale of substantially all of the Company's assets. These warrants were issued in
conjunction with obtaining a capital lease line. The warrants were recorded at
their fair value of $89,000, which was recorded as a debt issue cost and is
being amortized over the terms of the lease line.
During December 1998, the Company issued warrants to purchase shares of
Series E preferred stock with a value of $137,500 at an exercise price equal to
the lesser of i) $10 per share or ii) the greater of $7.50 or the average of
$4.50 per share and the share value of the next round of financing. These
warrants are exercisable at any time after issuance for a period of five years.
These warrants were issued in conjunction with obtaining a capital lease line.
The warrants were recorded at their fair value of $48,766, which was recorded as
a debt issue cost and is being amortized over the term of the lease line. An
additional 100,000 shares of Series E preferred stock were also issued in
November 1998, in conjunction with obtaining a term loan as described in Note 9.
These warrants have an exercise price of $10 per share and are exercisable
through November 23, 2003. The warrants have been recorded at their fair value
of $230,000 as an original issue discount which is being amortized over the life
of the term loan.
13. INCOME TAXES
At January 3, 1999, the Company has net operating loss carryforwards of
approximately $31,100,000 which may be used to offset future taxable income.
These carryforwards expire beginning in 2010. The Internal Revenue Code places
certain limitations on the annual amount of net operating loss carryforwards
that can be utilized if certain changes in the Company's ownership occur. The
Company believes that, pursuant to Section 382 of the Internal Revenue Code,
there was a change in ownership of the Company in 1995 and that a substantial
portion of the net operating loss carryforwards generated in or prior to 1995
F-21
<PAGE> 89
VIXEL CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 29, 1996, DECEMBER 28, 1997 AND JANUARY 3, 1999
(approximately $2,700,000) are significantly limited and potentially unusable.
Future changes in the Company's ownership may further limit the use of such
carryforward benefits.
A reconciliation of taxes on net loss at the federal statutory rate to
actual tax expense is as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------
DECEMBER 29, DECEMBER 28, JANUARY 3,
1996 1997 1999
------------ ------------ ----------
<S> <C> <C> <C>
Tax at statutory rate........................... $(6,002) $(4,678) $(7,219)
Non deductible items............................ 15 57 2,236
Effect of state taxes........................... (618) (688) (734)
Change in tax credits........................... (243) (50) (990)
Change in valuation allowance................... 7,006 5,466 6,718
Other........................................... (158) (107) (11)
------- ------- -------
$ -- $ -- $ --
======= ======= =======
</TABLE>
The Company's net deferred tax assets consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 28, JANUARY 3,
1997 1999
------------ ----------
<S> <C> <C>
Net operating loss carryforwards............................ $ 9,600 $ 12,144
Goodwill and intangibles.................................... 3,176 2,263
Credit carryforwards........................................ 350 1,340
Accrued warranty costs...................................... 119 1,712
Other accruals.............................................. 222 1,213
Other....................................................... 84 508
-------- --------
Gross deferred tax assets................................... 13,551 19,180
Less: Valuation allowance................................... (13,551) (19,180)
-------- --------
Net deferred tax asset...................................... $ -- $ --
======== ========
</TABLE>
The Company has recorded a valuation allowance equal to the gross deferred
tax asset balance because the Company's accumulated deficit, history of
recurring net losses and possible limitations on the use of carryforwards give
rise to uncertainty as to whether the deferred tax assets are realizable.
The difference between the recorded provision for income taxes in the
fiscal years ended January 3, 1999 and December 28, 1997 and the expected amount
determined by applying the federal statutory rate to losses before income taxes
results primarily from an increase in the valuation allowance of $6,718,000 and
$5,466,000 in the fiscal years ended January 3, 1999 and December 28, 1997,
respectively.
14. RETIREMENT SAVINGS PLAN
The Company sponsors a retirement savings plan that qualifies under
Internal Revenue Code Section 401(k). The plan covers all qualified employees.
The Company matches a percentage of an employee's contribution as determined by
the Board of Directors. The Company contributed $0, $240 and $392 to the plan as
of December 29, 1996, December 28, 1997 and January 3, 1999, respectively.
F-22
<PAGE> 90
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Vixel Corporation
In our opinion, based upon our audit and the report of other auditors, the
accompanying balance sheet and the related statements of operations, of changes
in stockholders' equity (deficit) and of cash flows present fairly, in all
material respects, the financial position of Arcxel Technologies, Inc. (the
Company), a development stage enterprise, at December 31, 1997, and the results
of its operations and its cash flows for the year then ended and for the period
from inception (June 18, 1996) through December 31, 1997, in conformity with
generally accepted accounting principles. 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 audit. We did not audit the
financial statements for the period from inception (June 18, 1996) through
December 31, 1996, which statements reflect 14% of the cumulative net loss and
12%, 31% and 38% of the cumulative net cash flows from operating, investing and
financing activities, respectively, from inception (June 18, 1996) through
December 31, 1997. These statements were audited by other auditors whose report
thereon has been furnished to us, and our opinion, insofar as it relates to the
amounts for the period from inception (June 18, 1996) through December 31, 1996
is based solely on the report of the other auditors. We conducted our audit of
these statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit and the report of
other auditors provide a reasonable basis for the opinion expressed above.
As described in Note 9, on February 12, 1998 the stockholders approved and
authorized the acquisition of the Company by Vixel Corporation. The acquisition
was effective on February 17, 1998.
PricewaterhouseCoopers LLP
Seattle, Washington
April 24, 1998
F-23
<PAGE> 91
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Arcxel Technologies, Inc.:
We have audited the accompanying balance sheet of Arcxel Technologies, Inc.
(a development stage enterprise) as of December 31, 1996 and the related
statements of operations, stockholders' equity and cash flows for the period
from June 18, 1996 (inception) through December 31, 1996. 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 audit.
We conducted our audit 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 audit provides 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 Arcxel Technologies, Inc. as
of December 31, 1996, and the results of its operations and its cash flows for
the period from June 18, 1996 (inception) through December 31, 1996 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Orange County, California
May 1, 1997
See accompanying notes to the financial statements.
F-24
<PAGE> 92
ARCXEL TECHNOLOGIES, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1997
------ -------
<S> <C> <C>
Current assets
Cash and cash equivalents................................. $ 789 $ 582
Inventories, net.......................................... -- 166
Prepaid expenses.......................................... 5 101
------ -------
Total current assets.............................. 794 849
Property and equipment, net of accumulated depreciation... 53 366
Other assets.............................................. 3 161
------ -------
Total assets...................................... $ 850 $ 1,376
------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable.......................................... $ 12 $ 175
Accrued payroll and related benefits...................... 32 118
Other accrued liabilities................................. -- 16
Convertible notes payable to shareholder.................. -- 1,000
Current portion of capital lease obligations.............. -- 162
------ -------
Total current liabilities......................... 44 1,471
Long-term capital lease obligations......................... 55
------ -------
Total liabilities................................. 44 1,526
------ -------
Shareholders' equity (deficit)
Series A convertible preferred stock, $.01 par value;
authorized 5,000,000 shares; issued and outstanding
1,111,000 and 2,020,000 shares, respectively;
liquidation value $1.00 per share...................... 11 20
Common stock, $.01 par value; authorized 10,000,000
shares; issued and outstanding 1,170,000 and 1,495,000
shares, respectively................................... 1 4
Additional paid-in capital................................ 1,105 2,020
Deficit accumulated during the development stage.......... (311) (2,194)
------ -------
Total shareholders' equity (deficit).............. 806 (150)
Commitments and contingencies (Note 8)......................
Total liabilities and shareholders' equity
(deficit)........................................ $ 850 $ 1,376
====== =======
</TABLE>
See accompanying notes to the financial statements.
F-25
<PAGE> 93
ARCXEL TECHNOLOGIES, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
INCEPTION INCEPTION
(JUNE 18, 1996) YEAR ENDED (JUNE 18, 1996)
TO DECEMBER 31, DECEMBER 31 TO DECEMBER 31,
1996 1997 1997
--------------- ----------- ---------------
<S> <C> <C> <C>
Operating expense
Research and development........................ $ 204 $ 1,225 $ 1,429
General and administrative...................... 130 415 545
Sales and marketing............................. -- 255 255
---------- ---------- ----------
Total operating expenses................ 334 1,895 2,229
---------- ---------- ----------
Other (income) expense
Interest income................................. (23) (35) (58)
Interest expense................................ -- 26 26
Other........................................... -- (3) (3)
---------- ---------- ----------
(23) (12) (35)
---------- ---------- ----------
Net loss.......................................... $ (311) $ (1,883) $ (2,194)
========== ========== ==========
Basic and diluted net loss per share.............. $ (0.27) $ (1.49) $ (1.80)
========== ========== ==========
Weighted-average shares outstanding............... 1,134,184 1,264,384 1,218,895
========== ========== ==========
</TABLE>
See accompanying notes to the financial statements.
F-26
<PAGE> 94
ARCXEL TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DEFICIT
SERIES A ACCUMULATED TOTAL
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING THE SHAREHOLDERS
------------------ ------------------ PAID-IN DEVELOPMENT EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE (DEFICIT)
--------- ------ --------- ------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at inception, June 18, 1996..... -- $-- -- $-- $ -- $ -- $ --
Issuance of common stock for contributed
technology............................ -- -- 1,050,000 -- -- -- --
Issuance of common stock for cash....... -- -- 120,000 1 5 -- 6
Issuance of Series A convertible
preferred stock for cash.............. 1,111,000 11 -- -- 1,100 -- 1,111
Net loss................................ -- -- -- -- -- (311) (311)
--------- --- --------- --- ------ ------- -------
Balance at December 31, 1996............ 1,111,000 11 1,170,000 1 1,105 (311) 806
Issuance of Series A convertible
preferred stock for cash.............. 909,000 9 -- -- 900 -- 909
Exercise of stock options............... -- -- 325,000 3 15 -- 18
Net loss................................ -- -- -- -- -- (1,883) (1,883)
--------- --- --------- --- ------ ------- -------
Balance at December 31, 1997............ 2,020,000 $20 1,495,000 $ 4 $2,020 $(2,194) $ (150)
========= === ========= === ====== ======= =======
</TABLE>
See accompanying notes to the financial statements.
F-27
<PAGE> 95
ARCXEL TECHNOLOGIES, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION INCEPTION
(JUNE 18, 1996) YEAR ENDED (JUNE 18, 1996)
TO DECEMBER 31, DECEMBER 31, TO DECEMBER 31,
1996 1997 1997
--------------- ------------ ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss........................................ $ (311) $(1,882) $(2,193)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation................................. 9 148 157
Change in assets and liabilities:
Inventories................................ -- (166) (166)
Prepaid expenses........................... (5) (96) (101)
Other assets............................... (3) (159) (162)
Accounts payable........................... 12 163 175
Accrued payroll and related benefits....... 32 86 118
Other accrued liabilities.................. -- 16 16
------ ------- -------
Net cash used in operating activities...... (266) (1,890) (2,156)
------ ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment............. (62) (137) (199)
------ ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of convertible preferred
stock........................................ 1,111 909 2,020
Proceeds from issuance of common stock.......... 6 18 24
Proceeds from issuance of convertible notes
payable to shareholder....................... -- 1,000 1,000
Principal payments of capital lease
obligations.................................. -- (107) (107)
------ ------- -------
Net cash provided by financing activities......... 1,117 1,820 2,937
------ ------- -------
Net increase (decrease) in cash and cash
equivalents..................................... 789 (207) 582
Cash and cash equivalents, beginning of period.... -- 789
------ ------- -------
Cash and cash equivalents end of period........... $ 789 $ 582 $ 582
====== ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Purchase of property and equipment under capital
lease obligations............................... $ -- $ 324 $ 324
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest........................................ $ -- $ 21 $ 21
Income taxes.................................... $ -- $ -- $ --
</TABLE>
See accompanying notes to the financial statements.
F-28
<PAGE> 96
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Arcxel Technologies, Inc. (the Company) was formed on June 18, 1996 for the
purpose of developing and distributing fibre channel switches. During the period
from June 18, 1996 (inception) through December 31, 1997, the Company devoted
most of its efforts to activities such as financial planning, research and
development, acquiring property and equipment, and beginning production. At
December 31, 1997, the Company is a development stage enterprise, as it has not
yet generated revenue from its principal operations.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments readily convertible into
known amounts of cash and have original maturities of three months or less. The
Company maintains its cash accounts with two financial institutions that are
insured by the Federal Deposit Insurance Corporation up to $100,000.
The Company has cash equivalents potentially subject the Company to
concentrations of credit risk. The company has a cash investment policy which
restricts investments to ensure preservation of principal and maintenance of
liquidity.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
accounts payable, accrued liabilities, convertible notes payable to shareholder
and capital lease obligations. Except for capital lease obligations, the
carrying amounts of financial instruments approximate fair value due to their
short maturities. The fair value of capital lease obligations at December 31,
1997 is not materially different from the carrying amount, based on interest
rates available to the Company for similar types of arrangements.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being
determined by the first-in, first-out cost flow assumption.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets which
range from two to four years. The cost of additions is capitalized while
maintenance and repairs are expensed as incurred.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of long-lived assets
to be held and used, including but not limited to, property and equipment, when
events and circumstances warrant such a review. The carrying value of a
long-lived asset is considered impaired when the anticipated undiscounted cash
flow from such asset is separately identifiable and is less than its carrying
value. In that event, a loss is recognized based on the amount by which the
carrying value exceeds the fair value of the long-lived asset. Fair value is
determined primarily using the anticipated cash flows discounted at a rate
commensurate with the risk involved. Losses on long-lived assets to be disposed
of are determined in a similar manner, except that fair values are reduced by
the cost to dispose. No losses from impairment have been recognized in the
financial statements.
F-29
<PAGE> 97
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
INCOME TAXES
The Company provides for income taxes under the principles of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
requires that provision be made for taxes currently due and for the expected
future tax effects of temporary differences between the book and tax bases of
assets and liabilities.
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred.
STOCK COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation". SFAS 123 permits entities to recognize as expense
over the vesting period the fair value of all stock-based awards on the date of
grant. Alternatively, SFAS 123 allows entities to continue to apply the
provisions of Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees", and provide pro forma net loss disclosures for
employee stock option grants as if the fair-value-based method defined by SFAS
123 had been applied. The Company has elected to continue to apply the
provisions of APB 25. The provisions of SFAS 123 do not have a material impact
on the Company's financial statements (Note 7).
NET LOSS PER SHARE
Basic net loss per share represents net loss available to common
shareholders divided by the weighted-average number of shares outstanding during
the period. Diluted loss per share represents net loss available to common
shareholders divided by the weighted-average number of shares outstanding
including the potentially dilutive impact of common stock options, convertible
notes payable and convertible preferred stock. Common stock options are
converted using the treasury stock method. Convertible notes payable and
convertible preferred stock are converted using the if-converted method. Basic
and diluted net loss per share are equal for the periods presented because the
impact of common stock equivalents is anti-dilutive. Potentially dilutive
securities totaling 2,506,000 and 3,902,809 shares at December 31, 1996 and
1997, respectively, were excluded from diluted net loss per share due to their
anti-dilutive effect.
ESTIMATES
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the periods. Actual results could differ from
those estimates.
F-30
<PAGE> 98
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
2. INVENTORIES
Inventories consist of the following at December 31, 1997 (in thousands):
<TABLE>
<S> <C>
Raw materials......................................... $119
Work in process....................................... 23
Finished goods........................................ 48
----
190
Less: Inventory allowance............................. (24)
----
$166
----
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1997
----- ------
(IN THOUSANDS)
<S> <C> <C>
Computer software and equipment.............. $52 $ 484
Furniture and fixtures....................... 10 39
--- -----
62 523
Accumulated depreciation..................... (9) (157)
--- -----
$53 $ 366
--- -----
</TABLE>
4. CONVERTIBLE NOTES PAYABLE TO SHAREHOLDER
In both November and December 1997, the Company issued $500,000 of 8%
convertible notes payable to a shareholder (the Notes) due June 30, 1998 for a
total of $1,000,000. The Notes are automatically converted into preferred stock
upon (i) closing of the sale at least $3,000,000 of shares of preferred stock
(Preferred Stock Offering) or (ii) closing of a merger with Vixel Corporation.
The conversion price of an automatic conversion is equal to the lower of the
selling price of the Preferred Stock Offering or $3.6126 principal and accrued
interest amount at the Company's option, per share. The Notes are convertible
into Series A preferred stock at the option of the holder upon (i) receiving
notice from the Company of its intent to prepay any outstanding principal of the
Notes; (ii) receiving notice of the Company's intention to merge with a company
other than Vixel Corporation, liquidate or otherwise change the organization of
the Company as it currently exists; or (iii) receiving less than full repayment
of the Notes' principal and accrued interest as of June 30, 1998. The conversion
price of a voluntary conversion is $3.6126 principal and accrued interest amount
per share.
5. SHAREHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
On June 18, 1996, the Company authorized 10,000,000 shares of $.01 par
value common stock. On June 24, 1996, the Company issued 120,000 shares of
common stock for cash to two shareholders at $.05 per share and 1,050,000 shares
of common stock to two officers for their contribution of technology to the
Company. The technology contributed by the shareholders had minimal basis for
financial statement purposes and therefore the shares issued for this
contributed technology were assigned no value.
F-31
<PAGE> 99
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
In September 1997, the Company issued 325,000 shares of common stock to an
employee who exercised stock options with an exercise price of $0.055 per share.
PREFERRED STOCK
On June 18, 1996, the Company authorized 5,000,000 shares of convertible
preferred stock with a par value of $.01 per share, 2,020,000 shares of which
are designated Series A preferred stock.
On June 25, 1996 and March 24, 1997, the Company issued 1,111,000 and
909,000 shares, respectively, of $1.00 Series A convertible preferred stock to a
venture capital firm and one private investor, respectively. The preferred stock
has liquidation preferences over common stock and the holders of outstanding
shares of preferred stock are entitled to receive one noncumulative dividend at
a rate of $.10 per share when and if declared by the Board of Directors. Each
share of preferred stock can be converted, at the option of the holder, into one
share of common stock. Each share of preferred stock shall automatically be
converted into shares of common stock upon (i) the closing of a firmly
underwritten public offering, provided that the price per share is not less than
$5.00 and the aggregate gross proceeds to the Company are not less than
$7,500,000 or (ii) upon the election of the holders of a majority of the shares
of preferred stock then outstanding. Holders of preferred stock are entitled to
one vote for each share held and on all matters which the common stockholders
are entitled to vote.
6. INCOME TAXES
A current provision for income taxes has not been recorded for the periods
from June 18, 1996 (inception) through December 31, 1996 and the year ended
December 31, 1997 due to taxable losses incurred during such periods. A
valuation allowance has been recorded for deferred tax assets because
realization is primarily dependent on generating sufficient taxable income prior
to expiration of net operating loss carry-forwards.
A reconciliation of taxes on income at the Federal Statutory rate to actual
tax expense is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Tax at statutory rate....................... $(106) $(640)
State taxes................................. (20) (89)
Non-deductible items........................ 1 2
Tax credits................................. -- (56)
Change in valuation allowance............... 125 783
----- -----
$ -- $ --
----- -----
</TABLE>
F-32
<PAGE> 100
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
Deferred tax assets (liabilities) are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1996 1997
----- -----
(IN THOUSANDS)
<S> <C> <C>
Net operating loss carry-forward............ $ 136 $ 805
Research and development credit
carry-forward............................. 56
Depreciation and amortization............... 8 20
Accrued employee benefits................... 4 16
Other....................................... (3) 11
Gross deferred tax assets................. 145 908
Less: Valuation allowance................... (145) (908)
----- -----
$ -- $ --
----- -----
</TABLE>
At December 31, 1997, the Company has net operating loss carry-forwards for
federal and state income tax reporting purposes of $2,065,000. These net
operating losses will expire beginning in 2011 and 2004, respectively, if not
previously utilized. In certain circumstances, as specified in the Internal
Revenue Code, a 50% or more ownership change by certain combinations of the
Company's shareholders during any three-year period would result in limitations
on the Company's ability to utilize net operating loss carry-forwards. The
Company has determined that such a change occurred in February 1998 (Note 9) and
the utilization of loss carry forwards generated through that period will be
limited.
7. STOCK OPTION PLAN
In June 1996, the Company adopted a stock option plan (the Plan) pursuant
to which the Company's Board of Directors may grant stock options to officers
and key employees. Options to purchase up to 2,330,000 shares of authorized but
unissued common stock are authorized under the Plan. Stock options have up to
ten-year terms and vest and become fully exercisable between two to four years
from the date of grant. Stock options granted to officers and key employees
during the periods from June 18, 1996 (inception) through December 31, 1996 and
the year ended December 31, 1997 were granted at no less than their estimated
fair value as determined by the Company's Board of Directors. Accordingly, no
compensation expense has been recorded under APB 25. If stock option grants in
1996 and 1997 had been recorded using the fair value method defined in SFAS 123,
pro forma net loss for both periods would not have been materially different
from the net loss as reported.
The following summarizes stock option activity from June 18, 1996
(inception) through December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Granted............................. 1,395,000 $0.05
Outstanding at December 31, 1996.... 1,395,000 $0.05
Granted............................. 536,000 $0.42
Exercised........................... (325,000) $0.06
Outstanding at December 31, 1997.... 1,606,000 $0.17
</TABLE>
F-33
<PAGE> 101
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
The following summarizes information about stock options outstanding and
exercisable at December 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED
RANGE OF REMAINING AVERAGE WEIGHTED
EXERCISE OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------ ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.05 - $0.06 1,170,000 5.13 $0.05 608,439 $0.05
$0.50 436,000 9.32 $0.50 --
--------- -------
1,606,000 608,439
========= =======
</TABLE>
At December 31, 1996, 281,500 stock options were exercisable at a weighted
average exercise price of $0.05 per share.
8. LEASE COMMITMENTS
The Company leases certain facilities under noncancelable operating lease
agreements which include escalation clauses. Future minimum operating lease
payments under all noncancelable operating leases as of December 31, 1997 are as
follows (in thousands):
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1998............................................. $169
1999............................................. 176
2000............................................. 183
2001............................................. 190
2002............................................. 181
----
Total minimum lease payments.......................... $899
====
</TABLE>
Rent expense was $13,000 and $45,000 for the period from June 18, 1996
(inception) through December 31, 1996 and 1997, respectively.
The Company also leases certain equipment under capital lease agreements.
Future minimum lease payments under capital leases as of December 31, 1997 are
as follows (in thousands):
<TABLE>
<S> <C>
YEAR ENDING DECEMBER 31,
1998............................................ $ 182
1999............................................ 57
-----
239
Less: Interest....................................... (22)
-----
Principal payments................................... 217
Less: Current portion................................ (162)
-----
Long-term capital lease obligations.................. $ 55
=====
</TABLE>
At December 31, 1997, the cost and accumulated depreciation of equipment
under capital leases was $324,000 and $104,000, respectively. No equipment was
under capital lease at December 31 1996.
9. SUBSEQUENT EVENTS
On February 12, 1998, the Company's shareholders approved and authorized
the acquisition of the Company by Vixel Corporation (Vixel), a leading provider
of comprehensive storage area networks. The
F-34
<PAGE> 102
ARCXEL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
acquisition was effective on February 17, 1998. Vixel acquired all outstanding
shares of the Company's common stock and Series A preferred stock in exchange
for 0.765 shares of Vixel common stock for each share of the Company's common
stock and 0.765 shares of Vixel Series F preferred stock for each share of the
Company's Series A preferred stock. The Company's outstanding stock options were
converted into stock options for Vixel common stock at the same exchange rate.
The acquisition will be accounted for using the purchase method of accounting.
Immediately prior to the acquisition, the convertible notes payable to
shareholder were converted into the Company's Series A preferred stock (Note 4).
F-35
<PAGE> 103
VIXEL CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ARCXEL CIELO PRO FORMA
VIXEL TECHNOLOGIES, COMMUNICATIONS, ADJUSTMENTS
CORPORATION INC. INC. (NOTE 2) TOTAL
----------- ------------- --------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenue........................... $ 39,445 $ 52 $ 120 $ 39,377
Cost of revenue................... 36,199 34 313 35,920
---------- ----- ------- ----- ----------
Gross profit...................... 3,246 18 (193) 3,457
---------- ----- ------- ----- ----------
Operating expenses
Research and development........ 16,228 264 394 16,098
Selling, general and
administrative............... 14,521 108 517 14,112
Amortization and writedown of
goodwill and intangibles..... 2,057 -- -- $ 274 2,331
Amortization of deferred
compensation................. -- -- -- --
---------- ----- ------- ----- ----------
Total operating expenses..... 32,806 372 911 274 32,541
---------- ----- ------- ----- ----------
Loss from operations............ (29,560) (354) (1,104) (274) (29,084)
Other expense, net.............. 8,327 (14) 57 8,256
---------- ----- ------- ----- ----------
Net (loss) income............... $ (21,233) $(368) $(1,047) $(274) $ (20,828)
========== ===== ======= ===== ==========
Net (loss) income available to
common stockholders.......... $ (21,424) $(368) $(1,047) $(274) $ (21,829)
========== ===== ======= ===== ==========
Basic and diluted net loss per
share........................ $ (6.88) $ (7.01)
========== ==========
Weighted average shares of
common stock outstanding used
in computing basic and
diluted net loss per share... 3,113,017 3,113,017
========== ==========
</TABLE>
Note 2 -- The pro forma statements of operations give effect to the following
pro forma adjustments necessary to reflect the acquisition described
in Note 1:
(a) The amortization of goodwill over a period of 5 years.
(b) The amortization of capitalized research and development costs over
a period of 3 years.
F-36
<PAGE> 104
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
On February 13, 1998, Vixel Corporation sold all of the assets of its
Colorado division to Cielo Communications, Inc. for $7.25 million. On February
17, 1998, Vixel Corporation acquired the assets of Arcxel Technologies, Inc. for
approximately $14.8 million. The unaudited pro forma condensed statement of
operations is based on the individual unaudited statements of operations of
Vixel Corporation and Arcxel Technologies, Inc. appearing elsewhere in this
prospectus and has been prepared to reflect the acquisition by Vixel Corporation
of the assets of Arcxel Technologies Inc. and the sale of Cielo Communications,
Inc. The unaudited pro forma condensed statement of operations is based on
individual historical results of operations of Vixel Corporation and Arcxel
Technologies, Inc. for the fiscal year ended January 3, 1999, after giving
effect to the acquisition of Arcxel Technologies, Inc. and the sale of Cielo
Communications as if the transactions had occurred at the beginning of the
period presented.
The unaudited pro forma condensed financial statements should be read in
conjunction with the historical financial statements and notes thereto of Vixel
Corporation and Arcxel Technologies, Inc. The pro forma condensed financial
statements are presented for illustrative purposes only and are not necessarily
indicative of results of operations that would have actually occurred had the
acquisition of Arcxel Technologies, Inc. been effected on the dates assumed.
F-37
<PAGE> 105
(Inside Back Cover)
Title: The title consists of the Vixel logo, and the words "Vixel's Total SAN
Solution."
Image:
The image consists of an arch. At the lower left corner of the arch is an image
of a device labeled the "Vixel 1000", which connects by a line to a device
labeled the "Vixel Shortwave GBIC." Moving up the arch, from left to right, is
an image of a device labeled the "Vixel 2000," which connects by a line to a
device labeled the "Vixel Shortwave GBIC." Moving across the arch and to the
right, there is a device labeled the "Vixel 8100", which connects by a line to a
device labeled the "Vixel Shortwave GBIC." Moving across the arch and to the
right, there is a device labeled the "Vixel 2006", which connects by a line to a
device labeled the "Vixel Shortwave GBIC." Moving down the arch and to the
right, there is a device labeled the "Vixel 1000", which connects by a line to a
device labeled the "Vixel Shortwave GBIC."
Beneath the image are the following additional images:
Image: SAN InSite logo
Bullet: Comprehensive Management Software for Fabric Switches, Hubs and
Transceivers
Image: Vixel Fabric Switch
Bullet: True Fabric Switches with Advanced Features for Fabric and Loop Support
Image: Vixel Managed Hub
Managed Arbitrated Loop Hubs with Loop Auto-Recovery and Analyzer Diagnostics
Image: Vixel Entry-level hub
Bullet: Entry-level Arbitrated Loop Hubs for Low and Midrange Applications
Image: One Vixel gigabit interface converter and one Vixel gigabaud link module
Bullet: Transceivers Based on Leading Edge Fiber Optic Technology
<PAGE> 106
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 the Company in connection
with the sale of common stock being registered. All amounts are estimates except
the SEC registration and the NASD filing fees.
<TABLE>
<S> <C>
SEC Registration fee........................................ $ 11,120
NASD fee.................................................... 4,500
Nasdaq National Market initial listing fee.................. 95,000
Printing and engraving...................................... 120,000
Legal fees and expenses of the Company...................... 350,000
Accounting fees and expenses................................ 200,000
Blue sky fees and expenses.................................. 5,000
Transfer agent fees......................................... 10,000
Miscellaneous............................................... 54,380
--------
Total............................................. $850,000
========
</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 indemnification 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 of 1933
(the "Act"). The Company's bylaws provides for mandatory indemnification of its
directors and officers and permissible indemnification of employees and other
agents to the maximum extent not prohibited by the Delaware General Corporation
Law. The Company's certificate of incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for breach
of the directors' fiduciary duty as directors to the Company and its
stockholders. This provision in the certificate of incorporation does not
eliminate the directors' fiduciary duty, and in appropriate circumstances
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to the
Company for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
The Company has entered into indemnification agreements with its officers and
directors, a form of which is attached as Exhibit 10.1 hereto and incorporated
herein by reference. The indemnification agreements provide the Company's
officers and directors with further indemnification to the maximum extent
permitted by the Delaware General Corporation Law. We maintain liability
insurance for its directors and officers. Reference is also made to Section 7 of
the Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying
officers and directors of the Company against certain liabilities, and Section
3.10 of the Amended and Restated Investor Rights Agreement contained in Exhibit
4.2 hereto, indemnifying certain of the Company's stockholders, including
controlling stockholders, against certain liabilities.
II-1
<PAGE> 107
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
(a) During the past three years, we have issued unregistered securities to a
limited number of persons as described below:
- an aggregate of 4,529,221 shares of series E preferred stock at $4.50 per
share in October 1996 to 37 investors;
- an aggregate of 1,759,303 shares of series F preferred stock and
1,759,303 shares of common stock with an aggregate value of approximately
$12,100,000 in connection with the acquisition of Arcxel Technologies,
Inc. in February 1998;
- warrants to purchase 229,084 shares of series E preferred stock in
December 1996, May 1997, October 1998, December 1998 and March 1999 to
five investors; and
- options to purchase 10,826,971 shares of common stock at an average
exercise price of $2.03 per share to our officers, directors, employees
and consultants.
(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, executives, employees and consultants are also exempt
from registration pursuant to Rule 701 promulgated under the 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>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation, as amended
3.2 Form of Amended and Restated Certificate of Incorporation to
be effective on the closing of the offering made pursuant to
this Registration Statement
3.3 Bylaws of the Registrant
3.4 Bylaws of the Registrant to be effective upon the closing of
the offering made pursuant to this Registration Statement
4.1* Form of Registrant's Common Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated
February 17, 1998
4.3 First Amendment to Amended and Restated Investors' Rights
Agreement dated February 17, 1998
4.4 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Comdisco, Inc.
4.5 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to MMC/GATX Partnership No. 1
4.6 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Silicon Valley Bank
4.7 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Montgomery Securities
4.8 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Transamerica Business Credit
Corporation
</TABLE>
II-2
<PAGE> 108
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.9 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Greyrock Capital
4.10 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Comdisco, Inc.
4.11 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Western Digital Corporation
5.1* Opinion of Cooley Godward LLP
10.1 Form of Indemnity Agreement to be entered into by the
Registrant and each of its directors and executive officers
10.2* Amended and Restated 1995 Stock Option Plan and forms of
agreements thereunder
10.3 Secured Promissory Note between the Registrant and Western
Digital Corporation dated March 29, 1996, as amended March
30, 1999
10.4 Master Lease Agreement between Registrant and Transamerica
Business Credit Corporation dated May 23, 1997
10.5 Master Lease Agreement between Registrant and Comdisco, Inc.
dated January 18, 1996, together with addendum dated January
18, 1996
10.6 Term Loan and Security Agreement with Greyrock Capital, a
division of Nations Credit Corporation, with Registrant
dated November 26, 1997, as amended October 2, 1998
10.7 Turnkey Manufacturing Agreement with K*TEC Electronics, a
division of Kent Electronics Company, dated May 5, 1997
10.8 Employment Agreement between Registrant and Jay R. O'Donald
dated February 17, 1998
10.9 Employment Agreement between Registrant and Stuart B. Berman
dated February 17, 1998
10.10 Employment Agreement between Registrant and Gregory R.
Olbright dated November 30, 1998
10.11 Employment Agreement between Registrant and Stanley Reese
dated December 29, 1998
10.12 Employment Agreement between Registrant and James McCluney
dated April 26, 1999
10.13 Restricted Stock Purchase Agreement between Registrant and
James M. McCluney dated April 16, 1999
10.14 Restricted Stock Purchase Agreement between Registrant and
Gregory R. Olbright dated April 30, 1999
10.15* Restricted Stock Purchase Agreement between Registrant and
Kurtis L. Adams dated April 30, 1999
10.16 Full Recourse Promissory Note between Registrant and Stuart
B. Berman dated April 16, 1999
10.17 Form of Full Recourse Promissory Note between Registrant and
its executive officers
10.18 Form of Full Recourse Promissory Note between Registrant and
its directors
10.19* Lease Agreement between Registrant and Sun Life Assurance
Company of Canada (U.S.) dated December 5, 1996, as amended
January 22, 1997
10.20 Lease Agreement between Arcxel Technologies, Inc. and Aetna
Life Insurance Company, dated November 1, 1997, assigned to
Registrant August 24, 1998
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of KPMG LLP, Independent Accounts
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.4* Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see Page II-5 of the Registration
Statement)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be supplied by amendment.
II-3
<PAGE> 109
(b) FINANCIAL STATEMENT SCHEDULES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Vixel Corporation
Our audits of the financial statements referred to in our report dated May
19, 1999 appearing in the Registration Statement in Form S-1 also included an
audit of the financial statement schedules listed in Item 16 (b) of this Form
S-1. In our opinion, these financial statement schedules present fairly, in all
material respects, the information set forth therein when read in conjunction
with the related financial statements.
PricewaterhouseCoopers LLP
Seattle, Washington
June 22, 1999
Schedule -- Valuation and qualifying accounts
For the Years Ended December 29, 1996, December 28, 1997 and January 3,
1999 (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ------------ ---------- ---------- -------------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 29, 1996....................... -- -- -- --
Year ended December 28, 1997....................... -- $ 36 -- $ 36
Year ended January 3, 1999......................... $ 36 400 $ 205 231
ALLOWANCE FOR WARRANTIES
Year ended December 29, 1996....................... 100 -- -- 100
Year ended December 28, 1997....................... 100 298 104 294
Year ended January 3, 1999......................... 294 4,333 237 4,390
ALLOWANCE FOR INVENTORY OBSOLENCE
Year ended December 29, 1996....................... -- -- -- --
Year ended December 28, 1997....................... -- 414 -- 414
Year ended January 3, 1999......................... 414 994 145 1,263
</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 financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Company 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 Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the Delaware General Corporation Law, the Amended and Restated Certificate of
Incorporation or the Bylaws of the Company, Indemnification Agreements entered
into between the Company and its officers and directors, the Underwriting
Agreement, or otherwise, the Company has been advised that in the opinion of the
Securities and Exchange Commission
II-4
<PAGE> 110
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer, or controlling person of the Company 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 hereunder, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Company hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or
497(h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the 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 the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE> 111
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Vixel
Corporation certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-1 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Bothell, King County, State of Washington, on
this 22nd day of June, 1999.
VIXEL CORPORATION
By: /s/ JAMES M. MCCLUNEY
------------------------------------
James M. McCluney
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints James M. McCluney and Kurtis L. Adams,
his true and lawful attorneys-in-fact each acting alone, with full power of
substitution and resubstitution, for him and in his name, place and stead in any
and all capacities to sign any or all amendments (including post-effective
amendments) to this registration statement, and any registration statement filed
pursuant to Rule 462(b) under the Securities Act of 1933 in connection with the
registration under the Securities Act of 1933 of equity securities of Vixel
Corporation and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact, or
their substitutes, each acting alone, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES M. MCCLUNEY President, Chief Executive June 22, 1999
- ----------------------------------------------------- Officer and Director
James M. McCluney
/s/ KURTIS L. ADAMS Chief Financial Officer June 22, 1999
- -----------------------------------------------------
Kurtis L. Adams
/s/ GREGORY R. OLBRIGHT Chairman of the Board of June 22, 1999
- ----------------------------------------------------- Directors
Gregory R. Olbright
/s/ KEVIN A. FONG Director June 22, 1999
- -----------------------------------------------------
Kevin A. Fong
/s/ CHARLES A. HAGGERTY Director June 22, 1999
- -----------------------------------------------------
Charles A. Haggerty
</TABLE>
II-6
<PAGE> 112
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JUAN A. RODRIGUEZ Director June 22, 1999
- -----------------------------------------------------
Juan A. Rodriguez
/s/ TIMOTHY M. SPICER Director June 22, 1999
- -----------------------------------------------------
Timothy M. Spicer
/s/ WERNER F. WOLFEN Director June 22, 1999
- -----------------------------------------------------
Werner F. Wolfen
</TABLE>
II-7
<PAGE> 113
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation, as amended
3.2 Form of Amended and Restated Certificate of Incorporation to
be effective on the closing of the offering made pursuant to
this Registration Statement
3.3 Bylaws of the Registrant
3.4 Bylaws of the Registrant to be effective upon the closing of
the offering made pursuant to this Registration Statement
4.1* Form of Registrant's Common Stock Certificate
4.2 Amended and Restated Investors' Rights Agreement dated
February 17, 1998
4.3 First Amendment to Amended and Restated Investors' Rights
Agreement dated February 17, 1998
4.4 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Comdisco, Inc.
4.5 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to MMC/GATX Partnership No. 1
4.6 Warrant to purchase shares of Series C Preferred Stock of
the Registrant issued to Silicon Valley Bank
4.7 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Montgomery Securities
4.8 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Transamerica Business Credit
Corporation
4.9 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Greyrock Capital
4.10 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Comdisco, Inc.
4.11 Warrant to purchase shares of Series E Preferred Stock of
the Registrant issued to Western Digital Corporation
5.1* Opinion of Cooley Godward LLP
10.1 Form of Indemnity Agreement to be entered into by the
Registrant and each of its directors and executive officers
10.2* Amended and Restated 1995 Stock Option Plan and forms of
agreements thereunder
10.3 Secured Promissory Note between the Registrant and Western
Digital Corporation dated March 29, 1996, as amended March
30, 1999
10.4 Master Lease Agreement between Registrant and Transamerica
Business Credit Corporation dated May 23, 1997
10.5 Master Lease Agreement between Registrant and Comdisco, Inc.
dated January 18, 1996, together with addendum dated January
18, 1996
10.6 Term Loan and Security Agreement with Greyrock Capital, a
division of Nations Credit Corporation, with Registrant
dated November 26, 1997, as amended October 2, 1998
10.7 Turnkey Manufacturing Agreement with K*TEC Electronics, a
division of Kent Electronics Company, dated May 5, 1997
10.8 Employment Agreement between Registrant and Jay R. O'Donald
dated February 17, 1998
10.9 Employment Agreement between Registrant and Stuart B. Berman
dated February 17, 1998
</TABLE>
<PAGE> 114
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ----------- ------------
<C> <S> <C>
10.10 Employment Agreement between Registrant and Gregory R.
Olbright dated November 30, 1998
10.11 Employment Agreement between Registrant and Stanley Reese
dated December 29, 1998
10.12 Employment Agreement between Registrant and James McCluney
dated April 26, 1999
10.13 Restricted Stock Purchase Agreement between Registrant and
James M. McCluney dated April 16, 1999
10.14 Restricted Stock Purchase Agreement between Registrant and
Gregory R. Olbright dated April 30, 1999
10.15* Restricted Stock Purchase Agreement between Registrant and
Kurtis L. Adams dated April 30, 1999
10.16 Full Recourse Promissory Note between Registrant and Stuart
B. Berman dated April 16, 1999
10.17 Form of Full Recourse Promissory Note between Registrant and
its executive officers
10.18 Form of Full Recourse Promissory Note between Registrant and
its directors
10.19* Lease Agreement between Registrant and Sun Life Assurance
Company of Canada (U.S.) dated December 5, 1996, as amended
January 22, 1997
10.20 Lease Agreement between Arcxel Technologies, Inc. and Aetna
Life Insurance Company, dated November 1, 1997, assigned to
Registrant August 24, 1998
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of KPMG LLP, Independent Accounts
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.4* Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see Page II-5 of the Registration
Statement)
27.1 Financial Data Schedule
</TABLE>
- -------------------------
* To be supplied by amendment.
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
VIXEL CORPORATION
VIXEL CORPORATION, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
1. The name of the corporation is Vixel Corporation. The date of filing
of its original Certificate of Incorporation with the Secretary of State was
February 13, 1995.
2. This Restated Certificate of Incorporation has been duly adopted in
accordance with Sections 228, 242 and 245 of the Delaware General Corporation
Law, the Board of Directors of the corporation having adopted resolutions
setting forth the proposed Restated Certificate of Incorporation, declaring its
advisability, and directing that it be submitted to the stockholders of the
corporation for their approval; the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted having consented in writing to the adoption thereof; and
written notice of such adoption by the stockholders without a meeting by less
than unanimous written consent having been given to those stockholders from whom
such written consent was not received.
3. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation of this corporation by
restating the text of the original Certificate of Incorporation in full to read
as follows:
I.
The name of this corporation is Vixel Corporation (the "Corporation").
II.
The address of the registered office of the Corporation in the State of
Delaware is:
The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
County of New Castle
The name of the Corporation's registered agent at such address is The
Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
1.
<PAGE> 2
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares the corporation is authorized to issue is fifty million one hundred
sixty thousand four (50,160,004) shares, (i) thirty million (30,000,000) shares
of which shall be Common Stock (the "Common Stock") and (ii) twenty million one
hundred sixty thousand four (20,160,004) shares of which shall be Preferred
Stock (the "Preferred Stock"). The Common Stock and the Preferred Stock shall
have a par value of one-tenth of one cent ($.001) per share.
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of such stock then outstanding) by
the affirmative vote of the holders of a majority of the voting stock of the
Corporation (voting together on an as-converted basis).
C. DESIGNATION OF SERIES AND NUMBER OF AUTHORIZED SHARES. Five series of
Preferred Stock are created hereby: (i) five million seven hundred eighty-five
thousand five hundred seventy-three (5,785,573) of the authorized shares of
Preferred Stock are designated as "Series A Preferred Stock" (the "Series A
Preferred"); (ii) five million two hundred forty-three thousand eight hundred
and six (5,243,806) of the authorized shares of Preferred Stock are designated
as "Series B Preferred Stock" (the "Series B Preferred"); (iii) seven hundred
forty-seven thousand one hundred and forty-three (747,143) of the authorized
shares of Preferred Stock are designated as "Series C Preferred Stock" (the
"Series C Preferred"); (iv) two million (2,000,000) of the authorized shares of
Preferred Stock are designated as "Series D Preferred Stock" (the "Series D
Preferred"); (v) four million six hundred twenty-three thousand four hundred
eighty-two (4,623,482) of the authorized shares of Preferred Stock are
designated as "Series E Preferred Stock" ("the Series E Preferred"); and (vi)
one million seven hundred sixty thousand (1,760,000) shares of the authorized
shares of Preferred Stock are designated as "Series F Preferred Stock" ("the
Series F Preferred"). The Series A Preferred, the Series B Preferred, the Series
C Preferred, the Series D Preferred, the Series E Preferred and the Series F
Preferred may be collectively referred to herein as the "Convertible Preferred
Stock."
D. RIGHTS, PREFERENCES AND RESTRICTIONS OF CONVERTIBLE PREFERRED STOCK.
The Convertible Preferred Stock shall have the rights, preferences, privileges,
and the qualifications, limitations and restrictions thereof, as follows:
1. DIVIDEND RIGHTS. Holders of Convertible Preferred Stock shall
be entitled to receive cash dividends when, as and if declared by the Board of
Directors, out of any assets that are legally available therefor, prior and in
preference to any declaration or payment of any dividend (payable other than 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) on the Common Stock of the Corporation, at the rate
per share declared by the Board of Directors or, if greater (as determined on an
as-converted basis), an amount equal to
2.
<PAGE> 3
that paid on the Common Stock. Such dividends shall not be cumulative. After
payment of such dividends, any additional dividends declared shall be
distributed among all holders of Convertible Preferred Stock and all holders of
Common Stock in proportion to the number of shares of Common Stock that would be
held by each such holder if all shares of Convertible Preferred Stock were
converted into Common Stock at the then effective Conversion Rate for each
series of Convertible Preferred Stock.
2. VOTING RIGHTS.
a. Except as otherwise required by law or pursuant to any
other provision hereof, each holder of shares of Convertible Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
shares of Convertible Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share) at the record date for determination of stockholders
entitled to vote on such matters. 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 stockholders' meeting in accordance with the by-laws of
this Corporation, and shall be entitled to vote, except as otherwise provided
herein, together with holders of Common Stock, and not separately as a class,
with respect to any question upon which holders of Common Stock have the right
to vote.
b. The holders of shares of Series A Preferred Stock,
voting separately as a class, shall be entitled to elect two members of the
Board of Directors of the Corporation (the "Series A Directors"), the holders of
shares of Series B Preferred Stock, voting separately as a class, shall be
entitled to elect two members of the Board of Directors of the Corporation (the
"Series B Directors"), the holders of shares of Series D Preferred Stock, voting
separately as a class, shall be entitled to elect one member of the Board of
Directors of the Corporation (the "Series D Director"), and the holders of
shares of Series F Preferred Stock, voting separately as a class, shall be
entitled to elect one member of the Board of Directors of the Corporation (the
"Series F Director"). Additional members of the Board of Directors, if any,
(collectively, the "Other Directors") shall be elected by the holders of shares
of Common Stock and Convertible Preferred Stock, voting together as a single
class. Any Series A, Series B, Series D or Series F Director, as the case may
be, may be removed from the Board of Directors only by the affirmative vote of
the holders of a majority of the Series A, Series B, Series D or Series F
Preferred Stock, as the case may be, voting separately as a class, and the Other
Directors may be removed from the Board of Directors only by the affirmative
vote of the holders of a majority of the Common Stock and Convertible Preferred
Stock, voting together with as a single class. If a vacancy on the Board of
Directors is to be filled by the Board of Directors, only a director or
directors elected by the same class of stockholders as those who would be
entitled to vote to fill such vacancy, if any, shall vote to fill such vacancy.
3. LIQUIDATION RIGHTS. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
3.
<PAGE> 4
a. The holders of Series E Preferred shall be entitled to
be paid out of the assets of the Corporation, prior and in preference to any
payment or distribution out of the assets of the Corporation to holders of the
Series A, Series B, Series C, Series D or Series F Preferred or the Common Stock
or any other class or series of capital stock of the Corporation, an amount per
share equal to the sum of four dollars fifty cents ($4.50) (the "Series E
Original Issue Price") (subject to adjustment for stock splits, stock dividends
and recapitalizations) for each outstanding share of Series E Preferred plus an
amount equal to all declared but unpaid dividends on such share to the date
fixed for distribution (the "Series E Liquidation Preference"). If the assets
and funds thus distributed to the holders of the Series E Preferred shall be
insufficient to permit payment to such holders of the full aforesaid
preferential amount, then the entire assets of the Corporation legally available
for distribution shall be distributed ratably to the holders of the Series E
Preferred in proportion to the aggregate Series E Liquidation Preference of the
shares of Series E Preferred then held by them.
b. Thereafter, the holders of Series A Preferred shall be
entitled to be paid out of the assets of the Corporation an amount per share
equal to the sum of one dollar twenty-five cents ($1.25) (the "Series A Original
Issue Price") (subject to adjustment for stock splits, stock dividends and
recapitalizations) for each outstanding share of Series A Preferred plus an
amount equal to all declared but unpaid dividends on each such share to the date
fixed for distribution (the "Series A Liquidation Preference"). The holders of
Series B Preferred shall be entitled to be paid out of the assets of the
Corporation an amount per share equal to one dollar and seventy-five cents
($1.75) (the "Series B Original Issue Price") (subject to adjustment for stock
splits, stock dividends and recapitalizations) for each outstanding share of
Series B Preferred plus an amount equal to all declared but unpaid dividends on
share to the date fixed for distribution (the "Series B Liquidation
Preference"). The holders of Series C Preferred shall be entitled to be paid out
of the assets of the Corporation an amount per share equal to one dollar and
seventy-five cents ($1.75) (subject to adjustment for stock splits, stock
dividends and recapitalizations) for each outstanding share of Series C
Preferred plus an amount equal to all declared but unpaid dividends on each
share to the date fixed for distribution (the "Series C Liquidation
Preference"). The holders of Series D Preferred shall be entitled to be paid out
of the assets of the Corporation an amount per share equal to the sum of four
dollars ($4.00) (the "Series D Original Issue Price") (subject to adjustment for
stock splits, stock dividends and recapitalizations) for each outstanding share
of Series D Preferred plus an amount equal to all declared but unpaid dividends
on such share to the date fixed for distribution (the "Series D Liquidation
Preference"). The holders of Series F Preferred shall be entitled to be paid out
of the assets of the Corporation an amount per share equal to the sum of four
dollars ($4.00) (the "Series F Original Issue Price") (subject to adjustment for
stock splits, stock dividends and recapitalizations) for each outstanding share
of Series F Preferred plus an amount equal to all declared but unpaid dividends
on such share to the date fixed for distribution (the "Series F Liquidation
Preference"). The Series A, Series B, Series C, Series D and Series F Preferred
shall rank on a parity as to the receipt of the respective preferential amounts
for each such series. If the assets and funds thus available for distribution to
the holders of the Series A, Series B, Series C, Series D and Series F Preferred
shall be insufficient to permit payment to such holders of the full aforesaid
preferential amounts, then the entire assets of the Corporation legally
available for distribution (after payment of the Series E Liquidation
Preference) shall be
4.
<PAGE> 5
distributed ratably to the holders of the Series A, Series B, Series C, Series D
and Series F Preferred holders in proportion to the aggregate Series A
Liquidation Preference, Series B Liquidation Preference, Series C Liquidation
Preference, Series D Liquidation Preference and Series F Liquidation Preference
of the shares of the Series A, Series B, Series C, Series D and Series F
Preferred then held by them.
c. Thereafter, any remaining assets of the Corporation
legally available for distribution, if any, shall be distributed ratably among
the holders of Common Stock and the holders of the Convertible Preferred Stock
on an as-converted basis.
d. An Acquisition or an Asset Transfer, as defined in
subparagraph 4(i)(ii) below, shall be considered a liquidation for purposes of
this section. Notwithstanding the foregoing, additional purchases of the
Corporation's stock in connection with any transaction that might otherwise be
considered an Acquisition by persons who were, immediately prior to such
transaction, holders of the capital stock of the Corporation, shall not be
included in such definition.
4. CONVERSION TO COMMON STOCK. The holders of the Convertible
Preferred Stock shall have the following rights with respect to the conversion
of the Convertible Preferred Stock into shares of Common Stock:
a. OPTIONAL CONVERSION. Subject to and in compliance with
the provisions of this Section 4, any shares of Convertible Preferred Stock may,
at the option of the holder, be converted at any time into fully-paid and
nonassessable shares of Common Stock. The number of shares of Common Stock to
which a holder of a particular series of Convertible Preferred Stock shall be
entitled upon conversion shall be the product obtained by multiplying the
applicable "Conversion Rate" then in effect (determined as provided in paragraph
4(b)) by the number of shares of Convertible Preferred Stock of the applicable
series being converted.
b. CONVERTIBLE PREFERRED STOCK CONVERSION RATE. The
conversion rate in effect at any time for conversion of a particular series of
Convertible Preferred Stock (the applicable "Conversion Rate") shall be the
quotient obtained by dividing the "Original Issue Price" (as adjusted for any
stock combinations ,splits or stock dividends with respect to such series of
Convertible Preferred Stock) with respect to such series (as provided in the
table below) by the applicable "Conversion Price" for such series (calculated as
provided in paragraph 4(c)).
5.
<PAGE> 6
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK ORIGINAL ISSUE PRICE
BY SERIES PER SHARE
---------------------------------- ---------------------------------
<S> <C>
Series A Preferred $1.25
Series B Preferred $1.75
Series C Preferred $3.50
Series D Preferred $4.00
Series E Preferred $4.50
Series F Preferred $4.00
</TABLE>
c. CONVERSION PRICE. The applicable conversion price
("Conversion Price") for a particular series of Convertible Preferred Stock
initially shall be the applicable Original Issue Price for such series as set
forth in paragraph 4(b). Such initial Conversion Price for each series of
Convertible Preferred Stock shall be adjusted from time to time in accordance
with this Section 4. All references to the Conversion Price for a particular
series of Convertible Preferred Stock shall mean the applicable Conversion Price
for such series as so adjusted.
d. MECHANICS OF CONVERSION. Each holder of Convertible
Preferred Stock who desires to convert the same into shares of Common Stock
pursuant to this Section 4 shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or any transfer agent
for the Convertible Preferred Stock, and shall give written notice to the
Corporation at such office that such holder elects to convert the same. Such
notice shall state the number of shares of Convertible Preferred Stock being
converted. Thereupon, the Corporation promptly shall issue and deliver at such
office to such holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled and promptly shall pay in cash or,
to the extent sufficient funds are not then legally available therefor, in
Common Stock (at the fair market value of the Common Stock determined by the
Board of Directors as of the date of such conversion), any declared and unpaid
dividends on the shares of Convertible Preferred Stock being converted. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of
Convertible Preferred Stock to be converted, and the person entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder of such shares of Common Stock on such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date the first
share of Series E Preferred is issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock, the Conversion Price for each
series of Convertible Preferred Stock in effect immediately before such
subdivision shall be decreased proportionately. Conversely, if the Corporation
shall at any time or from time to time after the Original Issue Date combine the
outstanding shares of
6.
<PAGE> 7
Common Stock into a smaller number of shares, the Conversion Price for each
series of Convertible Preferred Stock in effect immediately before such
combination shall be increased proportionately. Any adjustment under this
paragraph 4(e) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND
DISTRIBUTIONS. If the Corporation at any time or from time to time after the
Original Issue Date makes or fixes a record date for the determination of
holders of Common Stock entitled to receive a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Conversion
Price then in effect for each series of Convertible Preferred Stock shall be
decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying the
Conversion Price then in effect for each series of Convertible Preferred Stock
by a fraction (A) the numerator of which is the total number of shares of Common
Stock issued and outstanding immediately prior to the time of such issuance or
the close of business on such record date, and (B) the denominator of which is
the total number of shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business on such record date
plus the number of shares of Common Stock issuable in payment of such dividend
or distribution; provided, however, that if such record date is fixed and such
dividend is not fully paid or if such distribution is not fully made on the date
fixed therefor, such Conversion Price shall be recomputed accordingly as of the
close of business on such record date and thereafter such Conversion Price shall
be adjusted pursuant to this paragraph 4(f) to reflect the actual payment of
such dividend or distribution.
g. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If
the Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of each series of Convertible Preferred Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of other securities of the
Corporation they would have received had their shares of such series of
Convertible Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the conversion date, retained such securities receivable by them
as aforesaid during such period, subject to all other adjustments called for
during such period under this Section 4 with respect to the rights of the
holders of such series of Convertible Preferred Stock or with respect to such
other securities by their terms.
h. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If at any time or from time to time after the Original Issue Date,
the Common Stock issuable upon the conversion of each series of Convertible
Preferred Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than an Acquisition or Asset Transfer or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 4), in
any such event each holder of such series of Convertible Preferred Stock shall
have the right thereafter to convert such stock into the kind and
7.
<PAGE> 8
amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Common Stock into which the shares of such series of
Convertible Preferred Stock could have been converted immediately prior to such
recapitalization, reclassification or change, all subject to further adjustment
as provided herein or with respect to such other securities or property by the
terms thereof.
i. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS.
(i) If at any time or from time to time after the
Original Issue Date, there is a capital reorganization of the Common Stock
(other than an Acquisition or Asset Transfer or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of any series of Convertible
Preferred Stock thereafter shall be entitled to receive upon conversion of such
series of Convertible Preferred Stock the number of shares of stock or other
securities or property of the Corporation to which a holder of the number of
shares of Common Stock deliverable upon conversion would have been entitled on
such capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 4 with respect to
the rights of the holders of such series of Convertible Preferred Stock after
the capital reorganization to the end that the provisions of this Section 4
(including adjustment of the Conversion Price with respect to such series of
Convertible Preferred Stock, as applicable, then in effect and the number of
shares issuable upon conversion of such series of Convertible Preferred Stock)
shall be applicable after that event and be as nearly equivalent as practicable.
(ii) For the purposes of this Certificate of
Incorporation: (A) "Acquisition" shall mean any consolidation or merger of the
Corporation with or into any other corporation or other entity or person, or any
other corporate reorganization, in which the stockholders of the Corporation
immediately prior to such consolidation, merger or reorganization, own less than
fifty percent (50%) of the voting power of the surviving corporation or other
entity or person immediately after such consolidation, merger or reorganization,
or any transaction or series of related transactions in which in excess of fifty
percent (50%) of the Corporation's voting power is transferred; and (B) "Asset
Transfer" shall mean a sale, lease or other disposition of all or substantially
all of the assets of the Corporation.
j. ADJUSTMENT OF CONVERSION PRICE OF SERIES A, SERIES B,
SERIES D, SERIES E AND SERIES F PREFERRED FOR DILUTIVE ISSUANCES. The Conversion
Price of the Series A, Series B, Series D, Series E and Series F Preferred shall
be subject to adjustment from time to time as follows:
(i) If at any time or from time to time after the
Original Issue Date, the Corporation issues or sells, or is deemed by the
express provisions of this paragraph 4(j) to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), other than as a dividend or
other distribution on any class of stock as provided in
8.
<PAGE> 9
paragraph 4(f) above, and other than a subdivision or combination of shares of
Common Stock as provided in paragraph 4(e) above, for an Effective Price (as
hereinafter defined) (A) in the case of each such series of Series A, Series B
and Series E Preferred Stock, less than the Conversion Price then in effect for
such series of Series A, Series B and Series E Preferred Stock, or (B) in the
case of the series of Series D and Series F Preferred Stock, less than $1.75 per
share (as adjusted in accordance with Article IV, Sections D(4)(e) through
D(4)(i) hereof), then and in each such case the Conversion Price then in effect
for such series of Series A, Series B, Series D, Series E and Series F Preferred
Stock shall be reduced, as of the opening of business on the date of such issue
or sale, to a price determined by multiplying the then existing Conversion Price
for such Series A, Series B, Series D, Series E or Series F Preferred Stock by a
fraction (A) the numerator of which shall be the sum of (1) the number of shares
of Common Stock deemed outstanding (as defined below) immediately prior to such
issue or sale, plus (2) the number of shares of Common Stock which the aggregate
consideration received (as defined in subparagraph 4(j)(ii)) by the Corporation
for the total number of Additional Shares of Common Stock so issued would
purchase at the Conversion Price then in effect for such Series A, Series B or
Series E Preferred Stock or, in the case of Series D or Series F Preferred
Stock, $1.75 per share (as adjusted in accordance with Article IV, Sections
D4(e) through D4(i) hereof), and (B) the denominator of which shall be the sum
of (1) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale, plus (2) the total number of
Additional Shares of Common Stock so issued.
For the purposes of the preceding sentence, the number of shares of
Common Stock deemed to be outstanding as of a given date shall be the sum of (A)
the number of shares of Common Stock actually outstanding, (B) the number of
shares of Common Stock into which the then outstanding shares of Convertible
Preferred Stock could be converted if fully converted on the day immediately
preceding the given date, and (C) the number of shares of Common Stock which
could be obtained through the exercise or conversion of all other rights,
options and convertible securities outstanding on the day immediately preceding
the given date.
(ii) For the purpose of making any adjustment
required under this paragraph 4(j), the consideration received by the
Corporation for any issue or sale of securities shall (A) to the extent it
consists of cash, be computed at the gross cash proceeds (before underwriters'
commission, expenses and fees) received by the Corporation, (B) to the extent it
consists of property other than cash, be computed at the fair value of that
property as determined in good faith by the Board of Directors, and (C) if
Additional Shares of Common Stock, Convertible Securities (as hereinafter
defined) or rights or options to purchase either Additional Shares of Common
Stock or Convertible Securities are issued or sold together with other stock or
securities or other assets of the Corporation for a consideration which covers
both, be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board of Directors to be allocable to
such Additional Shares of Common Stock, Convertible Securities or rights or
options.
(iii) For the purpose of the adjustment required
under this paragraph 4(j), if the Corporation issues or sells any rights or
options for the purchase of, or stock or other securities convertible into,
Additional Shares of Common Stock (such convertible
9.
<PAGE> 10
stock or securities being herein referred to as "Convertible Securities") and if
the Effective Price of such Additional Shares of Common Stock is (A) in the case
of the series of Series A, Series B and Series E Preferred Stock, less than the
Conversion Price then in effect for such Series A, Series B or Series E
Preferred Stock, as the case may be, or (B) in the case of the Series D or
Series F Preferred Stock, less than $1.75 per share (as adjusted in accordance
with Article IV, Sections D4(e) through D4(i) hereof), in each such case the
Corporation shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the Conversion Price for such series of Series A, Series B, Series
D, Series E or Series F Preferred Stock, as adjusted upon the issuance of such
rights, options or Convertible Securities, shall be made as a result of the
actual issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. If any
such rights or options or the conversion privilege represented by any such
Convertible Securities shall expire without having been exercised, the
Conversion Price for such series of Convertible Preferred Stock, as adjusted
upon the issuance of such rights, options or Convertible Securities, shall be
readjusted to the Conversion Price which would have been in effect had an
adjustment been made on the basis that the only Additional Shares of Common
Stock so issued were the Additional Shares of Common Stock, if any, actually
issued or sold on the exercise of such rights or options or rights of conversion
of such Convertible Securities, and such Additional Shares of Common Stock, if
any, were issued or sold for the consideration actually received by the
Corporation upon such exercise, plus the consideration, if any, actually
received by the Corporation for the granting of all such rights or options,
whether or not exercised, plus the consideration received for issuing or selling
the Convertible Securities actually converted, plus the consideration, if any,
actually received by the Corporation (other than by cancellation of liabilities
or obligations evidenced by such Convertible Securities) on the
10.
<PAGE> 11
conversion of such Convertible Securities, provided that such readjustment shall
not apply to prior conversions of Series A, Series B, Series D, Series E or
Series F Preferred Stock.
(iv) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued by the Corporation or deemed to be issued
pursuant to this paragraph 4(j), whether or not subsequently reacquired or
retired by the Corporation other than (A) shares of Common Stock issued upon
conversion of the Convertible Preferred Stock; (B) shares of Common Stock and/or
options, warrants or other Common Stock purchase rights, and the Common Stock
issued pursuant to such options, warrants or other rights (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like) issued or
to be issued to employees, officers or directors of, or consultants or advisors
to the Corporation or any subsidiary pursuant to stock purchase or stock option
plans or other arrangements that are approved by the Board; and (C) shares of
Common Stock issued pursuant to the exercise of options, warrants or convertible
securities outstanding as of the Original Issue Date. The "Effective Price" of
Additional Shares of Common Stock shall mean the quotient determined by dividing
the total number of Additional Shares of Common Stock issued or sold, or deemed
to have been issued or sold by the Corporation under this paragraph 4(j), into
the aggregate consideration received, or deemed to have been received by the
Corporation for such issue under this paragraph 4(j), for such Additional Shares
of Common Stock.
(v) There shall be no adjustment to the Series C
Conversion Price pursuant to this Section 4(j).
k. NOTICES OF RECORD DATE. Upon (i) any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, or (ii) any Acquisition or other capital
reorganization of the Corporation, any reclassification or recapitalization of
the capital stock of the Corporation, any merger or consolidation of the
Corporation with or into any other corporation, or any Asset Transfer, or any
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the Corporation shall mail to each holder of Convertible Preferred
Stock (A) at least twenty (20) days prior written notice of the record date for
the purpose of such dividend or distribution and a description of such dividend
or distribution, (and specifying the date on which holders of stock shall be
entitled thereto) or for determining rights to vote, if any, in respect to the
matters referred to in (ii) above; and (B) in the case of matters referred to in
(ii) above, at least twenty (20) days prior written notice of the date on which
any such Acquisition, reorganization, reclassification, transfer, consolidation,
merger, Asset Transfer, dissolution, liquidation or winding up is expected to
become effective, and the date, if any, that is to be fixed as to when the
holders of record of Common Stock (or other securities) shall be entitled to
exchange their shares of Common Stock (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
11.
<PAGE> 12
l. AUTOMATIC CONVERSION.
(i) Each share of any series of Convertible
Preferred Stock automatically shall be converted into shares of Common Stock,
based on the Conversion Rate then in effect with respect to such series of
Convertible Preferred Stock, immediately upon: (A) the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation where (1)(x) the per share price
(before underwriters' commissions, expenses and fees) is at least $8.50 per
share and (y) the gross cash proceeds to the Corporation (before underwriting
discounts, commissions and fees) are at least twenty million dollars
($20,000,000) or (2)(x) with respect to the Series A, Series B, Series C, Series
D Preferred and Series F, the holders of at least two-thirds of the outstanding
shares of the Series A, Series B, Series C, Series D and Series F Preferred
(voting together as a single class on an as-converted basis) vote in favor of
conversion in connection with such underwritten public offering and (y) in the
case of the Series E Preferred, the holders of a majority of the Series E
Preferred vote in favor of conversion in connection with such underwritten
public offering. Upon any such conversion, any declared and unpaid dividends
shall be paid in accordance with the provisions of Section 1.
(ii) Upon the occurrence of an event specified in
subparagraph 4(l)(i) above, the outstanding shares of Convertible Preferred
Stock shall be converted without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Corporation or its transfer agent; provided, however, that
the Corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such conversion unless the certificates
evidencing such shares of Convertible Preferred Stock, either are delivered to
the Corporation or its transfer agent as provided below, or the holder notifies
the Corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificates. Upon the occurrence of such conversion of the Convertible
Preferred Stock, the holders of Convertible Preferred Stock shall surrender the
certificates representing such shares at the office of the Corporation or any
transfer agent for the Convertible Preferred Stock. Thereupon, there shall be
issued and delivered to such holder promptly at such office and in its name as
shown on such surrendered certificate or certificates, a certificate or
certificates for the number of shares of Common Stock into which the shares of
Convertible Preferred Stock surrendered were convertible on the date on which
such conversion occurred, and the Corporation promptly shall pay in cash or, at
the option of the Corporation, Common Stock (at the fair market value of the
Common Stock determined by the Board as of the date of such conversion), or
both, together with all declared and unpaid dividends on the shares of such
Convertible Preferred Stock being converted, to and including the date of such
conversion.
m. FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of any series of Convertible Preferred Stock.
All shares of Common Stock (including fractions thereof) issuable upon
conversion of more than one share of a series of Convertible Preferred Stock by
a holder thereof shall be aggregated for purposes of determining
12.
<PAGE> 13
whether the conversion would result in the issuance of any fractional share. If,
after the aforementioned aggregation, the conversion would result in the
issuance of any fractional share, the Corporation shall, in lieu of issuing any
fractional share, pay cash equal to the product of such fraction multiplied by
the Common Stock's fair market value (as determined by the Board) on the date of
conversion.
n. 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 Convertible 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 Convertible Preferred Stock. If at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Convertible Preferred Stock, the Corporation will take such corporate action as
may, in the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose.
o. NOTICES. Any notice required by the provisions of this
Article IV shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Corporation.
p. PAYMENT OF TAXES. The Corporation will pay all taxes
(other than taxes based upon income) and other governmental charges that may be
imposed with respect to the issue or delivery of shares of Common Stock upon
conversion of shares of any series of Convertible Preferred Stock, excluding any
tax or other charge imposed in connection with any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that in which
the shares of such Convertible Preferred Stock so converted were registered.
q. NO DILUTION OR IMPAIRMENT. The Corporation shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but shall at all times in good faith
assist in carrying out all such action as may be reasonably necessary or
appropriate in order to protect the conversion rights of the holders of the
Convertible Preferred Stock against dilution or other impairment.
5. PROTECTIVE PROVISIONS.
a. So long as there remain outstanding at least an
aggregate of 3,750,000 shares of Series A, Series B, Series D, Series E and
Series F Preferred Stock, the Corporation shall not, without first obtaining the
separate approval (by vote or written consent,
13.
<PAGE> 14
as provided by law) of the holders of at least a majority of the Series A,
Series B, Series D, Series E and Series F Preferred Stock, voting together as a
class, take any of the following actions:
(i) amend or repeal any provision of the
Corporation's Certificate of Incorporation if such action would alter or change
the rights, preferences or privileges provided for the Series A, Series B,
Series D, Series E or Series F Preferred so as to adversely affect the holders
thereof;
(ii) redeem or repurchase or otherwise acquire any
shares of Common Stock other than (A) pursuant to the exercise of any
preexisting contractual or legal rights of first refusal or repurchase or any
repurchase of any outstanding securities of the Corporation that is unanimously
approved by the Corporation's Board of Directors;
(iii) pay or declare any dividend on shares of
Common Stock if dividends on the Convertible Preferred Stock payable pursuant to
Section 1 remain unpaid, except dividends payable solely in Common Stock;
(iv) authorize or issue shares of any class of
stock having a preference over, or being on a parity with, the Series A, Series
B, Series D, Series E or Series F Preferred with respect to dividends or assets;
(v) voluntarily dissolve or liquidate the
Corporation;
(vi) enter into a consolidation, merger or
reorganization of the Corporation with or into any other corporation or other
entity or person, or any other corporate reorganization, in which (A) the
Corporation is not the surviving entity or (B) the stockholders of the
Corporation immediately prior to such consolidation, merger or reorganization,
own less than fifty percent (50%) of the voting power of the surviving entity
immediately after such consolidation, merger or reorganization; or
(vii) enter into any transaction or series of
related transactions in which in excess of fifty percent (50%) of the
Corporation's voting power is transferred.
b. So long as there remain outstanding at least 750,000
shares of Series E Preferred, the corporation shall not, without first obtaining
the approval (by vote or written consent, as provided by law) of the holders of
at least a majority of the Series E Preferred, voting or consenting as a
separate class, take any of the following actions:
(i) amend or repeal Sections D(3) or D(6) of this
Article IV or this Section 5(b), amend or repeal any other provision of the
Corporation's Certificate of Incorporation if such action would alter or change
the rights, preferences or privileges provided for the Series E Preferred so as
to adversely affect the holders of the Series E Preferred in a manner different
than the other shares of Convertible Preferred Stock ;
14.
<PAGE> 15
(ii) increase the Conversion Price of the Series E
Preferred Stock (except as otherwise currently contemplated by Section D(4) of
this Article IV), or amend the Corporation's Certificate of Incorporation to
require conversion of the Series E Preferred Stock (except as currently
contemplated by Section D(4)(1) of this Article IV); or
(iii) exchange or reclassify any outstanding shares
of Convertible Preferred Stock or Common Stock for any class or series of
capital stock of the Corporation with preference over the Series E Preferred
with respect to dividends or assets.
6. REDEMPTION
a. The Corporation shall be obligated to redeem the Series
E Preferred as follows:
(i) At any time after October 21, 2001, the holders
of at least a majority of the then outstanding shares of Series E Preferred,
voting as a separate class, may require the Corporation, to the extent it may
lawfully do so, to redeem the Series E Preferred in three (3) equal annual
installments beginning on the first calendar quarter commencing at least thirty
(30) days after the Corporation's receipt of such redemption notice from such
holders (each a "Redemption Date"). The Corporation shall effect such
redemptions on the applicable Redemption Date by paying in cash in exchange for
the shares of Series E Preferred to be redeemed a sum equal to the Original
Issue Price per share of Series E Preferred (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) plus declared and unpaid dividends with respect to such shares. The
total amount to be paid for the Series E Preferred is hereinafter referred to as
the "Redemption Price." The number of shares of Series E Preferred that the
Corporation shall be required to redeem on any one Redemption Date shall be
equal to the amount determined by dividing (i) the aggregate number of shares of
Series E Preferred outstanding immediately prior to the Redemption Date by (ii)
the number of remaining Redemption Dates (including the Redemption Date to which
such calculation applies). Shares subject to redemption pursuant to this Section
6(a) shall be redeemed from each holder of Series E Preferred on a pro rata
basis.
(ii) At least thirty (30) days but no more than
sixty (60) days prior to the first Redemption Date, the Corporation shall send a
notice (a "Redemption Notice") to all holders of Series E Preferred to be
redeemed setting forth (a) the Redemption Price for the shares to be redeemed;
and (b) the place at which such holders may obtain payment of the redemption
Price upon surrender of their share certificates. If the Corporation does not
have sufficient funds legally available to redeem all shares to be redeemed at
the Redemption Date (including, if available, those to be redeemed at the option
of the corporation), then it shall redeem such shares pro rata (based on the
portion of the aggregate Redemption Price payable to them) to the extent
possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
b. On or prior to the Redemption Date, the Corporation
shall deposit the Redemption Price of all shares to be redeemed with a bank or
trust corporation having aggregate capital and surplus in excess of
$100,000,000, as trust fund, with irrevocable
15.
<PAGE> 16
instructions and authority to the bank or trust corporation to pay, on and after
such Redemption Date, the Redemption Price of the shares to their respective
holders upon the surrender of their share certificates. Any moneys deposited by
the Corporation pursuant to this paragraph 6(b) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 4 hereof no
later than the fifth (5th) day preceding the Redemption Date shall be returned
to the Corporation forthwith upon such conversion. The balance of any funds
deposited by the corporation pursuant to this Section 6(b) remaining unclaimed
at the expiration of one (1) year following such Redemption Date shall be
returned to the Corporation promptly upon its written request.
c. On or after such Redemption Date, each holder of shares
of Series E Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation 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 such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after such Redemption Date, unless
there shall have been a default in payment of the Redemption Price or the
Corporation is unable to pay the Redemption Price due to not having sufficient
legally available funds, all rights of the holders of such shares as holders of
Series E Preferred (except the right to receive the Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of Series E
Preferred are not redeemed due to a default in payment by the Corporation or
because the corporation does not have sufficient legally available funds, such
shares of Series E Preferred shall remain outstanding and shall be entitled to
all of the rights and preferences provided herein.
d. In the event of a call for redemption if any shares of
Series E Preferred, any conversion rights for such Series E Preferred shall
terminate as to the shares designated for redemption at the close of business on
the fifth (5th) day preceding the Redemption Date, unless default is made in
payment of the Redemption Price.
7. NO REISSUANCE OF CONVERTIBLE PREFERRED STOCK. No share or
shares of the Convertible Preferred Stock acquired by the Corporation by reason
of redemption, purchase, conversion or otherwise shall be reissued.
8. NO PREEMPTIVE RIGHTS. Stockholders shall have no preemptive
rights except as granted by the Corporation pursuant to written agreements.
V.
A director of the Corporation shall not be personally liable to the Corporation
or its stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction
16.
<PAGE> 17
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended to authorize corporate action further
eliminating or limiting the personal liability of directors, then the liability
of a director shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of this Article V shall be prospective and
shall not affect the rights under this Article V in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VI.
For the management of the business and for the conduct of the affairs of the
Corporation, and in further definition, limitation and regulation of the powers
of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the Bylaws.
B. The Board of Directors may from time to time make, amend, supplement
or repeal the Bylaws; provided, however, that the stockholders may change or
repeal any Bylaw adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the Common Stock and Convertible Preferred Stock voting together as a
single class; and, provided further, that no amendment or supplement to the
Bylaws adopted by the Board of Directors shall vary or conflict with any
amendment or supplement thus adopted by the stockholders.
C. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
VII.
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.
VIII.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.
17.
<PAGE> 18
IN WITNESS WHEREOF, said Vixel Corporation has caused this Certificate to be
signed by Stephen Smith, its Vice President, Finance, this 17th day of February,
1998.
VIXEL CORPORATION,
a Delaware corporation
By: /s/ Stephen Smith
-----------------------------------
Stephen Smith
Vice President, Finance
18.
<PAGE> 19
CERTIFICATE OF AMENDMENT
OF THE RESTATED CERTIFICATE OF INCORPORATION OF
VIXEL CORPORATION
Vixel Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), hereby
certifies as follows:
FIRST: The name of the Corporation is Vixel Corporation.
SECOND: Paragraphs A and C of Article IV of the Restated Certificate of
Incorporation of the Corporation are hereby amended in their entirety to read as
follows:
A. This Corporation is authorized to issue two classes of
stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares the corporation is authorized to
issue is fifty million three hundred sixty thousand four (50,360,004)
shares, (i) thirty million (30,000,000) shares of which shall be Common
Stock (the "Common Stock") and (ii) twenty million three hundred sixty
thousand four (20,360,004) shares of which shall be Preferred Stock (the
"Preferred Stock"). The Common Stock and the Preferred Stock shall have
a par value of One-Tenth of One Cent ($.001) per share.
C. DESIGNATION OF SERIES AND NUMBER OF AUTHORIZED SHARES.
Six series of Preferred Stock are created hereby: (i) five million seven
hundred eighty-five thousand five hundred seventy-three (5,785,573) of
the authorized shares of Preferred Stock are designated as "Series A
Preferred Stock" (the "Series A Preferred"); (ii) five million two
hundred forty-three thousand eight hundred and six (5,243,806) of the
authorized shares of Preferred Stock are designated as "Series B
Preferred Stock" (the "Series B Preferred"); (iii) seven hundred
forty-seven thousand one hundred and forty-three (747,143) of the
authorized shares of Preferred Stock are designated as "Series C
Preferred Stock" (the "Series C Preferred"); (iv) two million
(2,000,000) of the authorized shares of Preferred Stock are designated
as "Series D Preferred Stock" (the "Series D Preferred"); (v) four
million eight hundred twenty-three thousand four hundred eighty-two
(4,823,482) of the authorized shares of Preferred Stock are designated
as "Series E Preferred Stock" (the "Series E Preferred"); and (vi) one
million seven hundred sixty thousand (1,760,000) shares of the
authorized shares of Preferred Stock are designated as "Series F
Preferred Stock" (the "Series F Preferred"). The Series A Preferred, the
Series B Preferred, the Series C Preferred, the Series D Preferred, the
Series E Preferred and the Series F Preferred may be collectively
referred to herein as the "Convertible Preferred Stock."
THIRD: The foregoing amendment of the Restated Certificate of
Incorporation of the Corporation has been duly adopted by the directors and
stockholders of the Corporation in
1.
<PAGE> 20
accordance with the provisions of Sections 141, 228 and 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has executed this Certificate of
Amendment on the 20th day of November, 1998.
VIXEL CORPORATION
By: /s/ James C. T. Linfield
-----------------------------------------
James C. T. Linfield, Assistant Secretary
2.
<PAGE> 1
EXHIBIT 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
VIXEL CORPORATION
VIXEL CORPORATION, a corporation organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:
1. The name of the corporation is Vixel Corporation. The date of filing
of its original Certificate of Incorporation with the Secretary of State was
February 13, 1995.
2. This Restated Certificate of Incorporation has been duly adopted in
accordance with Sections 228, 242 and 245 of the Delaware General Corporation
Law, the Board of Directors of the corporation having adopted resolutions
setting forth the proposed Restated Certificate of Incorporation, declaring its
advisability and directing that it be submitted to the stockholders of the
corporation for their approval; the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted having consented in writing to the adoption thereof; and
written notice of such adoption by the stockholders without a meeting by less
than unanimous written consent having been given to those stockholders from whom
such written consent was not received.
3. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation of this corporation by
restating the text of the original Certificate of Incorporation in full to read
as follows:
I.
The name of this corporation is Vixel Corporation.
II.
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the corporation in the State of Delaware at
such address is the Corporation Trust Company.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
1.
<PAGE> 2
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is sixty-five million
(65,000,000) shares. Sixty million (60,000,000) shares shall be Common Stock,
each having a par value of one-tenth of one cent ($.001). Five million
(5,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. BOARD OF DIRECTORS. The management of the business and the
conduct of the affairs of the corporation shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed exclusively by one or more resolutions adopted by the
Board of Directors.
Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the initial public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended (the "1933 Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the
2.
<PAGE> 3
Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. Notwithstanding the foregoing provisions of this
section, each director shall serve until his successor is duly elected and
qualified or until his death, resignation or removal. No decrease in the number
of directors constituting the Board of Directors shall shorten the term of any
incumbent director. Notwithstanding the foregoing provisions of this section,
each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
2. REMOVAL OF DIRECTORS.
a. Neither the Board of Directors nor any individual
director may be removed without cause.
b. Subject to any limitation imposed by law, any
individual director or directors may be removed with cause by the holders of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
3. VACANCIES.
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole Board of Directors (as constituted immediately prior to
any such increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in offices as aforesaid, which election shall be governed by Section 211 of
the DGCL.
3.
<PAGE> 4
B.
1. Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend or repeal Bylaws.
2. The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering and
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provision of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
4.
<PAGE> 5
IN WITNESS WHEREOF, this Certificate has been subscribed this ____ day
of __________, 1999 by the undersigned who affirms that the statements made
herein are true and correct.
By:______________________________________
Name:____________________________________
Title:___________________________________
5.
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
VIXEL CORPORATION
(A DELAWARE CORPORATION)
AS ADOPTED BY THE BOARD OF DIRECTORS FEBRUARY 13, 1995
<PAGE> 2
BY-LAWS
OF
VIXEL CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business in Broomfield, Colorado, at such place
as may be fixed by the Board of Directors, and may also have offices at such
other places, both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from
1.
<PAGE> 3
time to time by the Board of Directors, or, if not so designated, then at the
office of the corporation required to be maintained pursuant to Section 2
hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the
corporation, for the purpose of election of Directors and for such other
business as may lawfully come before it, shall be held on such date and at such
time as may be designated from time to time by the Board of Directors
(b) 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. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given timely notice thereof in writing to the Secretary of the corporation.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date of the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of stockholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholder to be timely must
be so received a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary 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 conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, 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 to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
form of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the Securities and Exchange Act of
1934, as amended. Notwithstanding anything in these By-Laws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). 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 paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such
2.
<PAGE> 4
business not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) 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
in the election of Directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). 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 in accordance with
the provisions of paragraph (b) of this Section 5. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a Director: (A) the name, age, business
address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) 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, if any, as a nominee and to serving as a Director if
elected); and (ii) as to such stockholder giving notice, the information
required to be provided pursuant to paragraph (b) of this Section 5. At the
request of the Board of Directors, any person nominated by a stockholder for
election as a Director shall furnish to the Secretary of the corporation that
information required to be set forth in the 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 paragraph (c). The chairman of the meeting shall, if the facts
warrant, determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these By-laws, and if he should so
determine, he shall so declare at the meeting and the defective nomination shall
be disregarded.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation
may be called, for any purpose or purposes, by (i) the Chairman of the Board,
(ii) the President, (iii) the Board of Directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the Board for adoption)or (iv) by the
holders of shares entitled to cast not less than ten percent (10%) of the votes
at the meeting, and shall be held at such place, on such date, and at such time
as they or he shall fix; provided, however, that following registration of any
of the classes of equity securities of the corporation pursuant to the
3.
<PAGE> 5
provisions of the Securities Exchange Act of 1934, as amended, special meetings
of the stockholders may only be called by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized Directors.
(b) If a special meeting is called by any person or persons
other than the Board of Directors, 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. No business
may be transacted at such special meeting otherwise than specified in such
notice. The officer receiving the request shall cause notice to be promptly
given to the stockholders entitled to vote, in accordance with the provisions of
Section 7 of these By-Laws, that a meeting will be held 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 the receipt of the
request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph (b) shall be construed as limiting, fixing,
or affecting the time when a meeting of stockholders called by action of the
Board of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these By-Laws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. Any shares, the voting of
which at said meeting has been enjoined, or which for any reason cannot be
lawfully voted at such meeting, shall not be counted to determine a quorum at
such meeting. In the absence of a quorum any meeting of stockholders may be
adjourned, from time to time, either by the chairman of the meeting or by vote
of the holders of a majority of the shares represented thereat, but no other
business shall be transacted at such meeting. The stockholders present at a duly
called or convened meeting, at which a quorum is present, may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a
4.
<PAGE> 6
quorum. Except as otherwise provided by law, the Certificate of Incorporation or
these By-Laws, all action taken by the holders of a majority of the voting power
represented at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that Directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of Directors. Where a
separate vote by a class or classes is required, a majority of the outstanding
shares of such class or classes, present in person or represented by proxy,
shall constitute a quorum entitled to take action with respect to that vote on
that matter and the affirmative vote of the majority (plurality, in the case of
the election of Directors) of shares of such class or classes present in person
or represented by proxy at the meeting shall be the act of such class.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
represented thereat. When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS.
(a) For the purpose of determining those stockholders
entitled to vote at any meeting of the stockholders, except as otherwise
provided by law, only persons in whose names shares stand on the stock records
of the corporation on the record date, as provided in Section 12 of these
By-Laws, shall be entitled to vote at any meeting of stockholders. Except as may
be otherwise provided in the Certificate of Incorporation or these By-Laws, each
stockholder shall be entitled to one vote for each share of capital stock held
by such stockholder. Every person entitled to vote or execute consents shall
have the right to do so either in person or by an agent or agents authorized by
a written proxy executed by such person or his duly authorized agent, which
proxy shall be filed with the Secretary at or before the meeting at which it is
to be used. An agent so appointed need not be a stockholder. No proxy shall be
voted after three (3) years from its date of creation unless the proxy provides
for a longer period. All elections of Directors shall be by written ballot,
unless otherwise provided in the Certificate of Incorporation.
SECTION 11. BENEFICIAL OWNERS OF STOCK.
(a) If shares or other securities having voting power stand
of record in the names of two (2) or more persons, whether fiduciaries, members
of a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two (2) or more persons have the
5.
<PAGE> 7
same fiduciary relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(a) if only one (1) votes, his act binds all; (b) if more than one (1) votes,
the act of the majority so voting binds all; (c) if more than one (1) votes, but
the vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware Court of
Chancery for relief as provided in the General Corporation Law of Delaware,
Section 217(b). If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the purpose
of this subsection (c) shall be a majority or even-split in interest.
(b) Persons holding stock in a fiduciary capacity shall be
entitled to vote the shares so held. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
corporation he has expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his proxy, may represent such stock and vote thereon.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Any action required by statute to be taken at any annual
or special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, are signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted.
(b) Every written consent shall bear the date of signature
of each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the
6.
<PAGE> 8
Corporation in the manner herein required, written consents signed by a
sufficient number of stockholders to take action are delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to a corporation's registered office shall be by hand or
by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the
Board of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, the most senior Vice President
present, or in the absence of any such officer, a chairman of the meeting chosen
by a majority in interest of the stockholders entitled to vote, present in
person or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.
(b) The Board of Directors of the corporation shall be
entitled to make such rules or regulations for the conduct of meetings of
stockholders as it shall deem necessary, appropriate or convenient. Subject to
such rules and regulations of the Board of Directors, if any, the chairman of
the meeting shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are necessary, appropriate or convenient for the proper conduct of the
meeting, including, without limitation, establishing an agenda or order of
business for the meeting, rules and procedures for maintaining order at the
meeting and the safety of those present, limitations on participation in such
meeting to stockholders of record of the corporation and their duly authorized
and constituted proxies, and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless, and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
7.
<PAGE> 9
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The number of authorized
directors shall be set from time to time within these limits by resolution of
the Board of Directors. The number of authorized Directors may be modified from
time to time by amendment of this Section 15 in accordance with the provisions
of Section 44 hereof. Except as provided in Section 17, the Directors shall be
elected by the stockholders at their annual meeting in each year and shall hold
office until the next annual meeting and until their successors shall be duly
elected and qualified. Directors need not be stockholders unless so required by
the Certificate of Incorporation. If for any cause, the Directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these By-Laws. No reduction of the authorized number of
Directors shall have the effect of removing any Director before the Director's
term of office expires, unless such removal is made pursuant to the provisions
of Section 19 hereof.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, vacancies and newly created directorships resulting from any
increase in the authorized number of Directors may be filled by a majority of
the Directors then in office, although less than a quorum, or by a sole
remaining Director, and each Director so elected shall hold office for the
unexpired portion of the term of the Director whose place shall be vacant and
until his successor shall have been duly elected and qualified. A vacancy in the
Board of Directors shall be deemed to exist under this Section 17 in the case of
the death, removal or resignation of any Director, or if the stockholders fail
at any meeting of stockholders at which Directors are to be elected (including
any meeting referred to in Section 19 below) to elect the number of Directors
then constituting the whole Board of Directors.
SECTION 18. RESIGNATION. Any Director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more Directors shall resign from the Board of Directors, effective at a
future date, a majority of the Directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or
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resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.
SECTION 19. REMOVAL. At a special meeting of stockholders called for the
purpose in the manner hereinabove provided, subject to any limitations imposed
by law or the Certificate of Incorporation, the Board of Directors, or any
individual Director, may be removed from office, with or without cause, and a
new Director or Directors elected by a vote of stockholders holding a majority
of the outstanding shares entitled to vote at an election of Directors.
SECTION 20. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of
Directors shall be held immediately after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Except as hereinafter otherwise
provided, regular meetings of the Board of Directors shall be held in the office
of the corporation required to be maintained pursuant to Section 2 hereof.
Unless otherwise restricted by the Certificate of Incorporation, regular
meetings of the Board of Directors may also be held at any place within or
without the State of Delaware which has been determined by the Board of
Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the President or a majority of the Directors.
(d) TELEPHONE MEETINGS. Any member of the Board of
Directors, or of any committee thereof, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Written notice of the time and place
of all special meetings of the Board of Directors shall be given at least one
(1) day before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
Director by attendance thereat, except when the Director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
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(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the Directors not present shall sign a written
waiver of notice, or a consent to holding such meeting, or an approval of the
minutes thereof. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in
any written waiver of notice or consent unless so required by the Certificate of
Incorporation or these By-Laws. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a
greater number and except with respect to indemnification questions arising
under Section 42 hereof, for which a quorum shall be one-third of the exact
number of Directors fixed from time to time in accordance with Section 15
hereof, but not less than one (1), a quorum of the Board of Directors shall
consist of a majority of the exact number of Directors fixed from time to time
in accordance with Section 15 of these By-Laws, but not less than one (1);
provided, however, at any meeting whether a quorum be present or otherwise, a
majority of the Directors present may adjourn from time to time until the time
fixed for the next regular meeting of the Board of Directors, without notice
other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a
quorum is present all questions and business shall be determined by a vote of a
majority of the Directors present, unless a different vote be required by law,
the Certificate of Incorporation or these By-Laws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
Director from serving the corporation in any other capacity as an officer,
agent, employee,
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or otherwise and receiving compensation therefor.
SECTION 24. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may by
resolution passed by a majority of the whole Board of Directors, appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
specifically granted by the Board of Directors, shall have and may exercise when
the Board of Directors is not in session all powers of the Board of Directors in
the management of the business and affairs of the corporation, including,
without limitation, the power and authority to declare a dividend or to
authorize the issuance of stock, except such committee shall not have the power
or authority to amend the Certificate of Incorporation, to adopt an agreement of
merger or consolidation, to recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
to recommend to the stockholders of the corporation a dissolution of the
corporation or a revocation of a dissolution or to amend these By-Laws.
(b) OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, from time to
time appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors, and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall such committee have the powers denied to the
Executive Committee in these By-Laws.
(c) TERM. The members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee. The Board of Directors, subject to
the provisions of subsections (a) or (b) of this Section 24, may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall terminate
on the date of his death or voluntary resignation from the committee or from the
Board of Directors. The Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more Directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
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(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any Director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any Director by attendance thereat, except when the Director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 25. ORGANIZATION. At every meeting of the Directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the Directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
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ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
be the Chairman of the Board of Directors, the President, one or more Vice
Presidents, the Secretary and the Chief Financial Officer or Treasurer, all of
whom shall be elected at the annual organizational meeting of the Board of
Directors. The order of the seniority of the Vice Presidents shall be in the
order of their nomination, unless otherwise determined by the Board of
Directors. The Board of Directors may also appoint such other officers and
agents with such powers and duties as it shall deem necessary. The Board of
Directors may assign such additional titles to one or more of the officers as it
shall deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law. The
salaries and other compensation of the officers of the corporation shall be
fixed by or in the manner designated by the Board of Directors. The President
may appoint one or more Assistant Secretaries and Assistant Treasurers with such
powers and duties as he or she deems necessary.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure
of the Board of Directors and until their successors shall have been duly
elected and qualified, unless sooner removed. Any officer elected or appointed
by the Board of Directors may be removed at any time by the Board of Directors.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The
Chairman of the Board of Directors, when present, shall preside at all meetings
of the stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. If there is no President, then the
Chairman of the Board of Directors shall also serve as the Chief Executive
Officer of the corporation and shall have the powers and duties prescribed in
paragraph (c) of this Section 27.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
The President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President
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shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents, in the
order of their seniority, may assume and perform the duties of the President in
the absence or disability of the President or whenever the office of President
is vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all
meetings of the stockholders and of the Board of Directors, and shall record all
acts and proceedings thereof in the minute book of the corporation. The
Secretary shall give notice in conformity with these By-Laws of all meetings of
the stockholders, and of all meetings of the Board of Directors and any
committee thereof requiring notice. The Secretary shall perform all other duties
given him in these By-Laws and other duties commonly incident to his office and
shall also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER OR TREASURER. The
Chief Financial Officer or Treasurer shall keep or cause to be kept the books of
account of the corporation in a thorough and proper manner, and shall render
statements of the financial affairs of the corporation in such form and as often
as required by the Board of Directors or the President. The Chief Financial
Officer or Treasurer, subject to the order of the Board of Directors, shall have
the custody of all funds and securities of the corporation. The Chief Financial
Officer or Treasurer shall perform other duties commonly incident to his office
and shall also perform such other duties and have such other powers as the Board
of Directors or the President shall designate from time to time. The President
may direct any Assistant Treasurer to assume and perform the duties of the Chief
Financial Officer or Treasurer in the absence or disability of the Chief
Financial Officer or Treasurer, and each Assistant Treasurer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be
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effective when received by the person or persons to whom such notice is given,
unless a later time is specified therein, in which event the resignation shall
become effective at such later time. Unless otherwise specified in such notice,
the acceptance of any such resignation shall not be necessary to make it
effective. Any resignation shall be without prejudice to the rights, if any, of
the corporation under any contract with the resigning officer.
SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the vote or written consent of a majority of
the Directors in office at the time, or by any committee or superior officers
upon whom such power of removal may have been conferred by the Board of
Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these By-Laws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Chief Financial Officer or Treasurer or any Assistant Secretary or
Assistant Treasurer. All other instruments and documents requiring the corporate
signature, but not requiring the corporate seal, may be executed as aforesaid or
in such other manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for
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any amount.
SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be by
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the designations,
preferences, limitations, restrictions on transfer and relative rights of the
shares authorized to be issued.
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 35. TRANSFERS.
(a) Transfers of record of shares of stock of the
corporation shall be made only upon its books by the holders thereof, in person
or by attorney duly authorized, and upon
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the surrender of a properly endorsed certificate or certificates for a like
number of shares.
(b) The corporation shall have power to enter into and
perform any agreement with any number of stockholders of any one or more classes
of stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
SECTION 36. FIXING RECORD DATES.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which date shall not be more than ten
(10) days after the date upon which the resolution fixing the record date is
adopted by the Board of Directors. If no record date has been fixed by the Board
of Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by the
Board of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a Corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the
stockholders entitled to
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receive payment of any dividend or other distribution or allotment of any rights
or the stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature of a trustee under an indenture pursuant to which such bond, debenture
or other corporate security shall be issued, the signatures of the persons
signing and attesting the corporate seal on such bond, debenture or other
corporate security may be the imprinted facsimile of the signatures of such
persons. Interest coupons appertaining to any such bond, debenture or other
corporate security, authenticated by a trustee as aforesaid, shall be signed by
the Treasurer or an Assistant Treasurer of the corporation or such other person
as may be authorized by the Board of Directors, or bear imprinted thereon the
facsimile signature of such person. In case any officer who shall have signed or
attested any bond, debenture or other corporate security, or whose facsimile
signature shall appear thereon or on any such interest coupon, shall have ceased
to be such officer before the bond, debenture or other corporate security so
signed or attested shall have been delivered, such bond, debenture or other
corporate security nevertheless may be adopted by the corporation and issued and
delivered as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.
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ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
SECTION 40. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(a) DIRECTORS. The corporation shall indemnify its Directors
to the fullest extent not prohibited by the Delaware General Corporation Law;
provided, however, that the corporation shall not be required to indemnify any
Director in connection with any proceeding (or part thereof) initiated by such
person or any proceeding by such person against the corporation or its
Directors, officers, employees or other agents unless (i) such indemnification
is
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expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation or (iii) such indemnification is provided
by the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law.
(b) OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its officers, employees and other agents as set
forth in the Delaware General Corporation Law.
(c) GOOD FAITH.
(1) For purposes of any determination under this
Bylaw, a Director or executive officer shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe that his conduct was
unlawful, if his action is based on information, opinions, reports and
statements, including financial statements and other financial data, in each
case prepared or presented by:
(i) one or more officers or employees of the
corporation whom the Director or executive officer believed to be reliable and
competent in the matters presented;
(ii) counsel, independent accountants or
other persons as to matters which the Director or executive officer believed to
be within such person's professional competence; and
(iii) with respect to a Director, a committee
of the Board upon which such Director does not serve, as to matters within such
Committee's designated authority, which committee the Director believes to merit
confidence; so long as, in each case, the Director or executive officer acts
without knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal proceeding, that he had reasonable cause to believe that his conduct
was unlawful.
(3) The provisions of this paragraph (c) shall not
be deemed to be exclusive or to limit in any way the circumstances in which a
person may be deemed to have met the applicable standard of conduct set forth by
the Delaware General Corporation Law.
20.
<PAGE> 22
(d) EXPENSES. The corporation shall advance, prior to the
final disposition of any proceeding, promptly following request therefor, all
expenses incurred by any Director or executive officer in connection with such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this Bylaw or otherwise.
(e) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to Directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the Director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a Director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. The corporation shall be entitled to raise as a
defense to any such action that the claimant has not met the standards of
conduct that make it permissible under the Delaware General Corporation Law for
the corporation to indemnify the claimant for the amount claimed. Neither the
failure of the corporation (including its Board of Directors, independent legal
counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that claimant
has not met the applicable standard of conduct.
(f) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any
person by this Bylaw shall not be exclusive of any other right which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, By-Laws, agreement, vote of stockholders or disinterested
Directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its Directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(g) SURVIVAL OF RIGHTS. The rights conferred on any person
by this Bylaw shall continue as to a person who has ceased to be a Director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(h) INSURANCE. To the fullest extent permitted by the
Delaware General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase
21.
<PAGE> 23
insurance on behalf of any person required or permitted to be indemnified
pursuant to this Bylaw.
(i) AMENDMENTS. Any repeal or modification of this Bylaw
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(j) SAVING CLAUSE. If this Bylaw or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each Director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(k) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed
and shall include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the giving of
testimony in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed
and shall include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs and
expenses of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as a
director, officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include
employee benefit
22.
<PAGE> 24
plans; references to "fines" shall include any excise taxes assessed on a person
with respect to an employee benefit plan; and references to "serving at the
request of the corporation" shall include any service as a director, officer,
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions
of these By-Laws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to
any Director may be given by the method stated in subsection (a), or by
facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such Director shall have
filed in writing with the Secretary, or, in the absence of such filing, to the
last known post office address of such Director.
(c) ADDRESS UNKNOWN. If no address of a stockholder or
Director be known, notice may be sent to the office of the corporation required
to be maintained pursuant to Section 2 hereof.
(d) AFFIDAVIT OF MAILING. An affidavit of mailing, executed
by a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
Director or Directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall be conclusive evidence of the
statements therein contained.
(e) TIME NOTICES DEEMED GIVEN. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by facsimile, telex or telegram shall be deemed to have been
given as of the sending time recorded at time of transmission.
23.
<PAGE> 25
(f) METHODS OF NOTICE. It shall not be necessary that the
same method of giving notice be employed in respect of all Directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(g) FAILURE TO RECEIVE NOTICE. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any Director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such Director to receive such
notice.
(h) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or By-Laws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
is unlawful.
(i) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or By-Laws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve month period, have been mailed addressed to such
person at his address as shown on the records of the Corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
24.
<PAGE> 26
ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Except as otherwise set forth in paragraph (i)
of Section 42 of these By-Laws, these By-Laws may be amended or repealed and new
By-Laws adopted by a majority of the stockholders entitled to vote. The Board of
Directors shall also have the power, if such power is conferred upon the Board
of Directors by the Certificate of Incorporation, to adopt, amend or repeal
By-Laws (including, without limitation, the amendment of any Bylaw setting forth
the number of Directors who shall constitute the whole Board of Directors).
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other 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 45 shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
25.
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
OFFICES..................................................................................... 1
Section 1. Registered Office ...................................................... 1
Section 2. Other Offices .......................................................... 1
ARTICLE II
CORPORATE SEAL.............................................................................. 1
Section 3. Corporate Seal ......................................................... 1
ARTICLE III
STOCKHOLDERS' MEETINGS...................................................................... 1
Section 4. Place of Meetings ...................................................... 1
Section 5. Annual Meeting ......................................................... 2
Section 6. Special Meetings ....................................................... 3
Section 7. Notice of Meetings ..................................................... 4
Section 8. Quorum ................................................................. 4
Section 9. Adjournment and Notice of Adjourned Meetings ........................... 4
Section 10. Voting Rights .......................................................... 5
Section 11. Beneficial Owners of Stock ............................................. 5
Section 12. List of Stockholders ................................................... 6
Section 13. Action without Meeting ................................................. 6
Section 14. Organization ........................................................... 6
ARTICLE IV
DIRECTORS................................................................................... 7
Section 15. Number and Term of Office .............................................. 7
Section 16. Powers ................................................................. 7
Section 17. Vacancies .............................................................. 7
Section 18. Resignation ............................................................ 8
Section 19. Removal ................................................................ 8
Section 20. Meetings ............................................................... 8
(a) Annual Meetings....................................................... 8
(b) Regular Meetings...................................................... 8
(c) Special Meetings...................................................... 8
</TABLE>
1.
<PAGE> 28
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
(d) Telephone Meetings.................................................... 9
(e) Notice of Meetings.................................................... 9
(f) Waiver of Notice...................................................... 9
Section 21. Quorum and Voting ...................................................... 9
Section 22. Action without Meeting ................................................. 9
Section 23. Fees and Compensation .................................................. 10
Section 24. Committees ............................................................. 10
(a) Executive Committee................................................... 10
(b) Other Committees...................................................... 10
(c) Term.................................................................. 10
(d) Meetings.............................................................. 11
Section 25. Organization 11
ARTICLE V
OFFICERS.................................................................................... 11
Section 26. Officers Designated .................................................... 11
Section 27. Tenure and Duties of Officers .......................................... 12
(a) General............................................................... 12
(b) Duties of Chairman of the Board of Directors.......................... 12
(c) Duties of President................................................... 12
(d) Duties of Vice Presidents............................................. 12
(e) Duties of Secretary................................................... 12
(f) Duties of Chief Financial Officer or Treasurer........................ 13
Section 28. Delegation of Authority ................................................ 13
Section 29. Resignations ........................................................... 13
Section 30. Removal ................................................................ 13
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION............................................... 13
Section 31. Execution of Corporate Instruments ..................................... 13
Section 32. Voting of Securities Owned by the Corporation .......................... 14
ARTICLE VII
SHARES OF STOCK............................................................................. 14
</TABLE>
2.
<PAGE> 29
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
Section 33. Form and Execution of Certificates ..................................... 14
Section 34. Lost Certificates ...................................................... 15
Section 35. Transfers .............................................................. 15
Section 36. Fixing Record Dates .................................................... 15
Section 37. Registered Stockholders ................................................ 16
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION......................................................... 16
Section 38. Execution of Other Securities .......................................... 16
ARTICLE IX
DIVIDENDS................................................................................... 17
Section 39. Declaration of Dividends ............................................... 17
Section 40. Dividend Reserve ....................................................... 17
ARTICLE X
FISCAL YEAR................................................................................. 17
Section 41. Fiscal Year ............................................................ 17
ARTICLE XI
INDEMNIFICATION............................................................................. 17
Section 42. Indemnification of Directors, Officers, Employees and Other Agents ..... 17
(a) Directors............................................................. 17
(b) Officers, Employees and Other Agents.................................. 18
(c) Good Faith............................................................ 18
(d) Expenses.............................................................. 19
(e) Enforcement........................................................... 19
(f) Non-Exclusivity of Rights............................................. 19
(g) Survival of Rights.................................................... 19
(h) Insurance............................................................. 19
(i) Amendments............................................................ 20
(j) Saving Clause......................................................... 20
(k) Certain Definitions................................................... 20
</TABLE>
3.
<PAGE> 30
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
ARTICLE XII
NOTICES..................................................................................... 21
Section 43. Notices ................................................................ 21
(a) Notice to Stockholders................................................ 21
(b) Notice to Directors................................................... 21
(c) Address Unknown....................................................... 21
(d) Affidavit of Mailing.................................................. 21
(e) Time Notices Deemed Given............................................. 21
(f) Methods of Notice..................................................... 21
(g) Failure to Receive Notice............................................. 21
(h) Notice to Person with Whom Communication Is Unlawful.................. 22
(i) Notice to Person with Undeliverable Address........................... 22
ARTICLE XIII
AMENDMENTS.................................................................................. 22
Section 44. Amendments ............................................................. 22
ARTICLE XIV
LOANS TO OFFICERS........................................................................... 23
Section 45. Loans to Officers ...................................................... 23
</TABLE>
4.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
VIXEL CORPORATION
(A DELAWARE CORPORATION)
As Adopted by the Board of Directors June 21, 1999
<PAGE> 2
BYLAWS
OF
VIXEL CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware, as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the
1.
<PAGE> 3
direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder
2.
<PAGE> 4
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the corporation's books, and of such beneficial owner, (ii) the
class and number of shares of the corporation which are owned beneficially and
of record by such stockholder and such beneficial owner, and (iii) whether
either such stockholder or beneficial owner intends to deliver a proxy statement
and form of proxy to holders of, in the case of the proposal, at least the
percentage of the corporation's voting shares required under applicable law to
carry the proposal or, in the case of a nomination or nominations, a sufficient
number of holders of the corporation's voting shares to elect such nominee or
nominees (an affirmative statement of such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
3.
<PAGE> 5
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption)
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be) for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each
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stockholder entitled to vote at such meeting, such notice to specify the place,
date and hour and purpose or purposes of the meeting. Notice of the time, place
and purpose of any meeting of stockholders may be waived in writing, signed by
the person entitled to notice thereof, either before or after such meeting, and
will be waived by any stockholder by his attendance thereat in person or by
proxy, except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute, the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
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SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
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SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the DGCL if such action had been voted on by stockholders at a meeting
thereof, then the certificate filed under such section shall state, in lieu of
any statement required by such section concerning any vote of stockholders, that
written consent has been given in accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are
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necessary, appropriate or convenient for the proper conduct of the meeting,
including, without limitation, establishing an agenda or order of business for
the meeting, rules and procedures for maintaining order at the meeting and the
safety of those present, limitations on participation in such meeting to
stockholders of record of the corporation and their duly authorized and
constituted proxies and such other persons as the chairman shall permit,
restrictions on entry to the meeting after the time fixed for the commencement
thereof, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting. Notwithstanding the foregoing provisions of this section, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES.
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(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. REMOVAL.
(a) Neither the Board of Directors nor any individual director
may be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and
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such meeting shall be held for the purpose of electing officers and transacting
such other business as may lawfully come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
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SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by
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the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall any such committee have the powers denied to the Executive Committee
in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors
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present, shall preside over the meeting. The Secretary, or in his absence, any
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Chief Technology Officer, the Secretary, the Chief Financial
Officer, the Treasurer and the Controller, all of whom shall be elected at the
annual organizational meeting of the Board of Directors. The Board of Directors
may also appoint one or more Assistant Secretaries, Assistant Treasurers,
Assistant Controllers and such other officers and agents with such powers and
duties as it shall deem necessary. The Board of Directors may assign such
additional titles to one or more of the officers as it shall deem appropriate.
Any one person may hold any number of offices of the corporation at any one time
unless specifically prohibited therefrom by law. The salaries and other
compensation of the officers of the corporation shall be fixed by or in the
manner designated by the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
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(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller, to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to such office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
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SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall
15.
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have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued with the same effect as if he were such
officer, transfer agent or registrar at the date of issue. Each certificate
shall state upon the face or back thereof, in full or in summary, all of the
powers, designations, preferences and rights, and the limitations or
restrictions of the shares authorized to be issued or shall, except as otherwise
required by law, set forth on the face or back a statement that the corporation
will furnish, without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Within a
reasonable time after the issuance or transfer of uncertificated stock, the
corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to this section or otherwise required by law or with respect to this
section a statement that the corporation will furnish, without charge to each
stockholder who so requests, the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. The corporation may require, as a condition precedent
to the issuance of a new certificate or certificates, the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative, to
agree to indemnify the corporation in such manner as it shall require or to give
the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10)
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days before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or
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interest in such share or shares on the part of any other person whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting. Dividends may be
paid in cash, in property, or in shares of the capital stock, subject to the
provisions of the Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to
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the interests of the corporation, and the Board of Directors may modify or
abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS
(a) DIRECTORS AND OFFICERS. The corporation shall indemnify its
directors and officers to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized by the Board of
Directors of the corporation, (iii) such indemnification is provided by the
corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the DGCL or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power
to indemnify its employees and other agents as set forth in the DGCL or any
other applicable law. The Board of Directors shall have the power to delegate
the determination of whether indemnification shall be given to any such person
to such officers or other persons as the Board of Directors shall determine.
(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer of
the corporation, or is or was serving at the request of the corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Section 43 or otherwise.
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Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an officer of the corporation (except by reason of the fact that such officer is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or officer. Any right to indemnification or
advances granted by this Section 43 to a director shall be enforceable by or on
behalf of the person holding such right in any court of competent jurisdiction
if (i) the claim for indemnification or advances is denied, in whole or in part,
or (ii) no disposition of such claim is made within ninety (90) days of request
therefor. The claimant in such enforcement action, if successful in whole or in
part, shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standards of conduct that make it permissible under the DGCL or any other
applicable law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such officer is or was a director of
the corporation) for advances, the corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the DGCL or
any other applicable law, nor an actual determination by the corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically
20.
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authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law, or by any
other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) AMENDMENTS. Any repeal or modification of this Section 43
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Section 43 that shall
not have been invalidated, or by any other applicable law. If this Section 43
shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
officer to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the
21.
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same position under the provisions of this Section 43 with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee" or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee or agent with respect
to an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing,
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and all notices given by facsimile, telex or telegram shall be deemed to have
been given as of the sending time recorded at time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
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ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section [43] of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
24.
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TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
ARTICLE I OFFICES............................................................. 1
Section 1. Registered Office.......................................... 1
Section 2. Other Offices.............................................. 1
ARTICLE II CORPORATE SEAL..................................................... 1
Section 3. Corporate Seal............................................. 1
ARTICLE III STOCKHOLDERS' MEETINGS............................................ 1
Section 4. Place Of Meetings.......................................... 1
Section 5. Annual Meetings............................................ 1
Section 6. Special Meetings........................................... 4
Section 7. Notice Of Meetings......................................... 4
Section 8. Quorum..................................................... 5
Section 9. Adjournment And Notice Of Adjourned Meetings............... 6
Section 10. Voting Rights............................................. 6
Section 11. Joint Owners Of Stock..................................... 6
Section 12. List Of Stockholders...................................... 6
Section 13. Action Without Meeting.................................... 7
Section 14. Organization.............................................. 7
ARTICLE IV DIRECTORS.......................................................... 8
Section 15. Number And Term Of Office................................. 8
Section 16. Powers.................................................... 8
Section 17. Classes of Directors...................................... 8
Section 18. Vacancies................................................. 8
Section 19. Resignation............................................... 9
Section 20. Removal................................................... 9
Section 21. Meetings.................................................. 9
Section 22. Quorum And Voting........................................ 11
Section 23. Action Without Meeting................................... 11
Section 24. Fees And Compensation.................................... 11
Section 25. Committees............................................... 11
</TABLE>
i.
<PAGE> 27
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
PAGE
<S> <C>
Section 26. Organization............................................. 12
ARTICLE V OFFICERS........................................................... 13
Section 27. Officers Designated...................................... 13
Section 28. Tenure And Duties Of Officers............................ 13
Section 29. Delegation Of Authority.................................. 14
Section 30. Resignations............................................. 14
Section 31. Removal.................................................. 15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION.......................................... 15
Section 32. Execution Of Corporate Instruments....................... 15
Section 33. Voting Of Securities Owned By The Corporation............ 15
ARTICLE VII SHARES OF STOCK.................................................. 15
Section 34. Form And Execution Of Certificates....................... 15
Section 35. Lost Certificates........................................ 16
Section 36. Transfers................................................ 16
Section 37. Fixing Record Dates...................................... 16
Section 38. Registered Stockholders.................................. 17
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION............................. 18
Section 39 Execution Of Other Securities............................ 18
ARTICLE IX DIVIDENDS......................................................... 18
Section 40. Declaration Of Dividends................................. 18
Section 41. Dividend Reserve......................................... 18
ARTICLE X FISCAL YEAR........................................................ 19
Section 42. Fiscal Year.............................................. 19
ARTICLE XI INDEMNIFICATION................................................... 19
Section 43. Indemnification Of Directors, Executive Officers,
Other Officers, Employees And Other Agents............................ 19
ARTICLE XII NOTICES.......................................................... 22
Section 44. Notices.................................................. 22
</TABLE>
ii.
<PAGE> 28
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
PAGE
<S> <C>
ARTICLE XIII AMENDMENTS...................................................... 24
Section 45. Amendments............................................... 24
ARTICLE XIV LOANS TO OFFICERS................................................ 24
Section 46 Loans To Officers......................................... 24
</TABLE>
iii.
<PAGE> 1
EXHIBIT 4.2
================================================================================
VIXEL CORPORATION
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
FEBRUARY 17, 1998
================================================================================
<PAGE> 2
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the "AGREEMENT")
is entered into as of February 17, 1998, by and among Vixel Corporation, a
Delaware corporation (the "COMPANY"), Greg Olbright (the "FOUNDER") and the
individuals and entities set forth on Exhibit A attached hereto (the "HOLDERS").
RECITALS
A. The Company, the Founder and certain investors of the Company have
entered into an Amended and Restated Investor's Rights Agreement (the "PRIOR
RIGHTS AGREEMENT") dated as of October 21, 1996, as thereafter amended, pursuant
to which the Company granted such investors certain rights and such investors
have undertaken certain obligations with respect to their shares of the
Company's capital stock.
B. The Company and certain investors of the Company have entered into
the Agreement and Plan of Merger and Reorganization dated as of January 26, 1998
pursuant to which the Company issued to certain investors Series F Preferred
Stock of the Company (the "REORGANIZATION AGREEMENT") (the Series F Preferred
Stock is herein referred to as the "STOCK").
C. The Company and the Holders desire to amend and restate the Prior
Rights Agreement as set forth in this Agreement.
D. In consideration of the mutual promises and covenants hereinafter set
forth and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
1. TERMINATION OF AGREEMENTS.
Effective and contingent upon execution of this Agreement by the Holders
and upon the closing of the transactions contemplated by the Reorganization
Agreement, the Prior Rights Agreement is hereby amended and restated as set
forth herein, and the Company and the Holders hereby agree to be bound by the
provisions hereof as the sole agreement of the Company and the Holders with
respect to registration rights of the Company's securities and certain other
rights and obligations set forth herein.
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, except as
otherwise provided herein, any provisions hereof may be amended, waived,
discharged or terminated upon the written consent of the Company and the Holders
of a majority of the outstanding Registrable Securities (as defined below).
1.
<PAGE> 3
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 shares of Common Stock issuable or issued upon
conversion of (i) the Series A Preferred Stock and Series B Preferred Stock of
the Company held by the Holders (or their Permitted Transferees), (ii) the
Series A Preferred Stock of the Company acquired by Herb Alpert upon exercise of
a Warrant to purchase 240,000 shares dated July 6, 1994, (iii) the Series A
Preferred Stock of the Company acquired by the Holders (or their Permitted
Transferees) upon exercise of those certain Warrants to purchase an aggregate of
894,334 shares of Series A Preferred Stock, each dated October 6, 1995 issued
pursuant to the Series B Preferred Stock and Series A Warrant Purchase Agreement
dated October 6, 1995, (iv) the Series C Preferred Stock of the Company acquired
by Comdisco, Inc. (or its Permitted Transferee) upon exercise of a Warrant to
purchase 85,714 shares dated January 12, 1996, (v) the Series C Preferred Stock
of the Company acquired by Silicon Valley Bank upon exercise of a Warrant to
purchase 5,000 shares dated March 5, 1996, (vi) the Series C Preferred Stock of
the Company acquired by MMC/GATX Partnership No. 1 upon exercise of a Warrant to
purchase 85,000 shares dated March 5, 1996, (vii) 2,000,000 shares of Series D
Preferred Stock of the Company acquired by Western Digital Corporation pursuant
to the Purchase Agreement dated March 29, 1996, (viii) the Series E Preferred
Stock of the Company held by the Holders (or their Permitted Transferees (as
defined below)), (ix) the Series E Preferred Stock of the Company acquired by
Montgomery Securities (or their Permitted Transferees) upon exercise of those
certain Warrants to purchase 69,261 shares dated October 21, 1996, (x) the
Series E Preferred Stock of the Company acquired by Transamerica Business Credit
Corporation (or their Permitted Transferees) upon exercise of a Warrant to
purchase up to 25,000 shares dated May 30, 1997, (xi) the Series F Preferred
Stock of the Company held by the Holders (or their Permitted Transferees) and
(xii) the shares of capital stock issued or issuable with respect to the
securities referred to in (i)-(xii) above, or upon any other securities issued
as a dividend or other distribution with respect to, or in exchange or
replacement of, any such securities, excluding, in all cases, any Registrable
Securities that are held by a person to whom the rights of a Holder under this
Agreement have not been validly transferred in a written instrument pursuant to
Sections 3.12 and 6 hereof to a Permitted Transferee.
(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.
2.
<PAGE> 4
(d) The term "HOLDER" means any Holder of outstanding Registrable
Securities set forth on Exhibit A and their Permitted Transferees.
(e) The term "FORM S-3" means such form under the Securities Act
as in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the United States 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 DEMAND REGISTRATION.
(a) If the Company shall receive at any time after the earlier of
(i) October 1, 1999, 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 an SEC Rule 145 transaction), a written request from the Holders
of at least fifty percent (50%) of the Registrable Securities then outstanding
that the Company file a registration statement under the Securities Act: (i) for
at least twenty percent (20%) of the Registerable Securities then outstanding or
(ii) having an aggregate offering price, before deduction of underwriters
discounts and commissions, of at least $15,000,000, 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),
effect as soon as practicable, and in any event within ninety (90) days of the
receipt of such request, the registration under the Securities Act of all
Registrable Securities which the Holders request to be registered within thirty
(30) days of the effective date of such notice delivered by the Company in
accordance with Section 7.5.
(b) The right of any Holder to request registration pursuant to
subsection (a) above or to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in a firm
underwriting by an underwriter of nationally recognized standing and the
inclusion of such Holder's Registrable Securities in the underwriting. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 3.5(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Section 3.2, if the underwriter advises the Holders requesting
such registration (the "INITIATING Holders") in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Company 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; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from such
underwriting.
3.
<PAGE> 5
(c) The Company is obligated to effect only two (2) such
registrations pursuant to this Section 3.2.
(d) Notwithstanding the foregoing, if the Company shall furnish
to the Initiating 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 stockholders 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 that, the Company shall not be
entitled to delay such registration more than once in any six (6) month period.
3.3 PIGGYBACK REGISTRATION. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its Common Stock
or other securities under the Securities 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 Company stock option,
stock purchase or similar plan or to an 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 the effective
date of such notice by the Company in accordance with Section 7.5, the Company
shall, subject to the provisions of Section 3.8, cause to be registered under
the Securities Act all of the Registrable Securities that each such Holder has
requested to be registered.
3.4 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 3.4, (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
4.
<PAGE> 6
less than $1,000,000; (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 stockholders for such Form S-3 Registration
to be effected at such time, in which event the Company shall have the right to
defer the filing of the Form S-3 registration statement for a period of not more
than ninety (90) days after receipt of the request of the Holder or Holders
under this Section 3.4; (iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected one (1) registration
on Form S-3 for the Holders pursuant to this Section 3.4; (v) if the Company
has, within the one hundred eighty (180) day period preceding the date of such
request, effected any registration of its securities pursuant to the Securities
Act; (vi) 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; or (vii) if the
Company shall have effected two such registrations on Form S-3 pursuant to this
Section 3.4.
(c) subject to the foregoing, 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.
3.5 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 the earlier of one hundred twenty (120)
days or until the distribution contemplated in the registration statement has
been completed; provided, however, that (i) such one hundred twenty (120) day
period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the
request of an underwriter of Common Stock (or other securities) of the Company;
and (ii) in the case of any registration of Registrable Securities on Form S-3
which are intended to be offered on a continuous or delayed basis, such one
hundred twenty (120) day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are sold,
provided that Rule 415, or any successor rule under the Securities Act, permits
an offering on a continuous or delayed basis, and the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (A) includes any prospectus required by Section 10(a)(3) of the Securities
Act or (B) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (A) and (B)
above to be contained in periodic reports filed pursuant to Sections 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the "1934 ACT"), in the
registration statement.
5.
<PAGE> 7
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(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 Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Cause all such Registrable Securities registered pursuant to
this Section 3 to be listed on each securities exchange on which similar
securities issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to this Section 3 and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
(i) 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, an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
6.
<PAGE> 8
3.6 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.
3.7 EXPENSES OF REGISTRATIONS. All expenses (other than underwriting
discounts and commissions) incurred in connection with registrations, filings or
qualifications pursuant to this Section 3, including, without limitation, all
registration, filing and qualification fees, printers and accounting fees, fees
and disbursements of counsel for the Company shall be borne by the Company;
provided, however, that the Company shall not be required to pay for any
expenses of: (i) more than two Demand Registrations pursuant to Section 3.2,
(ii) more than two Form S-3 Registrations pursuant to Section 3.4, or (iii) 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 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.
3.8 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 reasonable opinion of the underwriters, jeopardize
the success of the offering by the Company. If the total amount of securities,
including Registrable Securities, requested by stockholders 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 which the underwriters reasonably believe will
not jeopardize the success of the offering (the "SELLING STOCKHOLDER
SECURITIES"), provided, however, that the Selling Stockholder Securities shall
first be allocated among the requesting Holders pro rata according to the total
amounts of Registrable Securities entitled to be included in such offering by
such requesting Holders and then among all other holders of securities
requesting and legally entitled to include securities in such offering pro rata
based on the total amount of such securities entitled to be included in such
offering by such holders and provided, further, that in no event shall the
amount of Registrable Securities of the selling Holders included in the offering
be reduced below thirty percent (30%) of the total amount of securities included
in such offering, unless such offering is the initial public offering of the
Company's securities, in which case all of the Registrable Securities may be
excluded if, in either case, the underwriters make the determination described
above and no other stockholder's securities are included. For purposes of this
section concerning apportionment, for any selling stockholder which is a holder
of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders 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
7.
<PAGE> 9
the foregoing persons shall be deemed to be a single "selling stockholder," and
any pro rata reduction with respect to such selling stockholder shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such selling stockholders.
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 Securities
Act) for such Holder and any of their respective officers, directors, employees
and agents each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the Securities Act, the 1934 Act or other federal or state law or
otherwise, 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 prospectus or final prospectus
contained therein or any amendments or supplements thereto, (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Securities 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, however, that 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 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 any 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 Securities 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 Securities 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
8.
<PAGE> 10
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, further, that in no event shall any
indemnity under this Section 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 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 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, will 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 will 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
9.
<PAGE> 11
connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement will control
provided that such indemnification provisions are substantially similar to those
set forth herein.
(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 THE 1934 ACT. With a view to making available to the
Holders the benefits of Rule 144 promulgated under the Securities 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;
(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 Securities 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 Securities 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 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 only to a transferee or assignee acquiring not less than 50,000 shares
of Registrable Securities (as presently constituted and subject to subsequent
adjustments for stock splits, stock dividends, reverse stock splits and the
like) (a "PERMITTED TRANSFEREE"), provided the Company is, within a reasonable
time after such transfer, furnished with written notice of the name and address
of such Permitted Transferee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if (A) the Permitted Transferee agrees in
writing to be bound by the obligations of a Holder under this Agreement and
10.
<PAGE> 12
(B) immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act.
All shares beneficially owned by affiliated entities or persons shall be
aggregated together for purposes of determining whether a transferee or assignee
in a Permitted Transferee. As a condition of such aggregation, holders of a
majority of the shares of the aggregating persons and entities shall designate
in writing from time to time one representative for all aggregating persons and
entities, and the Company shall be entitled to definitively rely upon the
authority of such representative and any action or omission of such
representative in exercising or failing to exercise the rights hereunder.
3.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that during
the period of up to 180 days following the effective date of the registration
statement filed by the Company with respect to its initial public offering under
the Securities Act, it shall not, to the extent requested by the 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 the obligations under this Section 3.13 are conditioned upon the
officers and the directors of the Company entering into similar agreements.
(a) 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 of every other person subject to the
foregoing restriction) until the end of such period.
3.14 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 initial 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 (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 an SEC Rule 145
transaction) (the "INITIAL OFFERING") or (B) at such time following the
Company's initial public offering and (i) for so long as such Holder holds
Registrable Securities equal to 1% or less of the outstanding stock of the
Company and may sell all of such Holder's Registrable Securities under Rule
144(k) or (ii) for so long as such Holder holds Registrable Securities equal to
1% or less of the outstanding stock of the Company and is able to dispose of all
of its Registrable Securities in any one (1) three-month period pursuant to Rule
144 (or such successor rule as may be adopted).
3.15 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date hereof, the Company will not, without the prior written consent of the
Holders of at least 50% of the voting power of the then outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company providing for registration rights more favorable
than those granted to the Holders hereunder or which allows such holder or
prospective holder of any securities of the Company to include such securities
in any registration filed under Sections 3.2 or 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 diminish the amount of Registrable Securities which are
included.
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4. ADDITIONAL RIGHTS.
4.1 RIGHT OF FIRST OFFER. Subject to the terms and conditions specified
in this Section 4.1, the Company hereby grants to each Holder (the
"RIGHTHOLDER") a right of first offer 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 transferees of shares pursuant to
Section 6.3(a), (b), (c), (d), (e), (f), (g) and (h). The Rightholder shall be
entitled to apportion the right of first offer hereby granted among itself and
its partners, stockholders 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 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 material 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 Subsection 4.1 (d)(i)).
(b) Within twenty (20) days after the Notice is given (in
accordance with Section 7.5), 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 7.5). 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 offer 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) "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: (A) 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; (B) 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
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arrangement approved by the Board of Directors to employees, officers and
directors of, or consultants, advisors or other persons performing services for,
the Company; (C) 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; (D) 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 offer granted under this Section 4.1 or was subject to the right of first
offer granted under this Section 4.1; (E) 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 or technology acquisition
transaction approved by the Board of Directors of the Company; and (F)
securities sold to the public in an offering pursuant to a registration
statement filed with the SEC under the Securities Act.
(i) The applicable "Percentage" for the Rightholder shall
be the number of shares of New Securities calculated by dividing (A) the total
number of shares of Common Stock owned by the Rightholder (assuming exercise of
all options, warrants or other rights to purchase capital stock of the Company
and conversion of all outstanding shares of Preferred Stock) by (B) the total
number of shares of Common Stock outstanding at the time the Notice is given
(assuming exercise of all options, warrants or other rights to purchase capital
stock of the Company and conversion of all outstanding shares of Preferred
Stock).
(e) The right of first offer granted under this Section 4.1 shall
not apply to and shall expire upon the consummation of the Company's Initial
Offering.
(f) The right of first offer granted under this Section 4.1 may
be assigned by the Rightholder to a transferee or assignee of the Rightholder's
shares of the Company's stock acquiring at least 100,000 (as adjusted for any
stock splits, stock dividends and the like) of the Rightholder'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). In the event
that the Rightholder shall assign its right of first offer pursuant to this
Section 4.1 but retain not less than 100,000 shares (as adjusted for any stock
splits, stock dividends and the like), the Rightholder shall also retain its
right of first offer to the extent then applicable under this Section 4.1. All
shares beneficially owned by affiliated entities or persons shall be aggregated
together for purposes of determining whether a transferee or assignee shall have
the right of first offer granted pursuant hereto. As a condition of such
aggregation, holders of a majority of the shares of the aggregating persons and
entities shall designate in writing from time to time one representative for all
aggregating persons and entities, and the Company shall be entitled to
definitively rely upon the authority of such representative and any action or
omission of such representative in exercising or failing to exercise the rights
hereunder.
4.2 INFORMATION RIGHTS.
(a) The Company shall deliver to each Holder as soon as
practicable, but in any event within one hundred twenty (120) 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
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of such year, and a schedule as to the sources and applications of funds 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.
(b) So long as a Holder holds at least 838,464, or, in the case
of holders of the Company's Series E or Series F Preferred Stock, 200,000 (as
adjusted for any stock splits, stock dividends and the like) shares of
Registrable Securities, the Company shall deliver to each such Holder:
(i) within twenty (20) 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;
(ii) as soon as practicable, but in any event thirty (30)
days after the end of each fiscal quarter, a report on financial and operational
highlights;
(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; and
(iv) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the Holder
or any assignee of the Holder may from time to time request, provided, however,
that the Company shall not be obligated to provide information which the Board
of Directors deems in good faith to be proprietary. All shares beneficially
owned by affiliated entities or persons shall be aggregated together for
purposes of determining whether a Holder shall have the information rights set
forth in this Section 4.2. As a condition of such aggregation, holders of a
majority of the shares of the aggregating persons and entities shall designate
in writing from time to time one representative for all aggregating persons and
entities, and the Company shall be entitled to definitively rely upon the
authority of such representative and any action or omission of such
representative in exercising or failing to exercise the rights hereunder.
(c) The Company shall provide to each holder of the Company's
Series E and Series F Preferred Stock holding not less than 1.25% of the then
outstanding capital stock of the Company on an as-converted basis (assuming
exercise of all outstanding options and warrants to purchase capital stock of
the Company) copies of materials prepared by the Company on a monthly basis for
the Board of Directors, including, but not limited to, minutes of the previous
Board of Directors meeting, financial statements and presentation materials;
provided, however, that each Holder agrees to hold any such information received
from the Company pursuant to this Section 4.2(c) in confidence, and not to use
or disclose any of such information to any third party or to any regulatory
authority to which a Holder is subject, except to the extent such information
may be made publicly available by the Company or otherwise as required by law.
(d) The Company shall permit each Holder holding not less than
615,836 (as adjusted for any stock splits, stock dividends and the like) shares
of Registrable Shares, at such Holder's expense, to visit and inspect the
Company's properties, to examine its books of account
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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 Holder;
provided, however, that the Company shall not be obligated pursuant to this
subsection 4.2(d) to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
(e) The Company shall deliver to each Holder a quarterly balance
sheet and income statement.
(f) The covenants set forth in this Section 4.2 shall terminate
as to all Holders and be of no further force or effect immediately upon the
consummation of the Company's Initial Offering.
4.3 DEBT. The Company shall be required to obtain the consent of a
majority of the Board of Directors before issuing any material debt security,
including, without limitation, borrowings from any bank or financial
institution.
4.4 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it
will operate in a manner such that it will not become a "United States real
property holding corporation" as that term is defined in Section 897(c)(2) of
the Code and the regulations thereunder ("FIRPTA"). The Company agrees to make
determinations as to its status as a USRPHC, and will file statements concerning
those determinations with the Internal Revenue Service, in the manner and at the
times required under Reg. Section 1.897-2(h), or any supplementary or successor
provision thereto. Within thirty (30) days of a request from a Holder or any of
its partners, the Company will inform the requesting party, in the manner set
forth in Reg. Section 1.897-2(h)(1)(iv) or any supplementary or successor
provision thereto, whether that party's interest in the Company constitutes a
United States real property interest (within the meaning of Code Section
897(c)(1) and the regulations thereunder) and whether the Company has provided
to the Internal Revenue Service all required notices as to its USRPHC status.
4.5 BOARD VISITATION PRIVILEGES.
(a) Any Holder holding not less than 1,048,762 (as adjusted for
any stock splits, stock dividends and the like) shares of Series B Preferred
Stock (or shares issued in conversion thereof) shall be entitled to designate a
representative to attend, as a nonvoting observer, meetings of the Board of
Directors. Such representative shall be required to sign a confidentiality
agreement. Such representative shall be entitled to notice of such meeting and
distribution of the agenda and other information disseminated to the Board in
connection with such board meeting. The Company has the right to exclude the
representative, from the entire meeting or portions thereof, if attendance by
the representative at such meeting or portion of such meeting or dissemination
of such information would, in the reasonable determination by the Company,
compromise or adversely affect the attorney-client privilege or would result in
a conflict of interest situation.
(b) Subject to Section 4.2, any Holder holding not less than
615,836 (as adjusted for any stock splits, stock dividends and the like) shares
of Registrable Securities shall be entitled to (i) receive notice of all
meetings of the Board of Directors and the materials to be
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distributed therewith by the Company and (ii) attend (at such Holder's own
expense) up to one-half of the regularly-scheduled meetings of the Board of
Directors per year; provided, however, that any such observer must be reasonably
acceptable to the Company, such acceptance not to be unreasonably withheld.
4.6 INDEMNIFICATION; DIRECTORS & OFFICERS LIABILITY INSURANCE. During
the term of this Agreement and for so long as one or more representatives of the
Holders remain on the Company's Board of Directors the Company will use its best
efforts to: (i) maintain indemnification provisions in the Company's Bylaws
substantially in the form set forth in the Company's Bylaws as approved February
13, 1995, and (ii) obtain and keep directors' and officers' liability insurance
in the minimum amount of $2,000,000 if such coverage is available at
commercially reasonable rates.
4.7 INSURANCE. The Company will maintain with financially sound and
reputable insurance companies, funds or underwriters insurance of the kinds,
covering the risks and in the relative proportionate amounts usually carried by
reasonable and prudent companies conducting businesses similar to that of the
Company.
4.8 TRANSACTIONS WITH AFFILIATES. The Company will not engage in any
transaction with any affiliate on terms more favorable to the affiliate than
would have been obtainable on an arms-length basis in the ordinary course of
business.
4.9 AGREEMENTS WITH EMPLOYEES. The Company shall enter into agreements
with each of its employees and consultants, respectively, including provisions
relating to assignment of inventions and confidentiality.
4.10 BOARD EXPENSES. The Company will pay the reasonable out-of-pocket
expenses (including airfare) incurred of any representative member of the Board
of Directors who is not then an employee of the Company incurred while acting on
behalf of the Company, including attending meetings of the Board of Directors,
upon presentation to the Company of an itemized accounting of such expenses with
reasonable supporting data.
4.11 INDEMNIFICATION OF DIRECTORS AND OFFICERS. During any period in
which a representative or designee of the Holders serves on the Company's Board
of Directors, the Company will continue to indemnify its officers and directors
to the full extent permitted by law.
4.12 TERMINATION. The covenants set forth in Sections 4.3, 4.4, 4.5,
4.6, 4.7, 4.8, 4.9, 4.10, 4.11 and 4.12 shall terminate as to all Holders and be
of no further force or effect immediately upon the consummation of the Company's
Initial Offering.
5. BOARD REPRESENTATION.
5.1 Subject to the terms and conditions set forth below, each of the
Holders, the Founder and their transferees hereunder will take such action as is
necessary to cause the election to the Board of Directors of the persons
referenced below (and against any proposal to remove the persons referenced
below), including but not limited to voting or causing to be voted all
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shares of voting capital stock of the Company now or hereafter beneficially
owned or controlled by such Holder, Founder or transferee:
(a) Thomas H. Bredt or such other person designated by Menlo
Ventures VI ("MENLO") for so long as Menlo and its affiliates hold at least
928,571 (as adjusted for any stock splits, stock dividends and the like) shares
of Series B Preferred Stock (or shares of Common Stock issuable upon conversion
thereof). The right to designate one member of the Board of Directors set forth
in this subparagraph shall be transferable to a subsequent holder or transferee
acquiring at least 928,571 (as adjusted for any stock splits, stock dividends
and the like) shares of Series B Preferred Stock (or Common Stock issuable upon
conversion thereof) held by Menlo.
(b) Kevin Fong or such other person designated by Mayfield VII
("MAYFIELD") for so long as Mayfield and its affiliates hold at least 928,571
(as adjusted for any stock splits, stock dividends and the like) shares of
Series B Preferred Stock (or shares of Common Stock issuable upon conversion
thereof). The right to designate one member of the Board of Directors set forth
in this subparagraph shall be transferable to a subsequent holder or transferee
acquiring at least 928,571 (as adjusted for any stock splits, stock dividends
and the like) shares of Series B Preferred Stock (or Common Stock issuable upon
conversion thereof) held by Mayfield.
(c) David Dull or such other person designated by Herb Alpert
("ALPERT") for so long as Alpert and his affiliates hold at least 928,571 (as
adjusted for any stock splits, stock dividends and the like) shares of Series A
Preferred Stock and Series B Preferred Stock (or shares of Common Stock issuable
upon conversion thereof). The right to designate one member of the Board of
Directors set forth in this subparagraph shall be transferable to a subsequent
holder or transferee acquiring at least 928,571 (as adjusted for any stock
splits, stock dividends and the like) shares of Series A and Series B Preferred
Stock (or Common Stock issuable upon conversion thereof) held by Alpert.
(d) Gregory Olbright, provided that, such obligation to elect
Gregory Olbright ("OLBRIGHT") shall terminate on the earlier of the following
events: (i) the date he no longer owns beneficially at least 750,000 shares of
the Company's voting capital stock (as adjusted by any stock split, stock
dividend or similar occurrence after the date hereof), or (ii) the date he shall
engage in another business as a founder or employee of, or consultant to
(provided that serving solely as a director shall not be deemed to be acting as
a consultant), such business which in the reasonable determination of the
majority of the Board of Directors, is directly competitive with the Company's
business or (iii) Olbright and the Company are engaged in a dispute relating to
his employment with the Company, which dispute is not resolved within a period
of thirty (30) days after the date of its inception (as determined in good faith
by the Board of Directors), and on or after the thirtieth (30th) day after the
inception of such dispute, seventy-five (75%) percent of the members of the
Board of Directors (without including Olbright in the total number of Directors
for calculation of such seventy-five percent), with Olbright abstaining,
determines in good faith that a continuing dispute exists and that Olbright's
continuation as a member of the Board of Directors would be detrimental to the
best interests of the Company; or (iv) in his capacity as a shareholder and
during the period of his employment with the Company Olbright
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votes against any proposal as to which the Board of Directors has recommended a
vote in favor and as to which a negative shareholder vote would give rise to
dissenter's rights pursuant to Delaware law. No amendment to this subparagraph
(D) shall be effective without the express written consent of Olbright.
(e) Juan A. Rodriguez or such other person designated by a
majority of the Board of Directors and is not an employee or officer of the
Company or a Holder, or an "affiliate" or "associate" of the Company or a Holder
as such terms are defined in Rule 12b-2 of the rules and regulations promulgated
under the 1934 Act.
(f) Charles A. Haggerty, or such other person designated by
Western Digital Corporation ("WDC") for so long as WDC holds at least 928,571
(as adjusted for any stock splits, stock dividends and the like) shares of
Series D Preferred Stock (or shares of Common Stock issuable upon conversion
thereof). The right to designate one member of the Board of Directors set forth
in this subparagraph shall not be transferable.
(g) Tim Spicer or such other person designated by AVI/Arcxel
Investors A, L.P. ("AVI") for so long as AVI and its affiliates hold at least
928,571 (as adjusted for any stock splits, stock dividends and the like) shares
of Series F Preferred Stock (or shares of Common Stock issuable upon conversion
thereof). The right to designate one member of the Board of Directors set forth
in this subparagraph shall be transferable to a subsequent holder or transferee
acquiring at least 928,571 (as adjusted for any stock splits, stock dividends
and the like) shares of Series F Preferred Stock (or Common Stock issuable upon
conversion thereof) held by AVI.
(h) The Holders, the Founder and Permitted Transferees will vote
shares and execute and deliver or cause to be executed and delivered any
instruments, certificates, stockholders written consents or other documents or
take such other actions (or refrain from taking such actions) as may reasonably
be required for the purposes of fully implementing this Section 5.
5.2 BOARD OF DIRECTORS. Each Holder will vote all of his or its voting
securities of the Company and take all other necessary or desirable actions
within his or its control (whether in the capacity of stockholder, director,
member of the executive committee or officer of the Company or otherwise), in
order to cause the Board to consist of not more than seven members; provided
that, upon unanimous consent by the Board of Directors, the board may increase
its size to not more than eight members and the foregoing covenant shall apply
to such increased number of Board Members.
6. RESTRICTIONS ON TRANSFERS.
6.1 GENERAL RESTRICTION. No sale, assignment, transfer, pledge,
hypothecation, gift, or other disposition of any shares of the Company's capital
stock, including, without limitation, certain Warrants dated as of October 6,
1995 to purchase the Company's Series A Preferred Stock, (the "SHARES") now
owned or hereafter held by any Holder, whether voluntary, involuntary or by
operation of law or (in the case of a Holder which is not a natural person)
pursuant to a merger, consolidation, sale of assets or other reorganization, or
a change in
18.
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beneficial ownership, and whether testamentary or inter-vivos, or otherwise, may
be made except as permitted by this Agreement and in accordance with its terms.
The Company agrees that it will not cause or permit the transfer of any Shares
to be made on its books unless the transfer is permitted by this Agreement and
has been made in accordance with its terms.
6.2 RESTRICTIONS ON TRANSFER.
(a) RIGHT OF FIRST OFFER. If a Holder at any time proposes to
sell for cash all or any portion of the shares of capital stock of the Company
now owned or hereafter acquired by such Holder, the Holder shall first deliver
to the Company written notice stating the terms and conditions of the proposed
transfer and offering to sell the shares to the Company as hereinafter provided
at the purchase price set forth in the offer (the "PURCHASE PRICE").
(b) PURCHASE OPTION. Subject to any limitations imposed by law,
the Company shall have a period of fifteen (15) days, after receipt of the
notice described in Section 6.3 (a), in which to elect to purchase all, and not
less than all, of the offered shares upon the terms stated in the notice by
delivering written notice to the Holder of its election to purchase such shares.
The Holder and any of its representatives shall not vote at the shareholders
and/or directors meeting on the question of the exercise or non-exercise of the
Company's right to purchase as provided herein; however, if the Company elects
to exercise its right to purchase, the Holder shall then participate in any vote
taking any other action in connection with the purchase, including the reduction
of stated capital or re-evaluation of assets, as may be necessary in order to
effect the purchase.
(c) ASSIGNMENT. The Company may, in its sole discretion, assign
its purchase rights to any of its existing shareholders as it may determine. The
assignment may be made at any time during the fifteen (15) day exercise period
by notice to the shareholder. The assignee shareholders shall have fifteen (15)
days from the date of such notice to exercise the purchase rights hereunder.
(d) TRANSFER; NEW OFFER. If all of the shares are not purchased
pursuant to the foregoing provisions of this Section 6, then the entire amount
of the Shares may be transferred by the Holder on the terms set forth in the
initial notice to the Company pursuant to the terms and conditions specified
therein; provided, however, that such transferee and the transferred shares
shall be bound by the terms of this Agreement. If such transfer is not made
within thirty (30) days following the termination of the right to purchase, a
new offer must be made pursuant to the provisions of this Section 6 before the
Holder can transfer any portion of his Shares and the provisions of this Section
6 shall again apply to such transfer.
6.3 EXCLUDED TRANSFERS. Provided that the Holder has first given the
Company notice of any such transfer, the restrictions on transfer set forth in
this Section 6 shall not apply to (a) a transfer to the Holder's estate, heirs,
administrators or executors, (b) a transfer in connection with a merger,
reorganization or the sale of all or substantially all of the assets of a Holder
which is a corporation, (c) a transfer by right of survivorship of Shares held
as joint tenants, (d) a transfer (whether by gift or otherwise) from the Holder
to such Holder's spouse, lineal descendants or ancestors (or to a trustee of a
trust for the benefit of such persons), (e) a transfer to
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<PAGE> 21
a corporation or other business entity wholly owned by, or under common control
with, the Holder, (f) a transfer to the Holder's general or limited partners or,
if the Holder is a corporation, to any or all of its stockholders, (g) a
transfer to the Company, its officers or directors, or any other stockholder of
the Company; provided, however, that as to each such transfer, transferees and
the transferred Shares shall be bound by the terms of this Agreement, or (h)
transfers by Alpert of not more than an aggregate of 669,000 shares of capital
stock to persons or entities having a close preexisting business relationship
with Alpert provided that, in no event shall Alpert make transfers pursuant to
this Section 6.3(h) to more than an aggregate of ten (10) persons or entities
and further, that any transfer to a person or entity that is not an "accredited
investor" as that term is defined in Rule 501 of Regulation D of the Rules and
Regulations promulgated under the Securities Act shall be subject to prior
written approval by the Company.
6.4 MARKING OF CERTIFICATES. Each certificate representing Shares
subject to this Agreement shall bear the following legend:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS PURSUANT TO CERTAIN STOCK AGREEMENTS, (THE "AGREEMENTS"). SUCH
AGREEMENTS, AMONG OTHER THINGS, RESTRICT CERTAIN RIGHTS WITH RESPECT TO VOTING,
TRANSFER OR PLEDGE OF THE SHARES, OR OTHERWISE ENCUMBER THE SHARES REPRESENTED
HEREBY. COPIES OF SUCH AGREEMENTS MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION."
6.5 ACQUISITION OF OTHER SHARES. If the Holder shall acquire any other
Shares, such other Shares shall be subject to all the terms of this Agreement
and the certificates representing them shall be marked as set forth in Section
6.4.
6.6 TERMINATION OF RIGHT OF FIRST OFFER. The foregoing right of first
offer shall terminate on the closing of the transaction in which securities of
the Company are first offered to the public pursuant to a registration statement
filed with, and declared effective by, the United States SEC pursuant to the
Securities Act and such right of first refusal shall not extend to shares sold
pursuant to such registration statement.
7. MISCELLANEOUS.
7.1 ASSIGNMENT. Subject to the transfer restrictions set forth above,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any 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 in this Agreement.
7.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements entered into
solely between residents of, and to be performed entirely within, such state.
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7.3 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.
7.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.5 NOTICES.
(a) All notices, requests, demands and other communications under
this Agreement or in connection herewith shall be given to or made upon the
Holders to their respective addresses as set forth under their name on Exhibit A
attached hereto and, if to the Company, to Vixel Corporation, 325 Interlocken
Pkwy., Broomfield, Colorado 80021, Attention: President, with a copy to Cooley
Godward LLP, 2595 Canyon Blvd., Suite 250, Boulder, CO 80302 Attention: James
C.T. Linfield.
(b) All notices, requests, demands and other communications given
or made in accordance with the provisions of this Agreement shall be in writing,
and shall be sent by airmail, return receipt requested, by a nationally
recognized overnight courier service, or by telex or telecopy (facsimile) with
confirmation of receipt, and shall be deemed to be given or made when receipt is
so confirmed.
(c) Any party may, by written notice to the other, alter its
address or respondent, and such notice shall be considered to have been given
five (5) days after the airmailing, overnight couriering, telexing or
telecopying thereof.
7.6 ATTORNEY'S FEES. If any action at law or in equity (including
arbitration) 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.
7.7 EFFECT OF AMENDMENT OR WAIVER. Each Holder and its successors and
assigns acknowledge that by the operation of Section 2 hereof the holders of a
majority of the outstanding Registrable Securities, acting in conjunction with
the Company, will have the right and power to diminish or eliminate all rights
pursuant to this Agreement.
7.8 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 interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.9 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
21.
<PAGE> 23
to any other holder of any securities of the Company as a result of exercising
or refraining from exercising any such right or rights.
7.10 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any of the Registrable Securities,
upon any breach or default of the Company under this Agreement, shall impair any
such right, power or remedy of such Holder 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 holder of any breach or
default under this Agreement, or any waiver on the part of any holder 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.
7.11 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement between the parties hereto pertaining to
the subject matter hereof, and any and all other written or oral agreements
existing between the parties hereto are expressly canceled.
[Signature Page Follows]
22.
<PAGE> 24
IN WITNESS WHEREOF, this Amended and Restated Investors Rights Agreement
is hereby executed as of the date first above written.
COMPANY:
VIXEL CORPORATION
By: /s/ Gregory R. Olbright
------------------------------------
Gregory Olbright, President and CEO
HOLDERS:
Printed Name
---------------------------
(person or entity)
By:
-------------------------------------
Title:
----------------------------------
<PAGE> 25
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
1. TERMINATION OF AGREEMENTS...........................................................1
2. AMENDMENT...........................................................................1
3. REGISTRATION RIGHTS.................................................................2
3.1 Definitions as used in this Agreement........................................2
3.2 Demand Registration..........................................................3
3.3 Piggyback Registration.......................................................4
3.4 Form S-3 Registration........................................................4
3.5 Obligations of the Company...................................................5
3.6 Furnish Information..........................................................6
3.7 Expenses of Registrations....................................................7
3.8 Underwriting Requirements....................................................7
3.9 Delay of Registration........................................................8
3.10 Indemnification..............................................................8
3.11 Reports under the 1934 Act..................................................10
3.12 Assignment of Registration Rights...........................................10
3.13 "Market Stand-Off" Agreement................................................11
3.14 Termination of Registration Rights..........................................11
3.15 Limitations on Subsequent Registration Rights...............................11
4. ADDITIONAL RIGHTS..................................................................11
4.1 Right of First Offer........................................................11
4.2 Information Rights..........................................................13
4.3 Debt........................................................................15
4.4 Qualified Small Business....................................................15
4.5 Real Property Holding Corporation...........................................15
4.6 Board Visitation Privileges.................................................15
4.7 Indemnification; Directors & Officers Liability Insurance...................16
4.8 Insurance...................................................................16
4.9 Transactions with Affiliates................................................16
4.10 Agreements with Employees...................................................16
4.11 Board Expenses..............................................................16
4.12 Indemnification of Directors and Officers...................................16
4.13 Termination.................................................................16
5. BOARD REPRESENTATION...............................................................17
5.2 Board of Directors..........................................................18
6. RESTRICTIONS ON TRANSFERS..........................................................18
</TABLE>
i
<PAGE> 26
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
6.1 General Restriction.........................................................18
6.2 Restrictions on Transfer....................................................19
6.3 Excluded Transfers..........................................................19
6.4 Marking of Certificates.....................................................20
6.5 Acquisition of other Shares.................................................20
6.6 Termination of Right of First Offer.........................................20
7. MISCELLANEOUS......................................................................20
7.1 Assignment..................................................................20
7.2 Governing Law...............................................................20
7.3 Counterparts................................................................21
7.4 Titles and Subtitles........................................................21
7.5 Notices.....................................................................21
7.6 Attorney's Fees.............................................................21
7.7 Effect of Amendment or Waiver...............................................21
7.8 Severability................................................................21
7.9 Rights of Holders...........................................................22
7.10 Delays or Omissions.........................................................22
7.11 Entire Agreement............................................................22
</TABLE>
ii.
<PAGE> 27
EXHIBIT A
<TABLE>
<S> <C>
Japan Associated Finance Co., Ltd. JAFCO R-1(A) Investment Enterprise Partnership
c/o Todd Brooks c/o Todd Brooks
505 Hamilton Avenue, Suite 310 505 Hamilton Avenue, Suite 310
Palo Alto, CA 94301 Palo Alto, CA 94301
JAFCO R-1(B) Investment Enterprise Partnership U.S. Information Technology Investment
c/o Todd Brooks Enterprise Partnership
505 Hamilton Avenue, Suite 310 c/o Todd Brooks
Palo Alto, CA 94301 505 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Mayfield VII, a California Limited Jerome S. Moss
Partnership c/o Rondor Music International
2800 Sand Hill Road North La Cienega Blvd.
Menlo Park, CA 94025 Los Angeles, CA 90048
Mayfield Associates Fund II, a California Werner F. Wolfen
Limited Partnership c/o Irell & Manella
2800 Sand Hill Road 1800 Avenue of the Stars
Menlo Park, CA 94025 Los Angeles, CA 90067
Menlo Ventures VI, L.P. Juan A. Rodriguez
3000 Sand Hill Road 4517 Navajo Place
Menlo Park, CA 94025 Boulder, CO 80303
Menlo Entreprenuers Fund VI, L.P. John P. Brincko
3000 Sand Hill Road Brincko Associates, Inc.
Menlo Park, CA 94025 1801 Avenue of the Stars
Suite 1054
Los Angeles, CA 90067
Patterson Family Trust U/D/T 8/26/88 E. J. Olbright
115 Glen Ridge Avenue c/o Colorado First Construction Co.
Los Gatos, CA 95030 160 Highway 6, Suite 204
Drawer 1099
Silverthorne, CO 80498
Greg Reyes Gregory Olbright
P.O. Box 8751 c/o Vixel Corporation
17376 Calle Mayor 325 Interlocken Parkway
Rancho Santa Fe, CA 92067 Broomfield, CO 80021
</TABLE>
<PAGE> 28
<TABLE>
<S> <C>
Herb Alpert Silicon Valley Bank
c/o Rondor Music International 1731 Embarcadero Road, Suite 220
360 North La Cienega Blvd. Palo Alto, CA 94303
Los Angeles, CA 90048
Comdisco, Inc. Western Digital Corporation
6111 North River Road 8105 Irvine Center Drive
Rosemont, IL 60018 Irvine, CA 92718
Triumph-Connecticut Limited Partnership Tudor Arbitrage Partners, L.P.
100 California Street, Suite 756 40 Rowes Wharf, 2nd Floor
San Francisco, CA 94111 Boston, MA 02110
Richard McLaughlin Attention: Robert Fortenza
With a copy to:
Charles B. Spadoni
Cityplace I
35th Floor
Hartford, CT 06103
Hancock Venture Partners IV-Direct Fund L.P. Tudor BVI Futures, Ltd.
One Financial Center, 39th floor 40 Rowes Wharf, 2nd Floor
Boston, MA 02111 Boston, MA 02110
Attention: Robert Fortenza
Pilgrim Baxter Hybrid Partners I, L.P. Vixel Investors, L.P.
1255 Drummers Lane, Suite 300 909 3rd Avenue, 9th Floor
Wayne, PA 19087 New York, NY 10022
Raptor Global Fund, L.P. Navigator Fund, L.P.
40 Rowes Wharf, 2nd Floor 909 3rd Avenue, 9th Floor
Boston, MA 02110 New York, NY 10022
Attention: Robert Fortenza
Raptor Global Fund, Ltd. Navigator Global Fund, Limited
40 Rowes Wharf, 2nd Floor 909 3rd Avenue, 9th Floor
Boston, MA 02110 New York, NY 10022
Attention: Robert Fortenza
David Dull Brenner Family Revocable Trust Dated April
c/o Irell & Manella 24, 1994
1800 Avenue of the Stars 14241 Juniper Lane
Los Angeles, CA 90067 Saratoga, CA 95070
</TABLE>
<PAGE> 29
<TABLE>
<S> <C>
Stanford University Joseph M. Schell
c/o Stanford Management Company 3983 Happy Valley Road
2770 Sand Hill Road Lafayette, CA 94549
Menlo Park, CA 94025
Howard Johnson C. L. Gerhardt, Jr.
16541 Redmond Way, Suite 264 600 Montgomery St.
Redmond, WA 98052 San Francisco, CA 94111
Paul S. and Joan K. Madera Otto Victor Tschudi and Yvonne
1205 Vancouver Avenue Louise-Ericksen Tschudi, Trustee or Successor
Burlingame, CA 94010 Trustee, of the Otto Victor Tschudi and
Yvonne Louise-Ericksen Revocable Living
Trust, Dated Sept. 8, 1988
1885 St. Andrews Drive
Moraga, CA 94556
Derek Lemke-von Ammon Kenneth G. Rivera
66 27th Avenue 555 California Street, Suite 4650
San Francisco, CA 94121 San Francisco, CA 94104
William B. Bunting Mark Lieberman
61 Lakeview Avenue 1251 Francisco Street
Piedmont, CA 94611 San Francisco, CA 94123
Stephen A. LeBlang AVI/Arcxel Investors A, L.P.
2212 Nicholl St. AVI/Arcxel Investors B, L.P.
Boulder, CO 80304 AVI/Arcxel Investors C
One Bush Street, Suite 1350
San Francisco, CA 94104
Attn: Tim Spicer
Nationsbank Montgomery Securities Transamerica Business Credit Corporation
600 Montgomery Street Riverway II
San Francisco, CA 94111 West Office Tower
Attn: Paul Madera 9399 West Higgins Road
Rosemont, IL 60018
Robert Rich
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660-6641
</TABLE>
<PAGE> 1
EXHIBIT 4.3
FIRST AMENDMENT TO
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO THE AMENDED AND RESTATED INVESTORS' RIGHTS
AGREEMENT, dated as of February 17, 1998 (the "Investors' Rights Agreement"), is
entered into by and among Vixel Corporation, a Delaware corporation (the
"Company"), Gregory R. Olbright (the "Founder") and certain investors of the
Company listed on the signature pages hereof (the "Holders").
RECITALS
WHEREAS, the Company, the Founder, the Holders and certain other
investors of the Company are parties to the Investors' Rights Agreement and
desire to amend the definition of "Registrable Securities" contained in the
Investors' Rights Agreement to include the Common Stock issuable upon conversion
of up to 200,000 shares of Series E Preferred Stock of the Company issuable
pursuant to Series E Preferred Stock Purchase Warrants to be issued by the
Company in connection with commercial loan or lease transactions approved by the
Board of Directors of the Company (the "Series E Preferred Stock Purchase
Warrants").
In consideration of the mutual agreements contained herein, the parties
hereto agree as follows:
AGREEMENT
1. Section 3.1(b) of the Investors' Rights Agreement is hereby amended
in its entirety to read as follows:
"(b) The term "Registrable Securities" means:
(i) the shares of Common Stock issuable or issued upon
conversion of (i) the Series A Preferred Stock and Series B
Preferred Stock of the Company held by the Holders (or their
Permitted Transferees), (ii) the Series A Preferred Stock of the
Company acquired by Herb Alpert upon exercise of a Warrant to
purchase 240,000 shares dated July 6, 1994, (iii) the Series A
Preferred Stock of the Company acquired by the Holders (or their
Permitted Transferees) upon exercise of those certain Warrants to
purchase an aggregate of 894,334 shares of Series A Preferred Stock,
each dated October 6, 1995, issued pursuant to the Series B
Preferred Stock and Series A Warrant Purchase Agreement dated
October 6, 1995, (iv) the Series C Preferred Stock of the Company
acquired by Comdisco, Inc. (or its Permitted Transferee) upon
exercise of a Warrant to purchase 85,714 shares dated January 12,
1996, (v) the Series C Preferred Stock of the Company acquired by
Silicon Valley Bank upon exercise of a Warrant to purchase 5,000
shares dated March 5, 1996, (vi) the Series C Preferred Stock of the
Company acquired by MMC/GATX Partnership No. 1 upon exercise of a
Warrant to purchase 85,000 shares dated March 5, 1996,
1.
<PAGE> 2
(vii) 2,000,000 shares of Series D Preferred Stock of the Company
acquired by Western Digital Corporation pursuant to the Purchase
Agreement dated March 29, 1996, (viii) the Series E Preferred Stock
of the Company held by the Holders (or their Permitted Transferees
(as defined below)), (ix) the Series E Preferred Stock of the
Company acquired by Montgomery Securities (or their Permitted
Transferees) upon exercise of those certain Warrants to purchase
69,261 shares dated October 21, 1996, (x) the Series E Preferred
Stock of the Company acquired by Transamerica Business Credit
Corporation (or their Permitted Transferees) upon exercise of a
Warrant to purchase up to 25,000 shares dated May 30, 1997, (xi) the
Series F Preferred Stock of the Company held by the Holders (or
their Permitted Transferees), (xii) up to 200,000 shares of Series E
Preferred Stock of the Company issuable pursuant to Series E
Preferred Stock Purchase Warrants issued by the Company in
connection with commercial loan or lease transactions approved by
the Board of Directors of the Company, and (xiii) the shares of
capital stock issued or issuable with respect to the securities
referred to in (i)-(xii) above, or upon any other securities issued
as a dividend or other distribution with respect to, or in exchange
or replacement of, any such securities, excluding, in all cases, any
Registrable Securities that are held by a person to whom the rights
of a Holder under this Agreement have not been validly transferred
in a written instrument pursuant to Sections 3.12 and 6 hereof to a
Permitted Transferee."
2. Exhibit A to the Investors' Rights Agreement is hereby amended to
include each purchaser of the Series E Preferred Stock Purchase Warrants as a
"Holder" thereunder as of the date of such purchaser's signature of this
Amendment.
3. The grant of rights hereunder to any purchaser of Series E
Preferred Stock Purchase Warrants is subject to such purchaser's execution of
the signature page hereof, and such purchaser shall thereafter be subject to all
of the duties and obligations set forth in the Investors' Rights Agreement.
[REMAINDER OF THIS PAGE INTENTIONALY LEFT BLANK]
2.
<PAGE> 3
3. IN WITNESS WHEREOF, the undersigned have executed this Amendment
as of the date first above written.
VIXEL CORPORATION
By: /s/ KURTIS L. ADAMS
------------------------------------------------
Name: Kurtis L. Adams
Title: Vice President of Finance and Chief
Financial Officer
FOUNDER:
---------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
HERB ALPERT
---------------------------------------------------
[Signature]
---------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: 1,852,083
Series A Warrants: 396,412
Series B Shares: 857,142
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 4
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
------------------------------------------------
Name:
Title:
FOUNDER:
---------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
AVI/ARCXEL INVESTORS A, L.P.
---------------------------------------------------
[Signature]
---------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: 860,217
</TABLE>
3.
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
------------------------------------------------
Name:
Title:
FOUNDER:
---------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
AVI/ARCXEL INVESTORS B, L.P.
---------------------------------------------------
[Signature]
---------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: 669,058
</TABLE>
3.
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
------------------------------------------------
Name:
Title:
FOUNDER:
GREGORY R. OLBRIGHT
HOLDER:
AVI/ARCXEL INVESTORS C
---------------------------------------------------
[Signature]
---------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: 214,736
</TABLE>
3.
<PAGE> 7
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
------------------------------------------------
Name:
Title:
FOUNDER:
---------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
DAVID A. DULL
---------------------------------------------------
[Signature]
---------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 27,777
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
------------------------------------------------
Name:
Title:
FOUNDER:
---------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
HANCOCK VENTURE PARTNERS IV - DIRECT FUND L.P.
---------------------------------------------------
[Signature]
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 666,667
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
JAFCO R-1(A) INVESTMENT ENTERPRISE PARTNERSHIP
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 88,889
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 10
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
JAFCO R-1(B) INVESTMENT ENTERPRISE PARTNERSHIP
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 88,889
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
----------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
JAPAN ASSOCIATED FINANCE CO., LTD.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 44,445
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
MAYFIELD VII, A CALIFORNIA LIMITED PARTNERSHIP
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 175,353
Series B Shares: 1,764,286
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 192,111
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 13
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
MAYFIELD ASSOCIATES FUND II,
A CALIFORNIA LIMITED PARTNERSHIP
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 9,229
Series B Shares: 92,857
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 10,111
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 14
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
MENLO VENTURES VI, L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 181,854
Series B Shares: 1,829,698
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 199,189
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
MENLO ENTREPRENEURS FUND VI, L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 2,728
Series B Shares: 27,445
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 3,033
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 16
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
JEROME S. MOSS
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 88,382
Series B Shares: 428,571
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 60,000
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 17
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
NAVIGATOR FUND, L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 20,444
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 18
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
NAVIGATOR GLOBAL FUND, LIMITED
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 1,778
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 19
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
GREGORY R. OLBRIGHT
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: 1,555,189
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 20
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
PATTERSON & COMPANY C/O CORESTATES BANK, N.A., AS
CUSTODIAN FOR PILGRIM BAXTER HYBRID PARTNERS I, L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 444,444
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 21
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
RAPTOR GLOBAL FUND L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 56,000
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 22
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
RAPTOR GLOBAL FUND LTD.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 124,333
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
JUAN A. RODRIGUEZ
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 8,534
Series B Shares: 38,095
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 24
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
TRIUMPH - CONNECTICUT LIMITED PARTNERSHIP
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 1,111,111
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 25
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
TUDOR ARBITRAGE PARTNERS L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 51,369
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 26
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
TUDOR BVI FUTURES, LTD.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 212,742
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 27
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
U.S. INFORMATION TECHNOLOGY INVESTMENT
ENTERPRISE PARTNERSHIP
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 888,888
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 28
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of
the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
VIXEL INVESTORS, L.P.
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 66,667
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 29
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
WESTERN DIGITAL CORPORATION
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: -0-
Series B Shares: -0-
Series C Warrants: -0-
Series D Shares: 2,000,000
Series E Shares: -0-
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 30
IN WITNESS WHEREOF, the undersigned have executed this Amendment as
of the _____ day of _______________, 199___.
VIXEL CORPORATION
By:
--------------------------------------------------
Name:
Title:
FOUNDER:
-----------------------------------------------------
GREGORY R. OLBRIGHT
HOLDER:
WERNER F. WOLFEN
-----------------------------------------------------
[Signature]
-----------------------------------------------------
[Name and Title, if Signing on Behalf of an Entity]
Registrable Securities Held:
<TABLE>
<S> <C>
Series A Shares: -0-
Series A Warrants: 12,801
Series B Shares: 57,142
Series C Warrants: -0-
Series D Shares: -0-
Series E Shares: 38,889
Series E Warrants: -0-
Series F Shares: -0-
</TABLE>
3.
<PAGE> 1
EXHIBIT 4.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
Vixel Corporation
Dated as of January 18, 1996 (the "Effective Date")
WHEREAS, Vixel Corporation, a Delaware corporation (the "Company") has
entered into a Master Lease Agreement dated as of January 18, 1996 Equipment
Schedule No. VL-1 dated as of January 18, 1996, and related Summary Equipment
Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in
consideration for such Leases, the right to purchase shares of its Series C
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 85,714 fully paid and non-
assessable shares of the Company's Series C Preferred Stock ("Preferred Stock")
at a purchase price of $3.50 per share (the "Exercise Price"). In the event that
the Company's Series C Preferred Stock shall be converted into the Company's
Common Stock in accordance with the Company's Restated Certificate of
Incorporation, this Warrant shall be exercisable pursuant to the terms herein
for that number of shares of Common Stock that Warrantholder would have been
entitled to upon conversion of the Preferred Stock in the event this Warrant had
exercised prior to the conversion of all outstanding Preferred Stock. The number
and purchase price of such shares are subject to adjustment as provided in
Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement and
the right to purchase Preferred Stock as granted herein shall commence on the
Effective Date and shall be exercisable for a period of (i) ten (10) years or
(ii) five (5) years from the effective date of the Company's initial public
offering, whichever is longer.
Notwithstanding the term of this Warrrant Agreement fixed pursuant to the above,
the Company may repurchase the Warrant from Warrantholder for a price equal to
five (5) times the Exercise Price, immediately prior to the closing of the
issuance of sale of shares of Common Stock of the Company in the Company's first
public offering of securities for its own account pursuant to an effective
registration statement under the Securities Act of 1933, as amended ("Initial
Public Offering").
- 1 -
<PAGE> 2
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by the
Warrantholder, in whole or in part, at any time, or from time to time, prior to
the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by
cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined
below. If the Warrantholder elects the Net Issuance method, the Company will
issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock (or, the Common
Stock upon conversion of the Preferred Stock) to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock (or, the Common
Stock upon conversion of the Preferred Stock) requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock (or,
the Common Stock upon conversion of the Preferred Stock).
B = the Exercise Price.
For purposes of the above calculation, current fair market value of Preferred
Stock (or, the Common Stock upon conversion of the Preferred Stock) shall mean
with respect to each share of Preferred Stock (or, the Common Stock upon
conversion of the Preferred Stock):
(a) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement relating
to such public offering has been declared effective by the SEC, then the fair
market value per share shall be the product of (x) the initial "Price to Public"
specified in the final prospectus with respect to the offering and (y) the
number of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise (or was convertible at the time all
Preferred Stock was converted into Common Stock);
(b) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(i) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise (or was
convertible at the time all Preferred Stock was converted into Common
Stock); or
(ii) if actively traded over-the-counter, the fair market
value shall be deemed to be the product of (x) the average of the
closing bid and asked prices quoted on the NASDAQ system (or similar
system) over the twenty-one (21) day period ending three days before
the day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise
(or was convertible at the time all Preferred Stock was converted into
Common Stock);
- 2 -
<PAGE> 3
(c) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x) the
highest price per share which the Company could obtain from a willing buyer (not
a current employee, consultant, or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good faith by
its Board of Directors and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such exercise (or
was convertible at the time all Preferred Stock was converted into Common
Stock), unless the Company shall become subject to a merger, acquisition or
other consolidation pursuant to which the Company is not the surviving party, in
which case the fair market value of Common Stock shall be deemed to be the value
received by the holders of the Company's Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly
issue an amended Warrant Agreement representing the remaining number of shares
purchasable hereunder. All other terms and conditions of such amended Warrant
Agreement shall be identical to those contained herein, including, but not
limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
(c) Series C Conversion. Upon conversion of all outstanding shares of
Series C Preferred Stock into Common Stock pursuant to the Company's Restated
Certificate of Incorporation, this Warrant shall thereafter be exercisable only
for Common Stock.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of the Warrant, but in lieu of such fractional shares the
Company shall make a cash payment therefor upon the basis of the Exercise Price
then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting rights
or other rights as a shareholder of the Company prior to the exercise of the
Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
- 3 -
<PAGE> 4
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Restated Certificate of Incorporation, as amended through the Effective Date, a
true and complete copy of which is attached hereto as Exhibit IV (the
"Charter"). Upon written request of Warrantholder, the Company shall provide
Warrantholder with information as to issuances of its stock or other equity
security that occurs after the Effective Date of this Warrant, which list shall
include (a) the price at which such stock or security is sold, (b) the number of
shares issued, and (c) such other information as necessary for Warrantholder to
determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in connection with each
- 4 -
<PAGE> 5
such event, the Company shall send to the Warrantholder the same notice provided
to the holders of the Series C Preferred Stock as set forth in the Company's
Charter.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter 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 Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to bankruptcy and other similar laws.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital of the Company consists of
(A) 15,000,000 shares of Common Stock, of which 335,378 shares are
issued and outstanding, and (B) 11,971,429 shares of preferred stock,
of which 10,835,777 shares are issued and outstanding and are
convertible into 10,835,777 shares of Common Stock.
(ii) The Company has reserved 2,744,500 shares of Common Stock
for issuance under its Incentive Stock Option Plan, under which
1,986,133 options are outstanding. The Company has reserved 894,333
shares of Series A Preferred Stock for issuance pursuant to the
exercise of Warrants. There are no other options, warrants, conversion
privileges or other rights presently outstanding to
- 5 -
<PAGE> 6
purchase or otherwise acquire any authorized but unissued shares of the
Company's capital stock or other securities of the Company.
(iii) Except as set forth in the Investors' Rights Agreement
dated October 6, 1995 ("Investors' Rights Agreement") no shareholder of
the Company has preemptive rights to purchase new issuances of the
Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in
the Investors' Rights Agreement, the Company is not, pursuant to the terms of
any other agreement currently in existence, under any obligation to register
under the 1933 Act any of its presently outstanding securities or any of its
securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance upon the
following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its
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<PAGE> 7
rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of
such rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Warrantholder at its request by such
Commission stating that no action shall be recommended by such staff or taken by
such Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
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<PAGE> 8
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, attention: James Labe,
Venture Group, cc: Legal Department, attn: General Counsel, (and/or, if by
facsimile, (708) 518-5466 and (708) 518-5088) and (ii) to the Company at 325
Interlocken Parkway, Building A, Broomfield, Colorado 80021, attention:
President (and/or if by facsimile, (303) 466-0290) or at such other address as
any such party may subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase
price for the Leases referenced in the preamble of this Warrant Agreement
exceeds $1,000,000, the Company will also provide Warrantholder with an opinion
from the Company's counsel reasonably acceptable to Warrantholder.
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<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
executed by its officers thereunto duly authorized as of the Effective Date.
Company: VIXEL CORPORATION
By: /s/ Gregory R. Olbright
-------------------------------------
Title: CEO
----------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ James P. Labe
-------------------------------------
Title: President, Venture Lease Division
----------------------------------
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<PAGE> 10
EXHIBIT I
NOTICE OF EXERCISE
To:
----------------------
(1) The undersigned Warrantholder hereby elects to purchase __________
shares of the Series C Preferred Stock of Vixel Corporation, pursuant
to the terms of the Warrant Agreement dated the ____ day of __________,
19__ (the "Warrant Agreement") between Vixel Corporation and the
Warrantholder, and tenders herewith payment of the purchase price for
such shares in full, together with all applicable transfer taxes, if
any.
(2) In exercising its rights to purchase the Series C Preferred Stock of
Vixel Corporation, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the
Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such
other name as is specified below.
- -----------------------------------
(Name)
- -----------------------------------
(Address)
- -----------------------------------
Warrantholder: COMDISCO, INC.
By:
--------------------------------
Title:
-----------------------------
Date:
------------------------------
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<PAGE> 11
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned _________________________________ , hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ___________
shares of the Series C Preferred Stock of Vixel Corporation, pursuant to the
terms of the Warrant Agreement, and further acknowledges that __________ shares
remain subject to purchase under the terms of the Warrant Agreement.
Company: VIXEL CORPORATION
By:
---------------------------
Title:
------------------------
Date:
-------------------------
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<PAGE> 12
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this
form and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
________________________________________________________________________________
(Please Print)
whose address is________________________________________________________________
________________________________________________________________________________
Dated_______________________________________________
Holder's Signature _________________________________
Holder's Address ___________________________________
____________________________________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement,
without alteration or enlargement or any change whatever.
Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of
authority to assign the foregoing Warrant Agreement.
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<PAGE> 1
Exhibit 4.5
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
VIXEL CORPORATION
WARRANT TO PURCHASE 85,000 SHARES
OF SERIES C PREFERRED STOCK
THIS CERTIFIES THAT, for value received, MMC/GATX Partnership No. 1 is
entitled to subscribe for and purchase 85,000 shares of the fully paid and
nonassessable Series C Preferred Stock, $0.001 par value (as adjusted pursuant
to Section 4 hereof, the "Shares") of VIXEL CORPORATION, a Delaware corporation
(the "Company"), at the price of Three Dollars and Fifty Cents ($3.50) per share
(such price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, (a) the term "Series Preferred" shall mean the
Company's presently authorized Series C Preferred Stock, and any stock into or
for which such Series C Preferred Stock may hereafter be converted or exchanged,
including the conversion of all Series Preferred into Common Stock pursuant to
the Company's Restated Certificate of Incorporation, (b) the term "Date of
Grant" shall mean February 27, 1996, and (c) the term "Other Warrants" shall
mean any other warrants issued by the Company in connection with the transaction
with respect to which this Warrant was issued, and any warrant issued upon
transfer or partial exercise of this Warrant. The term "the Warrant" or "this
Warrant" as used herein shall be deemed to include Other Warrants unless the
context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) eight (8) years after the Date of Grant or (ii) five
(5) years after the closing of the Company's initial public offering of its
Common Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act"). Upon
request of the Company, the holder of this Warrant agrees to exercise the
purchase right under this Warrant (including without limitation by way of net
issuance as provided in paragraph 10.3) upon the sale of all of the assets or
stock of the Company, or the merger of the Company, if either (a) such sale or
merger is to or with an entity whose tangible net worth prior to such purchase
or merger is greater than $100,000,000 or (b) the net
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<PAGE> 2
proceeds per share to the holder of this Warrant upon such exercise will equal
at least the product of the Warrant Price multiplied by 2.5.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1, hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, (a) the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed) at
the principal office of the Company and by the payment to the Company, by check,
of an amount equal to the then applicable Warrant Price multiplied by the number
of Shares then being purchased, or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly executed) at the
principal office of the Company together with notice of arrangements reasonably
satisfactory to the Company for payment to the Company either by check or from
the proceeds of the sale of shares to be sold by the holder in such public
offering of an amount equal to the then applicable Warrant Price per share
multiplied by the number of Shares then being purchased. The person or persons
in whose name(s) any certificate(s) representing shares of Series Preferred
shall be issuable upon exercise of this Warrant shall be deemed to have become
the holder(s) of record of, and shall be treated for all purposes as the record
holder(s) of, the shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be delivered to the holder hereof as soon as possible and in any
event within thirty days after such exercise and, unless this Warrant has been
fully exercised or expired, a new Warrant representing the portion of the
Shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be issued to the holder hereof as soon as possible and in
any event within such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series Preferred
to provide for the exercise of the rights represented by this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Series Preferred into Common Stock. Upon conversion of all outstanding
shares of Series C Preferred Stock into Common Stock pursuant to the Company's
Restated Certificate of Incorporation, the Warrant shall thereafter be
exercisable only for Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
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<PAGE> 3
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value
to no par value, or from no par value to par value, or as a result of a
subdivision or combination), or in case of any merger of the Company with or
into another corporation (other than a merger with another corporation in which
the Company is the acquiring and the surviving corporation and which does not
result in any reclassification or change of outstanding securities issuable
upon exercise of this Warrant), or in case of any sale of all or substantially
all of the assets of the Company, the Company, or such successor or purchasing
corporation, as the case may be, shall duly execute and deliver to the holder
of this Warrant a new Warrant (in form and substance satisfactory to the holder
of this Warrant), so that the holder of this Warrant shall have the right to
receive, at a total purchase price not to exceed that payable upon the exercise
of the unexercised portion of this Warrant, and in lieu of the shares of Series
Preferred theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of the number of shares of
Series Preferred then purchasable under this Warrant. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. In addition, in
the event that all the authorized shares of Series Preferred are converted into
shares of Common Stock or any other series or class of capital stock of the
Company or in the case of any amendment or waiver of any of the terms of the
antidilution protection of the Series Preferred, then this Warrant shall be
deemed to be amended so that the holder of this Warrant shall continue to be
entitled to antidilution protection as nearly equivalent as may be practicable
to the antidilution protection applicable to the Series Preferred on the Date
of Grant, and the Company shall duly execute and deliver to the holder of this
Warrant a supplement hereto to such effect, in form and substance satisfactory
to the holder of this Warrant. The provisions of this subparagraph (a) shall
similarly apply to successive reclassifications, changes, mergers,
consolidations, transfers, amendments and waivers.
(b) Subdivision or Combination of Shares. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide
or combine its outstanding shares of Series Preferred, the Warrant Price shall
be proportionately decreased in the case of a subdivision or increased in the
case of a combination, effective at the close of business on the date the
subdivision or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Series Preferred payable in Series Preferred, or (ii)
make any other distribution with respect to Series Preferred (except any
distribution specifically
3
<PAGE> 4
provided for in the foregoing subparagraphs (a) and (b)) of Series Preferred,
then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
the Shares and the Common Stock of the Company are set forth in the Investors'
Rights Agreement dated as of October 6, 1995, as amended, by and among the
Company and the investors who are signatories thereto.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series
Preferred after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
Series Preferred.
4
<PAGE> 5
(a) Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be issued upon exercise hereof and any Common Stock issued upon conversion
thereof are being acquired for investment and that such holder will not offer,
sell or otherwise dispose of this Warrant, or any shares of Series Preferred to
be issued upon exercise hereof or any Common Stock issued upon conversion
thereof except under circumstances which will not result in a violation of the
Act. Upon exercise of this Warrant, unless the Shares being acquired are
registered under the Act or an exemption from such registration is available,
the holder hereof shall confirm in writing, by executing the form attached as
Schedule 1 to Exhibit A hereto, that the shares of Series Preferred so
purchased (and any shares of Common Stock issued upon conversion thereof) are
being acquired for investment and not with a view toward distribution or
resale. This Warrant and all shares of Series Preferred issued upon exercise of
this Warrant and all shares of Common Stock issued upon conversion thereof
(unless registered under the Act) shall be stamped or imprinted with a legend
in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF
THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach
an informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Act.
(2) The holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein. In this connection, the holder
understands that, in the view of the SEC, the statutory basis for such
exemption may be unavailable if the holder's representation was predicated
solely upon a present intention to hold the Warrant for the minimum capital
gains period specified under tax statutes, for a deferred sale, for
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<PAGE> 6
or until an increase or decrease in the market price of the Warrant, or for a
period of one year or any other fixed period in the future.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that, except as provided in Section
9 hereof, the Company is under no obligation to register this Warrant.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant there may be no public market upon which to make such a sale, and that,
even if such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144 and 144A, and that, in such
event, the holder may be precluded from selling this Warrant under Rule 144 and
144A even if the two-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this Warrant agrees
to give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of such holder's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or
6
<PAGE> 7
state law then in effect) of this Warrant or such shares of Series Preferred or
Common Stock and indicating whether or not under the Act certificates for this
Warrant or such shares of Series Preferred to be sold or otherwise disposed of
require any restrictive legend as to applicable restrictions on transferability
in order to ensure compliance with such law. Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable, shall notify such holder that such holder
may sell or otherwise dispose of this Warrant or such shares of Series Preferred
or Common Stock, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subsection (b) that
the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made and shall specify in detail the legal analysis
supporting any such conclusion. Notwithstanding the foregoing, this Warrant or
such shares of Series Preferred or Common Stock may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under
the Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall
apply to any transfer without any additional consideration of, or grant of a
security interest in, this Warrant or any part hereof (i) to a partner of the
holder if the holder is a partnership, (ii) by the holder to a partnership of
which the holder is a general partner, or (iii) to any affiliate as defined in
Rule 405 under the Act of the holder if the holder is a corporation; provided,
however, in any such transfer, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto and further provided that the number of transfers permitted
pursuant to this subparagraph shall be five (5).
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the
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<PAGE> 8
foregoing, the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to the holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
9. Registration Rights. The Company covenants and agrees as follows:
9.1 Definitions. For purposes of this Section 9:
(a) The term "Registrable Shares" means (i) the Common Stock
issuable or issued upon conversion of the Series Preferred issuable or issued
upon exercise or conversion of this Warrant or upon exercise or conversion of
the Other Warrants, and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such Common Stock or Series Preferred;
(b) The term "Shareholder" means any person owning or having the
right to acquire Registrable Shares or any assignee thereof in accordance with
Paragraph 9.3 hereof; and
(c) The term "Registration Rights" means Section 3 of the
Investors' Rights Agreement dated as of October 6, 1995, as amended, by and
among the Company and the investors who are signatories thereto (the "Purchase
Agreement")
9.2 Grant of Rights. The Company hereby grants to the Shareholders
the rights set forth in the Registration Rights. A true and complete copy of the
Registration Rights is attached hereto as Exhibit C. The Company represents and
warrants to the Shareholders that the Company has obtained all consents of
parties to the Purchase Agreement and of any other persons that are required in
order for the Registrable Shares to be included in the definition of
"Registrable Securities" and for the Shareholders to be included in the
definition of "Holders," as such terms are used in the Registration Rights.
9.3 Assignment of Registration Rights. Notwithstanding any provisions
of the Registration Rights, the rights to cause the Company to register
Registrable Shares pursuant to the Registration Rights and this Section 9 may be
assigned by a Shareholder to a transferee or assignee of such securities only in
accordance with the Registration Rights.
9.4 No Conflicting Agreements. The Company represents and warrants to
the Shareholders that the Company is not a party to any agreement that conflicts
in any manner with the Shareholders' rights to cause the Company to register
Shares pursuant to the Registration Rights and this Section 9. The Company
covenants and agrees that it shall not, without the prior written
8
<PAGE> 9
consent of the Shareholders holding a majority of the outstanding Registrable
Shares, amend, modify or restate the Registration Rights if the rights of the
Shareholders would be subordinated, diminished or otherwise adversely affected
in a different manner than other "Holders" of "Registrable Securities" (as
defined in the Registration Rights).
9.5 Rights and Obligations Survive Exercise and Expiration of
Warrant. The rights and obligations of the Company, of the holder of this
Warrant and of the Registrable Shares contained in the Registration Rights and
this Section 9 shall survive exercise, conversion and expiration of this
Warrant.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees that it will not interfere
with the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent (5%)
of the total voting power of the Company and will not interfere with the holder
in arranging the sale of this Warrant to the person or persons making such
offer.
10.2 Mergers. The Company will provide the holder of this Warrant with
at least twenty (20) days' notice of the terms and conditions of any proposed
(i) sale, lease, exchange, conveyance or other disposition of all or
substantially all of its property or business, or (ii) merger into or
consolidation with any other corporation (other than a wholly-owned subsidiary
of the Company) or any other transaction (including a merger or other
reorganization) or series of related transactions, in which more than 50% of the
voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted
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<PAGE> 10
Warrant Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date (as herein defined) by (Y) the fair market value of one share of
Series Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common Stock) that
may be issued to holder
Y = the fair market value (FMV) of one share of Series Preferred (or
Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a notice of exercise substantially in the form attached hereto as
Exhibit A-2, specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date. Any conversion from Series Preferred to Common Stock shall be
in a ratio of one (1) share of Common Stock for each share of Series Preferred
(as
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<PAGE> 11
adjusted herein and in the Charter ((as defined below)) and the Purchase
Agreement). On the Date of Grant, the Series Preferred purchasable under this
Warrant represents underlying shares of Common Stock at $__ per share.
(c) Determination of Fair Market Value. For purposes of this Section
10.3, "fair market value" of a share of Series Preferred (or Common Stock if
the Series Preferred has been automatically converted into Common Stock) as of
a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of shares of
Common Stock into which each share of Series Preferred is then convertible.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the 5-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible;
(B) If otherwise traded in an over-the-counter market, the
fair market value of the Common Stock shall be deemed to be the average of the
closing ask prices of the Common Stock over the 5-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the Company Board
of Directors provided that if the holder does not agree with such reduction,
then at the Company's and the holder's shared pro rata expense by an investment
banker of national reputation selected by the Company and reasonably acceptable
to the holder of this Warrant.
(11) Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
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<PAGE> 12
(a) This warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and the rules of law or principles at
equity governing specific performance, injunctive relief and other equitable
remedies;
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences and privileges granted to or imposed upon
the Series Preferred and the holders thereof are as set forth in the Company's
Articles of Incorporation, as amended to the Date of the Grant (the "Charter"),
a true and complete copy of which has been delivered to the original holder of
this Warrant and is attached hereto as Exhibit B and the Purchase Agreement;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved and, when issued in accordance with the
terms of the Charter, as amended, will be validly issued, fully paid and
nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company
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<PAGE> 13
shall be delivered, or shall be sent by certified or registered mail, postage
prepaid, to each such holder at its address as shown on the books of the
Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon
any corporation succeeding the Company by merger, consolidation or acquisition
of all or substantially all of the Company's assets, and all of the obligations
of the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities to which the holder
hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative provided that the foregoing shall not be interpreted to mean that such
representations are true and correct as of any date other than the date hereof.
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<PAGE> 14
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or by action at law, including, but not limited to, an action for
damages as a result of any such breach and/or an action for specific performance
of any such covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the value
of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
VIXEL CORPORATION
By: /s/ Gregory R. Olbright
-------------------------
Title: CEO/President
----------------------
Address:
--------------------
Date: February 27, 1996
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<PAGE> 15
EXHIBIT A
NOTICE OF EXERCISE
To: VIXEL CORPORATION
1. The undersigned hereby elects to purchase _______ shares of Series
C Preferred Stock of VIXEL CORPORATION pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
__________________________
(Name)
__________________________
__________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed as Investment Representation
Statement attached hereto as Schedule 1.
(signature)
(Date)
15
<PAGE> 16
EXHIBIT A-1
NOTICE OF EXERCISE
To: VIXEL CORPORATION (the "Company")
1. Contingent upon and effective immediately prior to the closing
(the "Closing") of the Company's public offering contemplated by the
Registration Statement on Form S-__, filed ___________, 199_ the undersigned
hereby elects to purchase _____________ shares of Series C Preferred Stock of
the Company (or such lesser number of shares as may be sold on behalf of the
undersigned at the Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a
stock certificate representing such ____________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $___________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such shares,
the undersigned agrees to deliver the difference to the Company prior to the
Closing.
(Signature)
(Date)
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<PAGE> 17
EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: VIXEL CORPORATION
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 10.3 of the Warrant) as provided herein. _______ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 10.3(a) of the
Warrant, which requires the use of the "fair market value" of the Company's
stock. As of the Determination Date (as defined in the Warrant), the "fair
market value" of one share of Series Preferred Stock (or Common Stock if the
Series C Preferred Stock has been automatically converted into Common Stock)
shall be determined in the manner provided in Section 10.3(c) of the Warrant,
which amount has been determined by the undersigned (or agreed to by the holder
of the Warrant and VIXEL CORPORATION) to be $_______ per share. Therefore,
______ shares are to be issued to the undersigned pursuant to this exercise.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or such other name or names as are specified
below:
--------------------
(Name)
--------------------
--------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
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<PAGE> 18
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: VIXEL CORPORATION
Security: Series C Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities and
underlying Common Stock (the "Securities"), the undersigned (the "Purchaser")
represents to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities except as set
forth in the Warrant under which the Securities are being acquired. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
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<PAGE> 19
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among
other things: The availability of certain public information about the Company,
the resale occurring not less than two years after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale,
and that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A,
and that, in such event, the Purchaser may be precluded from selling the
Securities under Rule 144 and 144A even if the two-year minimum holding period
had been satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive,
the Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
Date: ________, 199_
19
<PAGE> 1
Exhibit 4.6
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION
LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
VIXEL CORPORATION
WARRANT TO PURCHASE 5,000 SHARES
OF SERIES C PREFERRED STOCK
THIS CERTIFIES THAT, for value received, SILICON VALLEY BANK is entitled
to subscribe for and purchase 5,000 shares of the fully paid and nonassessable
Series C Preferred Stock, $0.001 par value (as adjusted pursuant to Section 4
hereof, the "Shares") of VIXEL CORPORATION, a Delaware corporation (the
"Company"), at the price of Three Dollars and Fifty Cents ($3.50) per share
(such price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the
"Warrant Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "Series Preferred" shall
mean the Company's presently authorized Series C Preferred Stock, and any stock
into or for which such Series C Preferred Stock may hereafter be converted or
exchanged, including the conversion of all Series Preferred into Common Stock
pursuant to the Company's Restated Certificate of Incorporation (b) the term
"Date of Grant" shall mean February 27, 1996, and (c) the term "Other Warrants"
shall mean any other warrants issued by the Company in connection with the
transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of this Warrant. The term "the Warrant"
or "this Warrant" as used herein shall be deemed to include Other Warrants
unless the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through the later of (i) eight (8) years after the Date of Grant
or (ii) five (5) years after the closing of the Company's initial public
offering of its Common Stock effected pursuant to a Registration Statement on
Form S-1 (or its successor) filed under the Securities Act of 1933, as amended
(the "Act"). Upon request of the Company, the holder of this Warrant agrees to
exercise the purchase right under this Warrant (including without limitation by
way of net issuance as provided in paragraph 10.3) upon the sale of all of the
assets or stock of the Company.
<PAGE> 2
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, (a) the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed)
at the principal office of the Company and by the payment to the Company, by
check, of an amount equal to the then applicable Warrant Price multiplied by
the number of Shares then being purchased, or (b) if in connection with a
registered public offering of the Company's securities, the surrender of this
Warrant (with the notice of exercise form attached hereto as Exhibit A-1 duly
executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the Company
either by check or from the proceeds of the sale of shares to be sold by the
holder in such public offering of an amount equal to the then applicable
Warrant Price per share multiplied by the number of Shares then being
purchased. The person or persons in whose name(s) any certificate(s)
representing shares of Series Preferred shall be issuable upon exercise of this
Warrant shall be deemed to have become the holder(s) of record of, and shall be
treated for all purposes as the record holder(s) of, the shares represented
thereby (and such shares shall be deemed to have been issued) immediately prior
to the close of business on the date or dates upon which this Warrant is
exercised. In the event of any exercise of the rights represented by this
Warrant, certificates for the shares of stock so purchased shall be delivered
to the holder hereof as soon as possible and in any event within thirty days
after such exercise and, unless this Warrant has been fully exercised or
expired, a new Warrant representing the portion of the Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof as soon as possible and in any event within such
thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance pursuant to the terms and conditions herein, be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of the issue upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Series
Preferred to provide for the exercise of the rights represented by this Warrant
and a sufficient number of shares of its Common Stock to provide for the
conversion of the Series Preferred into Common Stock. Upon conversion of all
outstanding shares of Series C Preferred Stock into Common Stock pursuant to the
Company's Restated Certificate of Incorporation, the Warrant shall thereafter be
exercisable only for Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
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<PAGE> 3
(a) Reclassification or Merger. In case of any reclassification,
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or
combination), or in case of any merger of the Company with or into another
corporation (other than a merger with another corporation in which the Company
is the acquiring and the surviving corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company, or such successor or purchasing corporation, as
the case may be, shall duly execute and deliver to the holder of this Warrant a
new Warrant (in form and substance satisfactory to the holders of this Warrant),
so that the holder of this Warrant shall have the right to receive, at a total
purchase price not to exceed that payable upon the exercise of the unexercised
portion of this Warrant, and in lieu of the shares of Series Preferred
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
reclassification, change or merger by a holder of the number of shares of Series
Preferred then purchasable under this Warrant. Such new Warrant shall provide
for adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. In addition, in the event that all
the authorized shares of Series Preferred are converted into shares of Common
Stock or any other series or class of capital stock of the Company or in the
case of any amendment or waiver of any of the terms of the antidilution
protection of the Series Preferred, then this Warrant shall be deemed to be
amended so that the holder of this Warrant shall continue to be entitled to
antidilution protection as nearly equivalent as may be practicable to the
antidilution protection applicable to the Series Preferred on the Date of Grant,
and the Company shall duly execute and deliver to the holder of this Warrant a
supplement hereto to such effect, in form and substance satisfactory to the
holder of this Warrant. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes, mergers, consolidations,
transfers, amendments and waivers.
(b) Subdivision or Combination of Shares. If the Company at any time
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in the foregoing subparagraphs (a) and (b)) of Series
Preferred, then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or
distribution, to that price
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<PAGE> 4
determined by multiplying the Warrant Price in effect immediately prior to such
date of determination by a fraction (i) the numerator of which shall be the
total number of shares of Series Preferred outstanding immediately prior to such
dividend or distribution, and (ii) the denominator of which shall be the total
number of shares of Series Preferred outstanding immediately after such
dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
the Shares and the Common Stock of the Company are set forth in the Investors'
Rights Agreement dated as of October 6, 1995, as amended, by and among the
Company and the investors who are signatories thereto.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving
effect to such adjustment, which shall be mailed (without regard to Section 13
hereof, by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the adjustment, the method by which
such adjustment was calculated, and the conversion price or ratio of the Series
Preferred after giving effect to such adjustment, and shall cause copies of
such certificate to be mailed (without regard to Section 13 hereof, by first
class mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No factional shares of Series Preferred will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value of the Series Preferred on the date of exercise as reasonably
determined in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
Series Preferred.
(a) Compliance with Securities Act. The holder of this Warrant, by
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be
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<PAGE> 5
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Series Preferred to be
issued upon exercise hereof or any Common Stock issued upon conversion thereof
except under circumstances which will not result in a violation of the Act.
upon exercise of this Warrant, unless the Shares being acquired are registered
under the Act or an exemption from such registration is available, the holder
hereof shall confirm in writing, by executing the form attached as Schedule 1
to Exhibit A hereto, that the shares of Series Preferred so purchased (and any
shares of Common Stock issued upon conversion thereof) are being acquired for
investment and not with a view toward distribution or resale. This Warrant and
all shares of Series Preferred issued upon exercise of this Warrant and all
shares of Common Stock issued upon conversion thereof (unless registered under
the Act) shall be stamped or imprinted with a legend in substantially the
following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATIONS ARE NOT
REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL
AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF
THE WARRANT UNDER WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach
an informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Act.
(2) The holder understands that this Warrant has not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the holder's
investment intent as expressed herein. In this connection, the holder
understands that, in the view of the SEC, the statutory basis for such exemption
may be unavailable if the holder's representation was predicated solely upon a
present intention to hold the Warrant for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Warrant, or for a period of one year or any
other fixed period in the future.
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<PAGE> 6
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that, except as provided in Section
9 hereof, the Company is under no obligation to register this Warrant.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among
other things: The availability of certain public information about the Company,
the resale occurring not less than two years after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell
this Warrant there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A,
and that, in such event, the holder may be precluded from selling this Warrant
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 and 144A will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this Warrant agrees
to give written notice to the Company prior thereto, describing briefly the
manner thereof, together with a written opinion of such holder's counsel, if
reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Act as then in effect or any federal or state law then in effect) of this
Warrant or such shares of Series Preferred or Common Stock and indicating
whether or not under the Act certificates for this Warrant or such shares of
Series Preferred to be sold or otherwise disposed of
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<PAGE> 7
require any restrictive legend as to applicable restrictions on transferability
in order to ensure compliance with such law. Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable, shall notify such holder that such holder
may sell or otherwise dispose of this Warrant or such shares of Series Preferred
or Common Stock, all in accordance with the terms of the notice delivered to
the Company. If a determination has been made pursuant to this subsection (b)
that the opinion of counsel for the holder is not reasonably satisfactory to
the Company, the Company shall so notify the holder promptly after such
determination has been made and shall specify in detail the legal analysis
supporting any such conclusion. Notwithstanding the foregoing, this Warrant or
such shares of Series Preferred or Common Stock may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A
under the Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a
legend as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
described in this Warrant nor the requirements of Section 7(b) above shall
apply to any transfer without any additional consideration of, or grant of a
security interest in, this Warrant or any part hereof (i) to a partner of the
holder if the holder is a partnership, (ii) by the holder to a partnership of
which the holder is a general partner, or (iii) to any affiliate as defined in
Rule 405 under the Act of the holder if the holder is a corporation; provided,
however, in any such transfer, the transferee shall on the Company's request
agree in writing to be bound by the terms of this Warrant as if an original
signatory hereto and further provided that the number of transfers permitted
pursuant to this subparagraph shall be five (5).
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time
be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the holder of this Warrant, as
such, any of the rights of a shareholder of the Company or any right to vote
for the election of directors or upon any matter submitted to shareholders at
any meeting thereof, or to receive notice of meetings, or to receive dividends
or subscription rights or otherwise until this Warrant shall have been
exercised and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company
will transmit to the holder of this Warrant such information, documents and
reports as are generally distributed to the holders of any class or
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<PAGE> 8
series of securities of the Company concurrently with the distribution thereof
to the shareholders.
9. Registration Rights. The Company covenants and agrees as follows:
9.1 Definitions. For the purposes of this Section 9:
(a) The term "Registrable Shares" means (i) the Common Stock
issuable or issued upon conversion of the Series Preferred issuable or issued
upon exercise or conversion of this Warrant or upon exercise or conversion of
the Other Warrants, and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, such Common Stock or Series Preferred;
(b) The term "Shareholder" means any person owning or having
the right to acquire Registrable Shares or any assignee thereof in accordance
with Paragraph 9.3 hereof; and
(c) The term "Registration Rights" means Section 3 of the
Investors' Rights Agreement dated as of October 6, 1995, as thereafter amended
by and among the Company and the investors who are signatories thereto (the
"Purchase Agreement").
9.2 Grant of Rights. The Company hereby grants to the Shareholders
the rights set forth in the Registration Rights. A true and complete copy of
the Registration Rights is attached hereto as Exhibit C. The Company represents
and warrants to the Shareholders that the Company has obtained all consents of
parties to the Purchase Agreement and of any other persons that are required in
order for the Registrable Shares to be included in the definition of
"Registrable Securities" and for the Shareholders to be included in the
definition of "Holders," as such terms are used in the Registration Rights.
9.3 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Shares pursuant to the Registration Rights and
this Section 9 may be assigned by a Shareholder to a transferee or assignee of
such securities only in accordance with the Registration Rights.
9.4 No Conflicting Agreements. The Company represents and warrants to
the Shareholders that the Company is not a party to any agreement that conflicts
in any manner with the Shareholders' rights to cause the Company to register
Register Shares pursuant to the Registration Rights and this Section 9. The
Company covenants and agrees that it shall not, without the prior written
consent of the Shareholders holding a majority of the outstanding Registrable
Shares, amend, modify or restate the Registration Rights if the rights of the
Shareholders would be subordinated, diminished or otherwise adversely affected
in a different
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<PAGE> 9
manner than other "Holders" of "Registrable Securities" (as defined in the
Registration Rights).
9.5 Rights and Obligations Survive Exercise and Expiration of
Warrant. The rights and obligations of the Company, of the holder of this
Warrant and of the Registrable Shares contained in the Registration Rights and
this Section 9 shall survive exercise, conversion and expiration of this
Warrant.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees that it will not interfere
with the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent
(5%) of the total voting power of the Company and will not interfere with the
holder in arranging the sale of this Warrant to the person or persons making
such offer.
10.2 Mergers. The Company will provide the holder of this Warrant
with at least twenty (20) days' notice of the terms and conditions of any
proposed (i) sale, lease, exchange, conveyance or other disposition of all or
substantially all of its property or business, or (ii) merger into or
consolidation with any other corporation (other than a wholly-owned subsidiary
of the Company) or any other transaction (including a merger or other
reorganization) or series of related transactions, in which more than 50% of
the voting power of the Company is disposed of.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
(a) Right to Convert. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject
to this Warrant (the "Converted Warrant Shares"), the Company shall deliver to
the holder (without payment by the holder of any exercise price or any cash or
other consideration) (X) that number of shares of fully paid and nonassessable
Series Preferred (or Common Stock if the Series Preferred has been
automatically converted into Common Stock) equal to the quotient obtained by
dividing the value of this Warrant (or the specified portion hereof) on the
Conversion Date (as defined in subsection (b) hereof), which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Converted
Warrant Shares immediately prior to the exercise of the Conversion Right from
(B) the aggregate fair market value of the Converted Warrant Shares issuable
upon exercise of this Warrant (or the specified portion hereof) on the
Conversion Date (as
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<PAGE> 10
herein defined) by (Y) the fair market value of one share of Series Preferred
(or Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common Stock)
that may be issued to the holder
Y = the fair market value (FMV) of one share of Series Preferred
(or Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to
the holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised
by the holder by the surrender of this Warrant at the principal office of the
Company together with a notice of exercise substantially in the form attached
hereto as Exhibit A-2, specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this
Warrant that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with
the aforesaid notice of exercise, or on such later date as is specified therein
(the "Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of
the Conversion Right and, if applicable, a new warrant evidencing the balance
of the shares remaining subject to this Warrant, shall be issued as of the
Conversion Date and shall be delivered to the holder within thirty (30) days
following the Conversion Date. Any conversion from Series Preferred to Common
Stock shall be in a ratio of one (1) share of the Common Stock for each share
of Series Preferred (as adjusted herein and in the Charter ((as defined below))
and the Purchase Agreement). On the Date of Grant, the Series Preferred
purchasable under this Warrant represents underlying shares of Common Stock at
$____ per share.
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<PAGE> 11
(c) Determination of Fair Market Value. For purposes of this Section
10.3, "fair market value" of a share of Series Preferred (or Common Stock if
the Series Preferred has been automatically converted into Common Stock) as of
a particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of shares of
Common Stock into which each share of Series Preferred is then convertible.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to
be the average of the closing or last reported sale prices of the Common Stock
on such exchange market over the 5-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible;
(B) If otherwise traded in an over-the-counter market, the
fair market value of the Common Stock shall be deemed to be the average of the
closing ask prices of the Common Stock over the 5-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock,
then fair market value shall be determined in good faith by the Company's Board
of Directors, provided that if the holder does not agree with such reduction,
then at the Company's and the holder's shared pro rata expense by an investment
banker of national reputation selected by the Company and reasonably acceptable
to the holder of this Warrant.
11. Representations and Warranties. The Company represents and warrants
to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
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<PAGE> 12
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for issuance
by the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences and privileges granted to or imposed
upon the Series Preferred and the holders thereof are as set forth in the
Company's Articles of Incorporation, as amended to the Date of the Grant, a
true an complete copy of which has been delivered to the original holder of
this Warrant and is attached hereto as Exhibit B (the "Charter") and the
Purchase Agreement;
(d) The shares of Common Stock issuable upon conversion of the
Shares have been duly authorized and reserved and, when issued in accordance
with the terms of the Charter, as amended, will be validly issued, fully paid
and nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws,
do not and will not contravene any law, governmental rule or regulation,
judgment or order applicable to the Company, and do not and will not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of an action in
respect of or by, any Federal, state or local government authority or agency or
other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the signature
page of this Warrant.
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<PAGE> 13
14. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities to which the holder
hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative provided that the foregoing shall not be interpreted to mean that such
representations are true and correct as of any date other than the date hereof.
19. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by a
holder), may proceed to protect and enforce their or its rights either by suit
in equity and/or
13
<PAGE> 14
by action at law, including, but not limited to, an action for damages as a
result of any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the value
of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
VIXEL CORPORATION
By: Gregory R. Olbright
---------------------------
Title: CEO/President
---------------------------
Address:
---------------------------
Date: February 27, 1996
14
<PAGE> 15
EXHIBIT A
NOTICE OF EXERCISE
To: VIXEL CORPORATION
1. The undersigned hereby elects to purchase _________ shares of Series C
Preferred Stock of VIXEL CORPORATION pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
_____________________
(Name)
_____________________
_____________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
15
<PAGE> 16
EXHIBIT A-1
NOTICE OF EXERCISE
To: VIXEL CORPORATION
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-__, filed __________, 199_ the undersigned hereby elects to
purchase __________ shares of Series C Preferred Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such __________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $___________ or, if less, the net
proceeds due the undersigned from the sale of shares in the aforesaid public
offering. If such net proceeds are less than the purchase price for such
shares, the undersigned agrees to deliver the difference to the Company prior
to the Closing.
(Signature)
(Date)
16
<PAGE> 17
EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: VIXEL CORPORATION
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 10.3 of the Warrant) as provided herein. _________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 10.3(a) of the
Warrant, which requires the use of the "fair market value" of the Company's
stock. As of the Determination Date (as defined in the Warrant), the "fair
market value" of one share of Series Preferred Stock (or Common Stock if the
Series C Preferred Stock has been automatically converted into Common Stock)
shall be determined in the manner provided in Section 10.3(c) of the Warrant,
which amount has been determined by the undersigned (or agreed to by the Holder
of the Warrant and VIXEL CORPORATION) to be $__________ per share. Therefore,
_________ shares are to be issued to the undersigned pursuant to this exercise.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below:
_____________________
(Name)
_____________________
_____________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
17
<PAGE> 18
Schedule 1
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: VIXEL CORPORATION
Security: Series C Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities and
underlying Common Stock (the "Securities"), the undersigned (the "Purchaser")
represents to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account and investment purposes only and
not with a view to, or for resale in connection with, any "distribution" thereof
for purposes of the Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the Purchaser's investment intent as expressed herein. In this
connection, the Purchaser understands that, in the view of the Securities and
Exchange Commission ("SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an
exemption from registration is otherwise available. Moreover, the Purchaser
understands that the Company is under no obligation to register the Securities
except as set forth in the Warrant under which the Securities are being
acquired. In addition, the Purchaser understands that the certificate
evidencing the Securities will be imprinted with the legend referred to in the
Warrant under which the Securities are being purchased.
18
<PAGE> 19
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded form selling the Securities
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
Date:____________, 199_
19
<PAGE> 1
EXHIBIT 4.7
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND SUCH WARRANT MAY NOT BE SOLD OR TRANSFERRED UNLESS
SUCH SALE OR TRANSFER IS IN ACCORDANCE WITH THE REGISTRATION REQUIREMENTS OF
SUCH ACT, AS AT THE TIME AMENDED, OR IN CONFORMITY WITH THE LIMITATIONS OF RULE
144 OR SIMILAR RULE AS THEN IN EFFECT UNDER SUCH ACT, OR UNLESS SOME OTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS AVAILABLE WITH
RESPECT THERETO.
Warrant to Purchase
69,261 Shares of Series E Preferred Stock
(Subject to Adjustment)
VIXEL CORPORATION
SERIES PREFERRED STOCK PURCHASE WARRANT
VOID AFTER OCTOBER 16, 2001
Vixel Corporation, a Delaware corporation (the "Company"), hereby
certifies that, for value received, MONTGOMERY SECURITIES, or assigns, is
entitled, subject to the terms set forth below, to purchase from the Company at
any time or from time to time before 5:00 p.m. Pacific time, on October 16, 2001
(the "Expiration Date"), sixty-nine thousand two hundred sixty-one (69,261)
fully paid and nonassessable shares of Series E Preferred Stock of the Company,
at the purchase price per share of $5.63 and otherwise in accordance with the
terms hereof. The number and character of such shares of Series E Preferred
Stock are subject to adjustment as provided below.
As used herein the following terms, unless the context otherwise requires,
have the following respective meanings:
(a) The term "Company" includes any corporation which shall succeed to or
assume the obligations of the Company hereunder.
(b) The term "Series E Preferred Stock" shall mean the Series E Preferred
Stock, $.01 par value per share, of the Company, and any other securities
or property of the Company or of any other person (corporate or otherwise)
which the holder of this Warrant at any time shall be entitled to receive
on the exercise hereof, in lieu of or in addition to Series E Preferred
Stock, or which at any time shall be issuable in exchange for or in
replacement of Series E Preferred Stock.
1. Initial Exercise Date; Expiration. This Warrant may be exercised at
any time or from time to time. It shall expire at 5:00 p.m., Pacific
time, on October 16, 2001 ("Expiration Date").
2. Exercise of Warrant; Partial Exercise and Exchange of Warrant.
2.1 Exercise of Warrant and Partial Exercise This Warrant may be
exercised in full or in part by the holder hereof by surrender of this
Warrant, with the form of subscription attached hereto duly executed
by such holder, to the Company at its principal office, accompanied by
1.
<PAGE> 2
payment, in cash or by certified or official bank check payable to the
order of the Company, of the purchase price of the shares of Series E
Preferred Stock to be purchased hereunder, the cancellation by the
holder of indebtedness of the Company to the holder in an amount equal
to such purchase price, or any combination thereof. For any partial
exercise hereof, the holder shall designate in the subscription the
number of shares of Series E Preferred Stock that it wishes to
purchase. On any such partial exercise, the Company at its expense
shall forthwith issue and deliver to the holder hereof a new warrant
of like tenor, in the name of the holder hereof, which shall be
exercisable for such number of shares of Series E Preferred Stock
represented by this Warrant which have not been purchased upon such
exercise.
2.2 Right to Exchange Warrant for Series E Preferred Stock.
(a) Right to Exchange. In addition to and without limiting the
rights of the holder under the terms of this Warrant, the holder shall
have the right to exchange this Warrant or any portion hereof (the
"Exchange Right") into shares of Series E Preferred Stock as provided
in this Section 2.2 at any time or from time to time during the term
of this Warrant; provided that the Exchange Right shall expire on the
closing of an Acquisition of the Company if the Company has duly
complied with the notice provisions set forth in Section 2.2(b). Upon
exercise of the Exchange Right with respect to a particular number of
shares subject to this Warrant (the "Exchange Warrant Shares"), the
Company shall deliver to the holder (without payment by the holder of
any cash or other consideration) that number of shares of Series E
Preferred Stock equal to the quotient obtained by dividing (x) the
value of this Warrant (or the specified portion hereof) on the
Exchange Date (as defined in section 2.2(c), which value shall be
determined by subtracting (A) the aggregate exercise purchase price of
the Exchanged Warrant Shares immediately prior to the exercise of the
Exchange Right from (B) the aggregate fair market value of the
Exchanged Warrant Shares issuable upon exercise of this Warrant (or
the specified portion hereof) on the Exchange Date by (y) the fair
market value of one share of Series E Preferred Stock on the Exchange
Date. No fractional shares shall be issuable upon exercise of the
Exchange Right, and if the number of shares to be issued determined in
accordance with the foregoing formula is other than a whole number,
the Company shall pay to the holder an amount in cash equal to the
fair market value of the resulting fractional share on the Exchange
Date.
(b) Definitions. The "Acquisition" of the Company is the closing
of the Company's sale of all or substantially all of its assets or the
acquisition of the Company by another entity by means of merger,
combination or other transaction as a result of which shareholders of
the Company immediately prior to such acquisition possess a minority
of the voting power of the acquiring entity immediately following such
acquisition. The Company shall give notice to the holder of this
Warrant of an Acquisition at least thirty (30) days prior to the
closing of such Acquisition.
(c) Method of Exercise. The Exchange Right may be exercised by
the holder by the surrender of this Warrant prior to its expiration,
at the principal office of the Company together with a written
statement specifying that the holder thereby intends to exercise the
Exchange Right and indicating the number of shares subject to this
Warrant which are being surrendered (referred to in subsection (a)
hereof as the Exchanged Warrant Shares) in exercise of the Exchange
Right. Such exchange shall be effective upon receipt by the Company of
this
2.
<PAGE> 3
Warrant together with the aforesaid written statement, or on such
later date as is specified therein (the "Exchange Date") and, at the
election of the Holder, may be made contingent upon the closing of an
Acquisition or the consummation of the sale of the Company's Series E
Preferred Stock to the public in a public offering pursuant to a
Registration Statement under the Securities Act of 1933, as amended (a
"Public Offering"). Certificates for the shares of Series E Preferred
Stock issuable upon exercise of the Exchange Right (or any other
securities deliverable in lieu thereof under Section 5) and, if
applicable, a new warrant evidencing the balance of the shares
remaining subject to this Warrant, shall be issued as of the Exchange
Date and shall be delivered to the holder immediately following the
Exchange Date.
(d) Determination of Fair Market Value. For purposes of this
Section 2.2, fair market value of a share of Exchanged Warrant Shares
as of a particular date (the "Determination Date") shall mean:
(i) If the Exchange Right is exercised in connection with a
Public Offering, and if the Company's Registration Statement
relating to such Public Offering has been declared effective by
the Securities and Exchange Commission, the initial "Price to
Public" specified in the final prospectus with respect to such
offering times the number of shares of Series E Preferred Stock
into which each Exchanged Warrant Share is then convertible.
(ii) If the Exchange Right is exercised in connection with an
Acquisition, the effective per share consideration to be received
in an Acquisition by holders of the Series E Preferred Stock,
which price shall be as specified in the agreement entered into
with respect to such Acquisition and determined assuming receipt
of the aggregate exercise price of all outstanding warrants to
purchase equity securities of the Company (the "Outstanding
Warrants"), or if no such price is set forth in the agreement
concerning the Acquisition, than as determined in good faith by
the Company's Board of Directors upon a review of relevant
factors, including the aggregate exercise price of all
Outstanding Warrants.
(iii) If the Exchange Right is not exercised in connection
with an Acquisition or in connection with and contingent upon a
Public Offering, then as follows:
(A) If such type of security is traded on a securities
exchange, the fair market value shall be deemed to be the
average of the closing prices of such type of security on
such exchange over the 30-day period ending five business
days prior to the Determination Date;
(B) If such type of security is traded over-the-counter,
the fair market value shall be deemed to be the average of
the closing bid prices of such type of security over the
30-day period ending five business days prior to the
Determination Date; and
3.
<PAGE> 4
(C) If there is no public market for such type of
security, then fair market value shall be determined by
mutual agreement of the Holder and the Company, and if the
Holder and the Company are unable to so agree, by an
investment banker of national reputation selected by the
Company and reasonably acceptable to the Holder.
3. When Exercise Effective. The exercise of this Warrant shall be deemed
to have been effected immediately prior to the close of business on
the business day on which this Warrant is surrendered to the Company
as provided in Section 2, and at such time the person in whose name
any certificate for shares of Series E Preferred Stock shall be
issuable upon such exercise, as provided in Section 4, shall be deemed
to be the record holder of such Series E Preferred Stock for all
purposes.
4. Delivery on Exercise. As soon as practicable after the exercise of
this Warrant in full or in part, and in any event within five business
days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name
of and delivered to the holder hereof, or as such holder may direct, a
certificate or certificates for the number of fully paid and
nonassessable full shares of Series E Preferred Stock to which such
holder shall be entitled on such exercise, together with cash, in lieu
of any fraction of a share, equal to such fraction of the current
market value of one full share as determined in good faith by the
Board of Directors.
5. Adjustment of Purchase Price and Number of Shares. The character of
the shares of Series E Preferred Stock issuable upon exercise of this
Warrant (or any shares of stock or other securities at the time
issuable upon exercise of this Warrant) and the purchase price
therefor, are subject to adjustment upon the occurrence of the
following events:
5.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
etc. The exercise price of this Warrant and the number of shares of
Series E Preferred Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities at the time issuable upon
exercise of this Warrant) shall be appropriately adjusted to reflect
any stock dividend, stock split, combination of shares,
reclassification, recapitalization or other similar event affecting
the number of outstanding shares of Series E Preferred Stock (or such
other stock or securities). For example if there should be a 2-for-1
stock split, the exercise price would be divided by two and such
number of shares would be doubled.
5.2 Adjustment for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or
other distribution with respect to the Series E Preferred Stock (or
any shares of stock or other securities at the time issuable upon
exercise of the Warrant) payable in (i) securities of the Company
(other than shares of Series E Preferred Stock) or (ii) assets
(excluding cash dividends paid or payable solely out of retained
earnings), then in each case, the holder of this Warrant on exercise
hereof at any time after the consummation, effective date or record
date of such event, shall receive, in addition to the Series E
Preferred Stock (or such other stock or securities) issuable on such
exercise prior to such date, the securities or such other assets of
the Company to which such holder would have been entitled upon such
4.
<PAGE> 5
date if such holder had exercised this Warrant immediately prior
thereto (all subject to further adjustment as provided in this
Warrant).
5.3 Adjustment for Reorganization, Consolidation, Merger, etc. In case
of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization
(except for an Acquisition), in which the Company shall not be the
continuing or surviving entity of such consolidation, merger or
reorganization (any such transaction being hereinafter referred to as
a "Reorganization"), then, in each case, the holder of this Warrant,
on exercise hereof at any time after the consummation or effective
date of such Reorganization (the "Effective Date"), shall receive, in
lieu of the Series E Preferred Stock issuable on such exercise prior
to the Effective Date, the stock and other securities and property
(including cash) to which such holder would have been entitled upon
the Effective Date if such holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as
provided in this Warrant); provided that notwithstanding the
foregoing, this Warrant shall terminate on an Acquisition as described
in Section 18.
5.4 Certificate as to Adjustments. In case of any adjustment or
readjustment in the price or kind of securities issuable on the
exercise of this Warrant, the Company will promptly give written
notice thereof to the holder of this Warrant in the form of a
certificate, certified and confirmed by the Board of Directors of the
Company, setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment
is based.
6. No Dilution or Impairment. The Company will not, by amendment of its
Articles of Organization or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this
Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not increase the par
value of any shares of stock receivable on the exercise of this
Warrant above the amount payable therefor on such exercise, (b) will
at all times reserve and keep available a number of its authorized
shares of Series E Preferred Stock, free from all preemptive rights
therein, which will be sufficient to permit the exercise of this
Warrant, and (c) shall take all such action as may be necessary or
appropriate in order that all shares of Series E Preferred Stock as
may be issued pursuant to the exercise of this Warrant will, upon
issuance, be duly and validly issued, fully paid and nonassessable and
free from all taxes, liens and charges with respect to the issue
thereof.
5.
<PAGE> 6
7. Notices of Record Date, etc. In the event of
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or 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, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company, or any transfer of all or substantially all the assets of the
Company to or consolidation or merger of the Company with or into any
other person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of
any class or any other securities, then and in each such event the
Company will mail to the holder hereof a notice specifying (i) the
date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, (ii) the date on which any
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the
holders of record of Series E Preferred Stock (or any shares of stock
or other securities at the time issuable upon the exercise of this
Warrant) shall be entitled to exchange their shares for securities or
other property deliverable on such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution,
liquidation or winding-up, and (iii) the amount and character of any
stock or other securities, or rights or options with respect thereto,
proposed to be issued or granted, the date of such proposed issue or
grant and the persons or class of persons to whom such proposed issue
or grant is to be offered or made. Such notice shall be mailed at
least 20 days prior to the date therein specified.
8. Exchange of Warrants. On surrender for exchange of this Warrant,
properly endorsed, to the Company, the Company at its expense will
issue and deliver to or on the order of the holder thereof a new
Warrant of like tenor, in the name of such holder or as such holder
may direct, calling in the aggregate on the face thereof for the
number of shares of Series E Preferred Stock called for on the face of
the Warrant so surrendered.
9. Replacement of Warrants. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of this Warrant and, in the case of any such loss, theft
or destruction of this Warrant, on delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, on surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
10. Investment Intent. Unless a current registration statement under the
Securities Act of 1933, as amended, shall be in effect with respect to
the securities to be issued upon exercise of this Warrant, the holder
thereof, by accepting this Warrant, covenants and agrees that, at the
time of exercise hereof, and at the time of any proposed transfer of
securities acquired upon
6.
<PAGE> 7
exercise hereof, such holder will deliver to the Company a written
statement that the securities acquired by the holder upon exercise
hereof are for the own account of the holder for investment and are
not acquired with a view to, or for sale in connection with, any
distribution thereof (or any portion thereof) and with no present
intention (at any such time) of offering and distributing such
securities (or any portion thereof).
11. Transfer. Subject to the transfer conditions referred to in the legend
endorsed hereon, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof
upon surrender of this Warrant with a properly executed assignment (in
the form annexed hereto) at the principal office of the Company. Upon
any partial transfer, the Company will at its expense issue and
deliver to the holder hereof a new Warrant of like tenor, in the name
of the holder hereof, which shall be exercisable for such number of
shares of Series E Preferred Stock which were not so transferred.
12. No Rights or Liability as a Stockholder. This Warrant does not entitle
the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provisions hereof, in the absence of
affirmative action by the holder hereof to purchase Series E Preferred
Stock, and no enumeration herein of the rights or privileges of the
holder hereof shall give rise to any liability of such holder as a
stockholder of the Company. Notwithstanding the foregoing, the Company
will transmit to the Warrantholder such information, documents and
reports as are generally distributed to the holders of any class or
series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
13. Damages. The Company recognizes and agrees that the holder hereof will
not have an adequate remedy if the Company fails to comply with the
terms of this Warrant and that damages will not be readily
ascertainable, and the Company expressly agrees that, in the event of
such failure, it shall not oppose an application by the holder of this
Warrant or any other person entitled to the benefits of this Warrant
requiring specific performance of any and all provisions hereof or
enjoining the Company from continuing to commit any such breach of the
terms hereof.
14. Representations and Warranties. The Company represents and warrants to
the Warrantholder as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms;
(b) The shares of Series E Preferred Stock issuable hereunder
have been duly authorized and reserved for issuance by the Company
and, when issued in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable;
(c) The execution and delivery of this Warrant are not, and the
issuance of the shares of Series E Preferred Stock upon exercise of
this Warrant in accordance with the terms hereof will not be,
inconsistent with the Company's Certificate of Incorporation or
Bylaws, do not and will not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and, except
for consents that have already been obtained by the Company, do not
and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is
7.
<PAGE> 8
a party or by which it is bound or require the consent or approval of,
the giving of notice to, the registration with or the taking of any
action in respect of or by, any Federal, state or local governmental
authority or agency or other person.
15. Registration Rights. The Company covenants and agrees as follows:
15.1 Definitions. For purposes of this Section 15:
The term "Registrable Securities" means the Common Stock issuable upon
conversion of (i) the Series E Preferred Stock issued pursuant to this
Warrant and (ii) any Series E Preferred Stock of the Company issued as
(or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Series
E Preferred Stock.
15.2 Grant of Rights. The Company hereby grants to the initial holder
of this Warrant (and the permitted transferee of the Registration
Rights, as hereinafter defined) the rights set forth in Section 3 of
the Amended and Restated Investors' Rights Agreement dated as of
October 21, 1996, by and among the Company and the investors who are
signatories thereto (the "Rights Agreement") (such rights are referred
to herein as the "Registration Rights"). Each of the Company and the
Holders severally covenants and agrees that it shall comply with each
of the covenants and agreements contained in the Registration Rights,
which covenants and agreements are expressly incorporated herein by
reference as though stated herein in full.
15.3 Assignment of Registration Rights. The rights to cause the
Company to register Registrable Securities pursuant to the
Registration Rights may be assigned by a Holder to a transferee or
assignee of such securities to the same extent as permitted by Section
3.12 of the Rights Agreement.
15.4 No Conflicting Agreements. The Company represents and warrants to
the Holder that the Company is not a party to any agreement that
conflicts in any manner with the holder's rights to cause the Company
to register Registrable Securities pursuant to the Registration
Rights. The Company covenants and agrees that it shall not, without
the prior written consent of the holders of a majority of the
outstanding Registrable Securities, amend, modify or restate the
Registration Rights if the Holder would be adversely affected by the
amendment in a different manner than other holders of "Registrable
Shares" (as defined in the Registration Rights) similarly situated.
16. Notices. All notices referred to in this Warrant shall be in writing
and shall be delivered personally or by certified or registered mail,
return receipt requested, postage prepaid and will be deemed to have
been given when so delivered or mailed (i) to the Company, at its
principal executive offices and (ii) to the holder of this Warrant, at
such holder's address as it appears in the records of the Company
(unless otherwise indicated by such holder).
17. Payment of Taxes. All shares of Series E Preferred Stock issued upon
the exercise of this Warrant shall be validly issued, fully paid and
nonassessable, and the Company shall pay all taxes and other
governmental charges that may be imposed in respect to the issue or
delivery thereof.
8.
<PAGE> 9
18. Termination. This Warrant shall terminate and be of no further force
or effect automatically upon the earlier of the following dates: (i)
the Expiration Date; and (ii) the closing of an Acquisition of the
Company.
19. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated (except as provided in Section 18
hereof) only by an instrument in writing signed by the party against
which enforcement of such change, waiver, discharge or termination is
sought. This Warrant is being delivered in the State of California and
shall be governed by and construed and enforced in accordance with the
internal laws of the State of California (without reference to any
principles of the conflicts of laws). The headings in this Warrant are
for purposes of reference only, and shall not limit or otherwise
affect any of the terms hereof.
Dated: October 21, 1996
VIXEL CORPORATION
By: /s/ Gregory R. Olbright
-----------------------------------
President
Attest:
/s/ James C. T. Linfield
- ----------------------------------------
Name: James C. T. Linfield
Title: Secretary
9.
<PAGE> 10
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ______________________________
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ______________* shares of Series E Preferred Stock of
_________________________________, and herewith makes payment of $_____________
therefor, and requests that the certificates for such shares be issued in the
name of, and delivered to __________________________, whose address is
____________________________________.
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
---------------------------------------
---------------------------------------
(Address)
Dated:
- ----------------------
* Insert here the number of shares as to which the Warrant is being exercised.
10.
<PAGE> 11
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ________________________________ the right represented by the within
Warrant to purchase shares of Series E Preferred Stock of
_______________________________ to which the within Warrant relates, and
appoints ______________________________ Attorney to transfer such right on the
books of ___________________________________________ with full power of
substitution in the premises.
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
---------------------------------------
---------------------------------------
(Address)
Dated:
- ----------------------
11.
<PAGE> 1
EXHIBIT 4.8
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE SERIES E PREFERRED STOCK OF
VIXEL CORPORATION (THE "COMPANY")
DATE OF INITIAL ISSUANCE: MAY 30, 1997
THIS CERTIFIES THAT for value received, TRANSAMERICA BUSINESS CREDIT
CORPORATION or its registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company, at any time during the Term of this
Warrant, Twenty-Five Thousand (25,000) shares of Series E Preferred Stock,
$0.001 par value, of the Company (the "Series E Preferred Stock"), at the
Warrant Price, payable as provided herein. The exercise of this Warrant shall be
subject to the provisions, limitations and restrictions herein contained, and
may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
SERIES E PREFERRED STOCK - shall mean and include the Company's
authorized Series E Preferred Stock, $0.001 par value, as constituted at the
date hereof or any security into which such Series E Preferred Stock may
hereafter be converted or exchanged pursuant to the Company's Certificate of
Incorporation as from time to time amended, including the conversion of all
Series E Preferred Stock into Common Stock upon the closing of an initial public
offering of the Company's Common Stock.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on the sooner to occur of (i) May 31, 2002,
(ii) one year after completion of the Company's initial firm commitment
underwritten public offering of the Company's securities, or (iii) subject to
compliance with Section 7 hereof, the closing of a consolidation or merger of
the Company with another entity, or the sale of all or substantially all of its
assets to another person or entity.
<PAGE> 2
WARRANT PRICE - $5.62 per share, subject to adjustment in accordance
with Section 5 hereof.
WARRANTS - this Warrant issued pursuant to a Commitment Letter dated May
2, 1997 executed by the Company and Transamerica Business Credit Corporation
(the "Commitment Letter") to the original holder of this Warrant, or any
transferees from such original holder or this Holder.
WARRANT SHARES - shares of Series E Preferred Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Series E Preferred
Stock), the Holder shall deliver to the Company at its office referred to in
Section 11 hereof at any time and from time to time during the Term of this
Warrant: (i) the Notice of Exercise in the form attached hereto, (ii) cash,
certified or official bank check payable to the order of the Company, wire
transfer of funds to the Company's account (or any combination of any of the
foregoing) in the amount of the Warrant Price for each share being purchased,
and (iii) this Warrant. Notwithstanding any provisions herein to the contrary,
if the Current Market Price (as defined in Section 5) is greater than the
Warrant Price (at the date of calculation, as set forth below), in lieu of
exercising this Warrant as hereinabove permitted, the Holder may elect to
receive shares of Series E Preferred Stock equal to the value (as determined
below) of this Warrant (or the portion thereof being canceled) by surrender of
this Warrant at the office of the Company referred to in Section 11 hereof,
together with the Notice of Exercise, in which event the Company shall issue to
the Holder that number of shares of Series E Preferred Stock computed using the
following formula:
PS = WPS x (CMP-WP)
-------------------
CMP
Where
PS equals the number of shares of Series E Preferred Stock to be
issued to the Holder
WPS equals the number of shares of Series E Preferred Stock
purchasable under the Warrant or, if only a portion of the
Warrant is being exercised, the portion of the Warrant being
exercised (at the date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Series E Preferred Stock so
purchased, registered in the name of the Holder or such other name or names as
may be designated by the Holder, shall be delivered to the Holder hereof within
a reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except
-2-
<PAGE> 3
a remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder hereof within
such time. The person in whose name any certificate for shares of Series E
Preferred Stock is issued upon exercise of this Warrant shall for all purposes
be deemed to have become the holder of record of such shares on the date on
which the Warrant was surrendered and payment of the Warrant Price and any
applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws, (ii) any securities exchange upon which such
Warrant Shares may, at the time of such exercise, be listed, and (iii) the
Amended and Restated Investors Rights Agreement by and among the Company and
certain of its securityholders, dated as of May __, 1997) on the face thereof
unless at the time of exercise such Warrant Shares shall be registered under the
Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO SERIES E PREFERRED STOCK. The Company covenants and
agrees that all shares of Series E Preferred Stock that may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issue thereof. The Company further covenants and
agrees that it will pay when due and payable any and all federal and state taxes
which may be payable in respect of the issue of this Warrant or any Series E
Preferred Stock or certificates therefor issuable upon the exercise of this
Warrant, but excluding taxes on or measured by the net income of the Holder. The
Company further covenants and agrees that the Company will have authorized and
reserved within 60 days of the date of Initial Issuance of this Warrant, free
from preemptive rights, a sufficient number of shares of Series E Preferred
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Series E Preferred Stock issuable upon
the exercise of this Warrant is listed on any national securities exchange, the
Company will, if permitted by the rules of such exchange, list and keep listed
on such exchange, upon official notice of issuance, all shares of such Series E
Preferred Stock issuable upon exercise of this Warrant.
-3-
<PAGE> 4
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Series E Preferred Stock outstanding is increased by a stock dividend
payable in shares of Series E Preferred Stock or by a subdivision or split-up of
shares of Series E Preferred Stock, then, following the record date fixed for
the determination of holders of Series E Preferred Stock entitled to receive
such stock dividend, subdivision or split-up, the Warrant Price shall be
appropriately decreased so that the number of shares of Series E Preferred Stock
issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Series E Preferred Stock outstanding is decreased by a combination of
the outstanding shares of Series E Preferred Stock, then, following the record
date for such combination, the Warrant Price shall appropriately increase so
that the number of shares of Series E Preferred Stock issuable upon the exercise
hereof shall be decreased in proportion to such decrease in outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Series E Preferred Stock payable
otherwise than out of earnings or earned surplus or shall distribute to holders
of its Series E Preferred Stock shares of its capital stock (other than Series E
Preferred Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends and distributions) or options or rights (excluding options to purchase
and rights to subscribe for Series E Preferred Stock or other securities of the
Company convertible into or exchangeable for Series E Preferred Stock), then, in
each such case, immediately following the record date fixed for the
determination of the holders of Series E Preferred Stock entitled to receive
such dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Series E Preferred
Stock minus (y) the fair market value (as determined by the Board of Directors
of the Company, whose determination shall be conclusive) of the stock,
securities, evidences of indebtedness, assets, options or rights so distributed
in respect of one share of Series E Preferred Stock, and of which the
denominator shall be such Current Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Series E Preferred Stock shall
be deemed to be the average of the daily closing prices for the 15 consecutive
business days ending no more than 5 business days before the day in
-4-
<PAGE> 5
question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such 15 business day period) of one
share of the Company's common stock, multiplied by the number of shares of
common stock into which one share of Series E Preferred Stock is convertible.
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sales took place on such day, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Company's common stock is
listed or admitted to trading or as reported by Nasdaq (or if the Company's
common stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Company's common stock are not reported by Nasdaq
then such price shall be equal to the average of the last reported bid and asked
prices on such day as reported by The National Quotation Bureau Incorporated or
any similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Company's common stock is not traded in such manner that the quotations
referred to in this clause (v) are available for the period required hereunder,
the Current Market Price shall be determined in good faith by the Board of
Directors of the Company or, if such determination cannot be made, by a
nationally recognized independent investment banking firm selected by the Board
of Directors of the Company (or if such selection cannot be made, by a
nationally recognized independent investment banking firm selected by the
American Arbitration Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (viii) of this Section 5.
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
-5-
<PAGE> 6
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 11
hereof; provided, however, that this Warrant may not be transferred if
subsequent to such transfer there will be more than five different holders of
this Warrant or portions thereof. Upon receipt by the Company of evidence
reasonably satisfactory to it of the loss, theft or destruction, and, in such
case, of indemnity or security reasonably satisfactory to it, and upon surrender
of this Warrant if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant; provided that if the Holder hereof is an
instrumentality of a state or local government or an institutional holder or a
nominee for such an instrumentality or institutional holder an irrevocable
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 6, and no evidence of loss or theft or destruction shall be
necessary. This Warrant shall be promptly cancelled by the Company upon the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, the Company shall pay all expenses, taxes and other charges payable in
connection with any transfer or replacement of this Warrant, other than stock
transfer taxes (if any) payable in connection with a transfer of this Warrant,
which shall be payable by the Holder. Holder will not transfer this Warrant and
the rights hereunder except in compliance with federal and state securities
laws.
SECTION 7. NOTICE OF MERGER, CONSOLIDATION, SALE, DISSOLUTION OR LIQUIDATION. In
case of any proposed consolidation or merger of the Company with another entity,
or the proposed sale of all or substantially all of its assets to another person
or entity, or any proposed distribution of the assets of the Company in
dissolution or liquidation, the Company shall give notice thereof to the Holder
hereof and shall not consummate any such transaction until the expiration of
fifteen (15) business days from the date of mailing of the aforesaid notice and,
in any case, the Holder hereof may exercise this Warrant within fifteen (15)
business days from the date of the receipt of such notice, and all rights herein
granted not so exercised within such period shall thereafter become null and
void.
SECTION 8. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Series E
Preferred Stock except out of earned surplus or by way of a stock dividend
payable in shares of its Series E Preferred Stock, the Company shall mail notice
thereof to the Holder hereof not less than fifteen (15) business days prior to
the record date fixed for determining shareholders entitled to participate in
such dividend or other distribution, and the Holder hereof shall not participate
in such dividend or other distribution unless this Warrant is exercised prior to
such record date.
-6-
<PAGE> 7
SECTION 9. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 9, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
-7-
<PAGE> 8
SECTION 10. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant, the Company will reserve and set apart and have
available for issuance at all times, free from preemptive or other preferential
rights, the number of shares of authorized but unissued Series E Preferred Stock
deliverable upon the exercise of this Warrant.
SECTION 11. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at Transamerica Technology Finance Division, 76
Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at Vixel Corporation, 325 Interlocken
Parkway, Building A, Broomfield, CO 80021, Attention: Chief Financial Officer or
to such other address as shall have been furnished in writing to the Holder by
the Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
SECTION 12. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Series E Preferred Stock, and no mere enumeration herein
of the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 13. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF COLORADO WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 14. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party (or any predecessor in interest thereof) against which enforcement of the
same is sought. The headings in this Warrant are for purposes of reference only
and shall not affect the meaning or construction of any of the provisions hereof
(b) All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Financing Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 23rd day of May, 1997.
VIXEL CORPORATION
<PAGE> 9
By: /s/ Mark Harrington
---------------------------------
Title: Chief Financial Officer
------------------------------
-9-
<PAGE> 10
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Series E Preferred Stock which the undersigned is entitled to purchase by the
terms of the within Warrant according to the conditions thereof, and herewith
[check one]
[ ] makes payment of $_______ therefor; or
[ ] directs the Company to issue ______
shares, and to withhold ____ shares
in lieu of payment of the Warrant
Price, as described in Section 2.1
of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following
denominations:
------------------------------------
[Type Name of Holder]
By:
---------------------------------
Title:
------------------------------
Dated:
----------------------------
<PAGE> 11
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
------------------------------------
[Type Name of Holder]
By:
---------------------------------
Title:
------------------------------
Dated:
----------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-11-
<PAGE> 12
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ___ shares of Series E Preferred Stock under and pursuant to the
within Warrant, and (ii) on a non-exclusive basis, all other rights of the
undersigned under and pursuant to the within Warrant, it being understood that
the undersigned shall retain, severally (and not jointly) with the transferee(s)
named herein, all rights assigned on such non-exclusive basis. The undersigned
does hereby irrevocably constitute and appoint __________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
------------------------------------
[Type Name of Holder]
By:
---------------------------------
Title:
------------------------------
Dated:
----------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-12-
<PAGE> 1
EXHIBIT 4.9
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
(WHICH MAY BE COMPANY COUNSEL) IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE STOCK
WARRANT TO PURCHASE 100,000 ISSUE DATE: NOVEMBER 25, 1998
SHARES OF THE SERIES E PREFERRED EXPIRATION DATE: NOVEMBER 25, 2003
STOCK OF VIXEL CORPORATION INITIAL EXERCISE PRICE: $10.00 PER SHARE
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, GREYROCK CAPITAL, A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION (FORMERLY GREYROCK BUSINESS CREDIT) ("Holder") is
entitled to purchase the number of fully paid and non-assessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant, and subject further
to Section 1.7 hereof.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is more than ten percent (10%) greater than that determined by the
Board of Directors, then all fees and expenses of such investment banking firm
shall be paid by the Company. In all other circumstances, such fees and expenses
shall be paid by Holder.
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.6 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.6.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
-1-
<PAGE> 2
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
1.6.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7. REDEMPTION EVENT; WARRANT FOR COMMON SHARES AT HOLDER'S OPTION;
CONVERSION RATE APPLIES. If at the time the Holder intends to exercise this
Warrant a redemption of Series E Preferred shares of the Company is then slated
to occur or is occurring under the terms and provisions of subsection 6 of
section D of Article IV of the Restated Certificate of Incorporation of the
Company dated February 17, 1998, then this Warrant, at the sole option of the
Holder, shall be considered to be exercisable for the same number of shares of
common stock of the Company as stated above regarding the number of shares of
Series E Preferred of the Company as modified by the most recent per share
conversion rate applicable to the Series E Preferred stock of the Company as set
forth in the certificate of incorporation of the Company; the per share exercise
price for such common shares shall be the same as is set forth above with
respect to the Series E Preferred stock of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Certificate of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment for "Dilutive Issuances" as set forth in
the Restated Certificate of Incorporation.
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder an amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 ADJUSTMENTS. Holder shall be entitled to the same rights with
respect to notices regarding adjustments as provided to the holders of Series E
Preferred Stock as set forth in the Company's Restated Certificate of
Incorporation.
2.8 NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise of the Holder's rights to purchase Preferred Stock as provided for
herein.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided
-2-
<PAGE> 3
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
for herein or under applicable federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.gma
3.3 REGISTRATION AND INFORMATION RIGHTS. Substantially concurrently with
the issuance of this Warrant, the Company shall cause its Amended and Restated
Investors' Rights Agreement to be amended to make the Shares "Registrable
Securities" thereunder and Holder a "Holder" thereunder. By acceptance of this
Warrant, Holder shall be deemed a party to the Agreement and shall execute
counterpart signature pages thereto at the request of the Company.
ARTICLE 4. REPRESENTATIONS AND COVENANTS OF HOLDER. This Warrant has been
entered into by the Company in reliance upon the following representations and
covenants of Holder, which by its acceptance hereof the Holder hereby confirms:
4.1 INVESTMENT PURPOSE. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of Holder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof, and the Holder has no present intention of selling or engaging
in any public distribution of the same except pursuant to a registration or
exemption.
4.2 PRIVATE ISSUE. Holder understands (i) that the Preferred Stock
issuable upon exercise of the Warrantholder's rights contained herein is not
registered under the 1933 Act or qualified under applicable state securities
laws on the ground that the issuance contemplated by this Warrant Agreement will
be exempt from the registration and qualifications requirements thereof, and
(ii) that the Company's reliance on such exemption is predicated on the
representations set forth in this Section 4.
4.3 FINANCIAL RISK. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of its
investment.
4.4 RISK OF NO REGISTRATION. Holder understands that if the Company does
not register with the Securities and Exchange Commission pursuant to Section 12
of the 1933 Act, or file reports pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (the "1934 Act"), or if a registration statement covering
the securities under the 1933 Act is not in effect when it desires to sell (i)
the rights to purchase Preferred Stock pursuant to this Warrant Agreement, or
(ii) the Preferred Stock issuable upon exercise of the right to purchase, it may
be required to hold such securities for an indefinite period. The Holder also
understands that any sale of the rights of the Holder to purchase Preferred
Stock which might be made by it in reliance upon Rule 144 under the 1933 Act may
be made only in accordance with the terms and conditions of that Rule.
4.5 ACCREDITED INVESTOR. Holder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Act, as presently in effect.
ARTICLE 5. MISCELLANEOUS.
5.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above.
5.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
(WHICH MAY BE COMPANY COUNSEL) IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
5.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an
-3-
<PAGE> 4
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
affiliate of Holder or if there is no material question as to the availability
of current information as referenced in Rule 144(c), Holder represents that it
has complied with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company is provided
with a copy of Holders notice of proposed sale.
5.4 TRANSFER PROCEDURE. Subject to the provisions of Section 5.2 and
5.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
5.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
VIXEL CORPORATION
BY /s/ Gregory R. Olbright
------------------------------------
CHAIRMAN OF THE BOARD, PRESIDENT OR
VICE PRESIDENT
BY /s/ Kurtis L. Adams
------------------------------------
SECRETARY OR ASS'T SECRETARY
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ____________ shares of the
Common/Series ____ Preferred [strike one] Stock of __________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _______ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
--------------------------
(Name)
--------------------------
--------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
- -------------------------------------
(Signature)
- -------------------------------------
(Date)
<PAGE> 1
EXHIBIT 4.10
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
TO PURCHASE SHARES OF THE SERIES E PREFERRED STOCK OF
VIXEL CORPORATION
DATED AS OF DECEMBER 18, 1998 (THE "EFFECTIVE DATE")
WHEREAS, Vixel Corporation, a Delaware corporation (the "Company") has
entered into a Master Lease Agreement dated as of January 18, 1996, Equipment
Schedules No. VL-2 and VL-3 dated as of December 18, 1998, and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series E Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
For value received, the Company hereby grants to the Warrantholder, and the
Warrantholder is entitled, upon the terms and subject to the conditions
hereinafter set forth, to subscribe for and purchase from the Company that
number of fully paid and non assessable shares of the Company's Series E
Preferred Stock ("Preferred Stock") equal to One Hundred Thirty Seven Thousand
Five Hundred Dollars ($137,500.00) ("Aggregate Purchase Price") divided by the
exercise price ("Exercise Price"). The Exercise Price shall be equal to the
lesser of (i) $10.00 or (ii) the numerical average of $4.50 per share and the
next round. The next round shall be defined as an IPO, mezzanine round or
acquisition ("Next Round"). In the event the Exercise Price is less than $7.50
per share or the next round is not completed by September 30, 1999, then the
Exercise Price shall be $7.50 per share. The number and purchase price of such
shares are subject to adjustment as provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement and
the right to purchase Preferred Stock as granted herein shall commence on the
Effective Date and shall be exercisable for a period of five (5) years.
Notwithstanding the term of this Warrant Agreement fixed pursuant to the above,
the Company may repurchase the Warrant from Warrantholder for a price equal to
five (5) times the Exercise Price, immediately prior to the closing of the
issuance of sale of shares of Common Stock of the Company in the Company's first
public offering of securities for its own account pursuant to an effective
registration statement under the Securities Act of 1933, as amended ("Initial
Public Offering").
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by the
Warrantholder, in whole or in part, at any time, or from time to time, prior to
the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days
-1-
<PAGE> 2
thereafter, the Company shall issue to the Warrantholder a certificate for the
number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i) by
cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined
below. If the Warrantholder elects the Net Issuance method, the Company will
issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock (or, the Common
Stock upon conversion of the Preferred Stock) to be issued
to the Warrantholder.
Y = the number of shares of Preferred Stock (or, the Common
Stock upon conversion of the Preferred Stock) requested to
be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock
(or, the Common Stock upon conversion of the Preferred
Stock).
B = the Exercise Price.
For purposes of the above calculation, current fair market value of Preferred
Stock (or, the Common Stock upon conversion of the Preferred Stock) shall mean
with respect to each share of Preferred Stock (or, the Common Stock upon
conversion of the Preferred Stock):
(a) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement relating
to such public offering has been declared effective by the SEC, then the fair
market value per share shall be the product of (x) the initial "Price to Public"
specified in the final prospectus with respect to the offering and (y) the
number of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise (or was convertible at the time all
Preferred Stock was converted into Common Stock);
(b) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(i) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise (or was
convertible at the time all Preferred Stock was converted into Common
Stock); or
(ii) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing bid
and asked prices quoted on the NASDAQ system (or similar system) over
the twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and (y)
the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise (or was convertible at
the time all Preferred Stock was converted into Common Stock);
(c) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x) the
highest price per share which the Company could obtain from a willing buyer (not
a current employee, consultant, or director) for shares of Common Stock sold by
the Company, from authorized but unissued shares, as determined in good faith by
its Board of Directors and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such exercise (or
was convertible at the time all Preferred Stock was converted into Common
Stock), unless the Company shall become subject to a merger, acquisition or
other consolidation pursuant to which the Company is not the surviving party, in
which case the fair market value of Common Stock shall be deemed to be the value
received by the holders of the Company's Preferred Stock on a common equivalent
basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall promptly
issue an amended Warrant Agreement representing the remaining number of shares
purchasable hereunder. All other terms and conditions of
-2-
<PAGE> 3
such amended Warrant Agreement shall be identical to those contained herein,
including, but not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved hereunder require registration with or approval of any
governmental authority under any Federal or State law (other than any
registration under the 1933 Act, as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will, at
its expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
(c) Series E Conversion. Upon conversion of all outstanding shares of
Series E Preferred Stock into Common Stock pursuant to the Company's Restated
Certificate of Incorporation, this Warrant shall thereafter be exercisable only
for Common Stock.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of the Warrant, but in lieu of such fractional shares the
Company shall make a cash payment therefor upon the basis of the Exercise Price
then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting rights
or other rights as a shareholder of the Company prior to the exercise of the
Warrant.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have
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<PAGE> 4
been issuable as the result of such change with respect to the securities which
were subject to the purchase rights under this Warrant Agreement immediately
prior to such combination, reclassification, exchange, subdivision or other
change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the Company's stock,
then the Exercise Price shall be adjusted, from and after the record date of
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such record date by a fraction (i)
the numerator of which shall be the total number of all shares of the Company's
stock outstanding immediately prior to such dividend or distribution, and (ii)
the denominator of which shall be the total number of all shares of the
Company's stock outstanding immediately after such dividend or distribution. The
Warrantholder shall thereafter be entitled to purchase, at the Exercise Price
resulting from such adjustment, the number of shares of Preferred Stock
(calculated to the nearest whole share) obtained by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Preferred Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
the Preferred Stock purchasable hereunder are as set forth in the Company's
Restated Certificate of Incorporation, as amended through the Effective Date, a
true and complete copy of which is attached hereto as Exhibit IV (the
"Charter"). Upon written request of Warrantholder, the Company shall provide
Warrantholder with information as to issuances of its stock or other equity
security that occurs after the Effective Date of this Warrant, which list shall
include (a) the price at which such stock or security is sold, (b) the number of
shares issued, and (c) such other information as necessary for Warrantholder to
determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be an initial public offering; or (v) there shall be any
voluntary or involuntary dissolution, liquidation or winding up of the Company;
then, in connection with each such event, the Company shall send to the
Warrantholder the same notice provided to the holders of the Series E Preferred
Stock as set forth in the Company's Charter.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of the Company, and the Leases and this Warrant Agreement are
not inconsistent with the Company's Charter or Bylaws, do not contravene any law
or governmental rule, regulation or order applicable to it, do not and will not
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<PAGE> 5
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument to which it is a party or by which it is
bound, and the Leases and this Warrant Agreement constitute legal, valid and
binding agreements of the Company, enforceable in accordance with their
respective terms, subject to bankruptcy and other similar laws.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. The
authorized capital of the Company is as provided on the Amended and Restated
Certificate of Incorporation on Exhibit D attached hereto.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in the
Investors' Rights Agreement, the Company is not, pursuant to the terms of any
other agreement currently in existence, under any obligation to register under
the 1933 Act any of its presently outstanding securities or any of its
securities which may hereafter be issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance upon the
following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights
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<PAGE> 6
to acquire Preferred Stock or Preferred Stock issuable on the exercise of such
rights do not apply to transfers from the beneficial owner of any of the
aforementioned securities to its nominee or from such nominee to its beneficial
owner, and shall terminate as to any particular share of Preferred Stock when
(1) such security shall have been effectively registered under the 1933 Act and
sold by the holder thereof in accordance with such registration or (2) such
security shall have been sold without registration in compliance with Rule 144
under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder
at its request by the staff of the Securities and Exchange Commission or a
ruling shall have been issued to the Warrantholder at its request by such
Commission stating that no action shall be recommended by such staff or taken by
such Commission, as the case may be, if such security is transferred without
registration under the 1933 Act in accordance with the conditions set forth in
such letter or ruling and such letter or ruling specifies that no subsequent
restrictions on transfer are required. Whenever the restrictions imposed
hereunder shall terminate, as hereinabove provided, the Warrantholder or holder
of a share of Preferred Stock then outstanding as to which such restrictions
have terminated shall be entitled to receive from the Company, without expense
to such holder, one or more new certificates for the Warrant or for such shares
of Preferred Stock not bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1933 Act, or file reports pursuant to Section 15(d), of the
Securities Exchange Act of 1934 (the "1934 Act"), or if a registration statement
covering the securities under the 1933 Act is not in effect when it desires to
sell (i) the rights to purchase Preferred Stock pursuant to this Warrant
Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to
purchase, it may be required to hold such securities for an indefinite period.
The Warrantholder also understands that any sale of its rights of the
Warrantholder to purchase Preferred Stock or Preferred Stock which might be made
by it in reliance upon Rule 144 under the 1933 Act may be made only in
accordance with the terms and conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS. Subject to the terms and conditions contained in Section 10
hereof, this Warrant Agreement and all rights hereunder are transferable in
whole or in part by the Warrantholder and any successor transferee, provided,
however, in no event shall the number of transfers of the rights and interests
in all of the Warrants exceed three (3) transfers. The transfer shall be
recorded on the books of the Company upon receipt by the Company of a notice of
transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at
its principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall be
binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the Warrantholder
at 6111 North River Road, Rosemont, Illinois 60018, attention: Venture Lease
Administration, cc: Legal Department, attn: General Counsel, (and/or, if by
facsimile, (708) 518-5465 and (708) 518-5088) and (ii) to the Company at 11911
North Creek Parkway South, Bothell, WA 98011,
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<PAGE> 7
attention: Chief Financial Officer (and/or if by facsimile, (425) 806-4001 or at
such other address as any such party may subsequently designate by written
notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the issuance of the warrant and the execution of the leases.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be
executed by its officers thereunto duly authorized as of the Effective Date.
COMPANY: VIXEL CORPORATION
By: /s/ Kurtis L. Adams
---------------------------------
Title: Chief Financial Officer
---------------------------------
WARRANTHOLDER: COMDISCO, INC.
By:
---------------------------------
Title:
---------------------------------
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<PAGE> 8
EXHIBIT I
NOTICE OF EXERCISE
To:
--------------------
(1) The undersigned Warrantholder hereby elects to purchase __________
shares of the Series E Preferred Stock of Vixel Corporation, pursuant to
the terms of the Warrant Agreement dated the ____ day of __________,
19__ (the "Warrant Agreement") between Vixel Corporation and the
Warrantholder, and tenders herewith payment of the purchase price for
such shares in full, together with all applicable transfer taxes, if
any.
(2) In exercising its rights to purchase the Series E Preferred Stock of
Vixel Corporation, the undersigned hereby confirms and acknowledges the
investment representations and warranties made in Section 10 of the
Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series E Preferred Stock in the name of the undersigned or in such other
name as is specified below.
- ---------------------------------
(Name)
- ---------------------------------
(Address)
Warrantholder: COMDISCO, INC.
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
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<PAGE> 9
EXHIBIT II
ACKNOWLEDGEMENT OF EXERCISE
The undersigned ____________________, hereby acknowledge receipt of the
"Notice of Exercise" from Comdisco, Inc., to purchase __________ shares of the
Series E Preferred Stock of Vixel Corporation, pursuant to the terms of the
Warrant Agreement, and further acknowledges that __________ shares remain
subject to purchase under the terms of the Warrant Agreement.
Company:
By:
---------------------------------
Title:
------------------------------
Date:
-------------------------------
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<PAGE> 10
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form
and supply required information. Do not use this form to purchase
shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
- ------------------------------------------------------------
(Please Print)
whose address is -------------------------------------------
- ------------------------------------------------------------
Dated
--------------------------------
Holder's Signature
--------------------
Holder's Address
--------------------
--------------------------------------
Signature Guaranteed:
--------------------------------------
NOTE: The signature to this Transfer Notice must correspond with the
name as it appears on the face of the Warrant Agreement, without
alteration or enlargement or any change whatever. Officers of
corporations and those acting in a fiduciary or other
representative capacity should file proper evidence of authority
to assign the foregoing Warrant Agreement.
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<PAGE> 1
EXHIBIT 4.11
NO. PWE-3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE
SERIES E PREFERRED STOCK OF
VIXEL CORPORATION
(VOID AFTER MARCH 31, 2004)
This certifies that WESTERN DIGITAL CORPORATION or its assigns (the
"Holder"), for value received, is entitled to purchase from VIXEL CORPORATION, a
Delaware corporation (the "Company"), having a place of business at 11911 North
Creek Parkway S., Bothell, Washington 98011, a maximum of 16,490 fully paid and
nonassessable shares of the Company's Series E Preferred Stock ("Series E
Preferred Stock") for cash at a price of Ten Dollars ($10.00) per share (the
"Stock Purchase Price") at any time or from time to time up to and including
5:00 p.m. (Pacific time) on March 31, 2004 (the "Expiration Date"), upon
surrender to the Company at its principal office (or at such other location as
the Company may advise the Holder in writing) of this Warrant properly endorsed
with the Form of Subscription attached hereto duly filled in and signed and, if
applicable, upon payment in cash or by check of the aggregate Stock Purchase
Price for the number of shares for which this Warrant is being exercised
determined in accordance with the provisions hereof. The Stock Purchase Price
and the number of shares purchasable hereunder are subject to adjustment as
provided in Section 3 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
1.1 GENERAL. This Warrant is exercisable at the option of the
holder of record hereof, at any time or from time to time, up to the Expiration
Date for all or any part of the shares of Series E Preferred Stock (but not for
a fraction of a share) which may be purchased hereunder. The Company agrees that
the shares of Series E Preferred Stock purchased under this Warrant shall be and
are deemed to be issued to the Holder hereof as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
surrendered, properly endorsed, the completed, executed Form of Subscription
delivered and payment made for such shares. Certificates for the shares of
Series E Preferred Stock so purchased, together with any other securities or
property to which the Holder hereof is entitled upon such exercise, shall be
delivered to the Holder hereof by the Company at the Company's expense within a
reasonable time after the rights represented by this Warrant have been so
exercised. In case of a purchase of less than all the shares which may be
purchased under this Warrant, the Company shall cancel this Warrant and execute
and deliver a new Warrant or Warrants of like tenor for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder hereof
<PAGE> 2
within a reasonable time. Each stock certificate so delivered shall be in such
denominations of Series E Preferred Stock as may be requested by the Holder
hereof and shall be registered in the name of such Holder.
1.2 NET ISSUE EXERCISE. Notwithstanding any provisions herein to
the contrary, if the fair market value of one share of the Company's Series E
Preferred Stock is greater than the Stock Purchase Price (at the date of
calculation as set forth below), in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value (as determined below)
of this Warrant (or the portion thereof being canceled) by surrender of this
Warrant at the principal office of the Company together with the properly
endorsed Form of Subscription and notice of such election in which event the
Company shall issue to the Holder a number of shares of Series E Preferred Stock
computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Series E Preferred Stock to be issued
to the Holder
Y = the number of shares of Series E Preferred Stock purchasable under
the Warrant or, if only a portion of the Warrant is being exercised, the
portion of the Warrant being canceled (at the date of such calculation)
A = the fair market value of one share of the Company's Series E
Preferred Stock (at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such calculation)
For purposes of the above calculation, the fair market value of one share of
Series E Preferred Stock shall be determined by the Company's Board of Directors
in good faith; provided, however, that in the event the Company makes an initial
public offering of its Common Stock the fair market value per share shall be:
(i) if the Warrant is being converted in connection with and contingent upon a
public offering of the Company's securities, and if the Company's registration
statement relating to such public offering has been declared effective by the
U.S. Securities and Exchange Commission, then the fair market value of the
Series E Preferred Stock shall be the initial "Price to Public" specified in the
final prospectus with respect to such offering multiplied by the number of
shares of Common Stock into which each share of Series E Preferred Stock is then
convertible; or (ii) if the Warrant is not being converted in connection with
and contingent upon a public offering of the Company's securities, then as
follows: (x) if traded on a securities exchange or the Nasdaq National Market,
the fair market value of the Common Stock shall be deemed to be the average of
the closing or last reported sale prices of the Common Stock on such exchange or
market over the 30-day period ending five business days prior to the date of
calculation, and the fair market value of the Series E Preferred Stock shall be
deemed to be such fair market value of the Common Stock multiplied by the number
of shares of Common Stock into which each share of Series E Preferred Stock is
then convertible or (y) if otherwise traded in an over-the-counter market, the
fair market value of the Common Stock shall be deemed to be the average of the
reported closing bid and ask prices of the Common Stock over the 30-day
2.
<PAGE> 3
period ending five business days prior to the date of calculation, and the fair
market value of the Series E Preferred Stock shall be deemed to be such fair
market value of the Common Stock multiplied by the number of shares of Common
Stock into which each share of Series E Preferred Stock is then convertible.
2. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Series E Preferred Stock which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
duly authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Series E Preferred Stock, or other securities and property, when and as
required to provide for the exercise of the rights represented by this Warrant.
The Company will take all such action as may be necessary to assure that such
shares of Series E Preferred Stock may be issued as provided herein without
violation of any applicable law or regulation, or of any requirements of any
domestic securities exchange upon which the Series E Preferred Stock may be
listed; provided, however, that the Company shall not be required to effect a
registration under Federal or State securities laws with respect to such
exercise. The Company will not take any action which would result in any
adjustment of the Stock Purchase Price (as set forth in Section 3 hereof) (i) if
the total number of shares of Series E Preferred Stock issuable after such
action upon exercise of all outstanding warrants, together with all shares of
Series E Preferred Stock then outstanding and all shares of Series E Preferred
Stock then issuable upon exercise of all options and upon the conversion of all
convertible securities then outstanding, would exceed the total number of shares
of Series E Preferred Stock then authorized by the Company's Restated
Certificate of Incorporation, or (ii) if the total number of shares of Common
Stock issuable after such action upon the conversion of all such shares of
Series E Preferred Stock, together with all shares of Common Stock then issuable
upon exercise of all options and upon the conversion of all such shares of
Series E Preferred Stock, together with all shares of Common Stock then
outstanding and all shares of Common Stock then issuable upon exercise of all
options and upon the conversion of all convertible securities then outstanding
would exceed the total number of shares of Common Stock then authorized by the
Company's Restated Certificate of Incorporation.
3. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 3. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.
<PAGE> 4
3.1 SUBDIVISION OR COMBINATION OF STOCK. In case the Company
shall at any time subdivide its outstanding shares of Series E Preferred Stock
into a greater number of shares, the Stock Purchase Price in effect immediately
prior to such subdivision shall be proportionately reduced, and conversely, in
case the outstanding shares of Series E Preferred Stock of the Company shall be
combined into a smaller number of shares, the Stock Purchase Price in effect
immediately prior to such combination shall be proportionately increased.
3.2 DIVIDENDS IN SERIES E PREFERRED STOCK, OTHER STOCK,
PROPERTY, RECLASSIFICATION. If at any time or from time to time the Holders of
Series E Preferred Stock (or any shares of stock or other securities at the time
receivable upon the exercise of this Warrant) shall have received or become
entitled to receive, without payment therefor,
(a) Series E Preferred Stock or any shares of stock or
other securities which are at any time directly or indirectly convertible into
or exchangeable for Series E Preferred Stock, or any rights or options to
subscribe for, purchase or otherwise acquire any of the foregoing by way of
dividend or other distribution,
(b) any cash paid or payable otherwise than as a cash
dividend, or
(c) Series E Preferred Stock or additional stock or
other securities or property (including cash) by way of spinoff, split-up,
reclassification, combination of shares or similar corporate rearrangement,
(other than shares of Series E Preferred Stock issued as a stock split or
adjustments in respect of which shall be covered by the terms of Section 3.1
above), then and in each such case, the Holder hereof shall, upon the exercise
of this Warrant, be entitled to receive, in addition to the number of shares of
Series E Preferred Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of stock and other securities and
property (including cash in the cases referred to in clause (b) above and this
clause (c)) which such Holder would hold on the date of such exercise had he
been the holder of record of such Series E Preferred Stock as of the date on
which holders of Series E Preferred Stock received or became entitled to receive
such shares or all other additional stock and other securities and property.
3.3 REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. If any recapitalization, reclassification or reorganization of the capital
stock of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of Series E Preferred
Stock shall be entitled to receive stock, securities, or other assets or
property (an "Organic Change"), then, as a condition of such Organic Change,
lawful and adequate provisions shall be made by the Company whereby the Holder
hereof shall thereafter have the right to purchase and receive (in lieu of the
shares of the Series E Preferred Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby)
such shares of stock, securities or other assets or property as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Series E Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby; provided, however, that in the
4.
<PAGE> 5
event the value of the stock, securities or other assets or property (determined
in good faith by the Board of Directors of the Company) issuable or payable with
respect to one share of the Series E Preferred Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby is in excess of the Stock Purchase Price hereof effective at
the time of a merger and securities received in such reorganization, if any, are
publicly traded, then this Warrant shall expire unless exercised prior to such
Organic Change. In the event of any Organic Change, appropriate provision shall
be made by the Company with respect to the rights and interests of the Holder of
this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Stock Purchase Price and of the
number of shares purchasable and receivable upon the exercise of this Warrant)
shall thereafter be applicable, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof.
3.4 CERTAIN EVENTS. If any change in the outstanding Series E
Preferred Stock of the Company or any other event occurs as to which the other
provisions of this Section 3 are not strictly applicable or if strictly
applicable would not fairly protect the purchase rights of the Holder of the
Warrant in accordance with such provisions, then the Board of Directors of the
Company shall make an adjustment in the number and class of shares available
under the Warrant, the Stock Purchase Price or the application of such
provisions, so as to protect such purchase rights as aforesaid. The adjustment
shall be such as will give the Holder of the Warrant upon exercise for the same
aggregate Stock Purchase Price the total number, class and kind of shares as the
Holder would have owned had the Warrant been exercised prior to the event and
had the Holder continued to hold such shares until after the event requiring
adjustment.
3.5 NOTICES OF CHANGE.
(a) Immediately upon any adjustment in the number or
class of shares subject to this Warrant and of the Stock Purchase Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
(b) The Company shall give written notice to the Holder
at least 10 business days prior to the date on which the Company closes its
books or takes a record for determining rights to receive any dividends or
distributions.
(c) The Company shall also give written notice to the
Holder at least 10 days prior to the date on which an Organic Change or an
initial public offering shall take place.
4. REPRESENTATIONS AND WARRANTIES OF THE HOLDER.
4.1 PURCHASE FOR OWN ACCOUNT. The Holder represents that it is
acquiring the Warrant and the equity securities issuable upon exercise of the
Warrant (collectively, the "Securities") solely for its own account and
beneficial interest for investment and not for sale or with a view to
distribution of the Securities or any part thereof, has no present intention of
selling
5.
<PAGE> 6
(in connection with a distribution or otherwise), granting any participation in,
or otherwise distributing the same, and does not presently have reason to
anticipate a change in such intention.
4.2 ACCREDITED INVESTOR STATUS. The Holder is an "accredited
investor" as such term is defined in Rule 501 under the Securities Act.
5. ISSUE TAX. The issuance of certificates for shares of Series E
Preferred Stock upon the exercise of the Warrant shall be made without charge to
the Holder of the Warrant for any issue tax (other than any applicable income
taxes) in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then Holder of the Warrant being exercised.
6. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Series E Preferred
Stock issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
7. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder of
the Company or any other matters or any rights whatsoever as a shareholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Series E Preferred Stock, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such Holder for the Stock Purchase Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by its creditors.
8. WARRANTS TRANSFERABLE. Subject to compliance with applicable federal
and state securities laws, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the holder hereof (except
for transfer taxes), upon surrender of this Warrant properly endorsed. Each
taker and holder of this Warrant, by taking or holding the same, consents and
agrees that this Warrant, when endorsed in blank, shall be deemed negotiable,
and that the holder hereof, when this Warrant shall have been so endorsed, may
be treated by the Company, at the Company's option, and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered owner hereof as the owner for all purposes. Notwithstanding the
foregoing, the Company shall have the right to refuse to transfer any portion of
this Warrant to any person who directly competes with the Company.
9. INVESTOR RIGHTS AGREEMENT. The Company hereby agrees that the shares
of Common Stock issuable upon conversion of the Series E Preferred Stock into
which this Warrant
6.
<PAGE> 7
is exercisable shall be deemed "Registrable Securities" under the Company's
Amended and Restated Investors' Rights Agreement, dated February 17, 1998, as
amended, and the Holder shall be deemed to be a "Holder" under such agreement,
entitled to the rights and benefits and subject to the duties and obligations of
a "Holder" thereunder. Holder shall execute a counterpart signature page to such
agreement at the request of the Company.
10. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Series E Preferred Stock issued upon exercise of this Warrant, shall
survive the exercise of this Warrant.
11. MODIFICATION AND WAIVER. This Warrant and any provision hereof may
be changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
12. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
13. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Series E Preferred Stock issuable upon the exercise of
this Warrant shall survive the exercise and termination of this Warrant. All of
the covenants and agreements of the Company shall inure to the benefit of the
successors and assigns of the holder hereof.
14. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Washington.
15. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
16. FRACTIONAL SHARES. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the then effective Stock Purchase Price.
7.
<PAGE> 8
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its officers, thereunto duly authorized this 30th day of March,
1999.
VIXEL CORPORATION
a Delaware corporation
By: /s/ Kurtis L. Adams
---------------------------------
Title: Chief Financial Officer
------------------------------
8.
<PAGE> 9
EXHIBIT A
SUBSCRIPTION FORM
Date: _______________, ____
VIXEL CORPORATION
11911 NORTH CREEK PARKWAY S.
BOTHELL, WASHINGTON 98011
Attn: Chief Financial Officer
Ladies and Gentlemen:
[ ] The undersigned hereby elects to exercise the warrant issued to it by
Vixel Corporation (the "Company") and dated March __, 1999 Warrant No.
PWE-___ (the "Warrant") and to purchase thereunder
__________________________________ shares of the Series E Preferred
Stock of the Company (the "Shares") at a purchase price of Ten Dollars
($10.00) per Share or an aggregate purchase price of
__________________________________ Dollars ($__________) (the "Purchase
Price").
[ ] The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of
Section 1.2 of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
Very truly yours,
------------------------------------
By:
---------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 10.1
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this __________ day of
__________, 19__ by and between Vixel Corporation, a Delaware corporation (the
"Corporation"), and __________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in
__________ capacity as __________ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as __________ of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
__________ after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE> 2
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent
by the Corporation under the non-exclusivity provisions of the Code and Section
41 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities of
the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated
by Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the
2.
<PAGE> 3
proceeding was authorized by the Board of Directors of the Corporation, (iii)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may, at
its option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such
3.
<PAGE> 4
action, in each of which cases the fees and expenses of Agent's separate counsel
shall be at the expense of the Corporation. The Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Corporation or as to which Agent shall have made the conclusion
provided for in clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
4.
<PAGE> 5
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
5.
<PAGE> 6
(b) If to the Corporation, to:
Vixel Corporation
11911 Northcreek Parkway South
Bothell, Washington 98011
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
[NAME]
By:________________________________________
Title:_____________________________________
AGENT
__________________________________________
Address:
__________________________________________
__________________________________________
6.
<PAGE> 1
EXHIBIT 10.3
SECURED PROMISSORY NOTE
$2,000,000 Irvine, California
March 29, 1996
FOR VALUE RECEIVED, the undersigned, VIXEL CORPORATION, a Delaware
corporation ("Maker"), promises to pay to the order of WESTERN DIGITAL
CORPORATION, a Delaware corporation or its successors or permitted assigns
("Payee"), the principal sum of Two Million U.S. Dollars ($2,000,000), with
simple interest upon the unpaid principal balance thereof at the lesser of 8.44%
per annum (calculated on the basis of a 365-day year) or the maximum rate
allowable by law. Interest shall accrue commencing as of and including the date
of this Note and continuing until all amounts due hereunder have been repaid.
All unpaid principal and interest shall be due and payable in full on
the second anniversary of the date of this Note. Maker shall make the following
mandatory payments of principal if the conditions described below are satisfied.
At the end of each second and fourth fiscal quarter of Maker in which
Maker holds in excess of $15,000,000 in cash and investments, $500,000 of
accrued interest and principal shall be due and payable within forty-five (45)
days after the end of each appropriate fiscal quarter during the term of this
Note.
If an underwritten public offering of shares of Maker's capital stock
("IPO") occurs, Maker shall make a payment of accrued interest and principal
equal to the lesser of the outstanding balance of the Note or 20% of the gross
proceeds payable to Maker from the IPO. Said payment shall be due and payable
within two (2) days after Maker's receipt of the proceeds from the IPO.
Payments of all sums due hereunder shall be made in lawful money of the
United States of America and shall be made at the following address: 8105 Irvine
Center Drive, Irvine, CA 92718, or at such other address as may be provided to
Maker by Payee in writing in immediately available funds.
This Note is secured by Maker's equipment and assets ("Collateral") more
fully described in that certain Security Agreement of even date herewith as
executed and delivered by Maker (the "Security Agreement").
Maker shall have the right to make payments of all or any part of the
principal or interest due and owing under this Note prior to the due date for
payment therefor, without advance notice to Payee and without penalty or bonus
as a result of such prepayment. Payments shall be applied first against accrued
interest and then against outstanding principal.
1
<PAGE> 2
Each of the following will constitute an event of default ("Event of
Default") under this Note:
(1) Should Maker default in the payment of principal or interest when
due and payable hereunder or in its performance or observance of the terms,
covenants and conditions set forth herein, in the Security Agreement, or in any
other instrument executed hereafter securing this Note to be performed and
observed by Maker.
(2) Should Maker make an assignment for the benefit of creditors, or if
a receiver of Maker's property shall be appointed, or if a petition in
bankruptcy or for the reorganization under any chapter of any federal or state
bankruptcy act or other similar proceeding under the law for the relief of
debtors shall be filed by or against Maker, or if any lien of attachment,
execution, lien or claim of lien is placed against the Collateral and is not
cleared from the record or reasonably bonded against within thirty (30) days
after it has been filed against the Collateral.
(3) Should Maker sell, contract to sell, transfer, assign, further
encumber, or alienate the Collateral, or any portion thereof, or any interest
therein, or be divested of title or any interest therein in any manner, whether
voluntarily or involuntarily, except as permitted in the Security Agreement.
(4) Should Maker suffer any money judgments, writs or warrants of
attachment, or similar processes which individually or in the aggregate involve
an amount in excess of $200,000 and shall not discharge, vacate, bond, or stay
the same within a period of 60 days or, in any event, within 10 days of the date
of any proposed sale thereunder, or a judgment creditor shall obtain possession
of any assets of Maker having an aggregate fair value in excess of $200,000 by
any means, including, without limitation, levy, distraint, replevin or
self-help.
(5) Should Maker default under any agreement to which Maker is a party
with a third party or parties resulting in an acceleration of the maturity of
any indebtedness of Maker in an amount in excess of $200,000.
(6) Should Maker be enjoined, restrained or in any way prevented by the
order of any court or any administrative or regulatory agency from conducting
all or any material part of its business and such order continues for more than
thirty (30) days.
Upon the occurrence of an Event of Default or should Maker experience a
"Change in Control" without obtaining Payee's prior written consent, Payee may,
at its option and without further demand on or notice to Maker, declare this
Note immediately due and payable, and may exercise all rights and remedies
available to Payee under law. For purposes hereof, a "Change in Control" means
the following and shall be deemed to occur if any of the following events occur:
2
<PAGE> 3
(a) Subsequent to an IPO, except as provided by subparagraph (c) hereof,
the acquisition (other than from Maker) by any person, entity or group, within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding, for
this purpose, Maker or its subsidiaries, or any employee benefit plan of Maker
or its subsidiaries which acquires beneficial ownership of voting securities of
Maker), of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of fifty percent (50%) or more of either the then
outstanding shares of common stock or the combined voting power of Maker's then
outstanding voting securities entitled to vote generally in the election of
directors; or
(b) Subsequent to an IPO, individuals who, as of the effective date of
the Note constitute the Board of Directors of Maker (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of Directors
of Maker, provided that any person becoming a director subsequent to the
effective date hereof whose election, or nomination for election by Maker's
shareholders, is or was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
directors of Maker, as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) shall be, for purposes of this Note
considered as though such person were a member of the Incumbent Board; or
(c) Approval by the shareholders of Maker of a reorganization, merger or
consolidation with any other person, entity or corporation, other than
(i) a merger or consolidation which would result in the voting
securities of Maker outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of another entity) more than fifty percent (50%) of the combined
voting power of the voting securities of Maker or such other entity outstanding
immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of Maker (or similar transaction) in which no person or entity
acquires fifty percent (50%) or more of the combined voting power of Maker's
then outstanding voting securities; or
(d) Approval by the shareholders of Maker of a plan of complete
liquidation of Maker or an agreement for the sale or other disposition by Maker
of all or substantially all of Maker's assets.
Notwithstanding the preceding provisions of this paragraph, a Change in Control
shall not be deemed to have occurred (a) if the "person" described in the
preceding provisions is an underwriter or underwriting syndicate that has
acquired the ownership of Maker's voting securities solely in connection with a
public offering of Maker's securities or (b) if the "person" described in the
preceding provisions is an employee stock ownership plan
3
<PAGE> 4
or other employee benefit plan maintained by Maker that is qualified under the
provisions of the Employee Retirement Income Security Act of 1974, as amended).
If any payment hereunder shall become due on a day which is not a
business day, such payment shall be made on the next following business day. For
purposes of this Note, a business day shall be any day other than a Saturday,
Sunday, federal holiday or other day on which banking institutions are
authorized or obligated to close in the State of California.
If this Note is not paid when due, whether at maturity or by
acceleration, the undersigned promises to pay all costs of collection,
including, but not limited to, reasonable attorneys' fees, and all costs and
expenses incurred in connection with the protection or realization of any
collateral incurred by the holder hereof, on account of any such collection,
whether or not suit is filed hereon or on any instrument granting a security
interest.
No failure to exercise and no delay in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided are cumulative and not
exclusive of any rights or remedies provided by law.
Except as otherwise expressly provided in this Note, Maker hereby
expressly waives presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default or
enforcement of this Note.
This Note may be amended or modified only upon the written consent of
both Maker and Payee. Any amendment must specifically state the provision or
provisions to be amended and the manner in which such provisions(s) are to be
amended.
No party hereto shall assign or transfer or permit the assignment or
transfer of this Note without the prior written consent of the other party;
provided, however, that Payee may assign any of its rights and obligations
hereunder to any entity that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with
Payee.
All agreements between Maker and Payee are expressly limited so that in
no contingency or event whatsoever, whether by reason of advancement of the
proceeds hereof, acceleration of maturity of the unpaid principal balance
hereof, or otherwise, shall the amount paid or agreed to be paid to Payee for
the use, forbearance or detention of the money to be advanced hereunder exceed
the highest lawful rate permissible under applicable usury laws. If, from any
circumstances whatsoever, fulfillment of any provision hereof at the time
performance of such provision shall be due shall involve transcending the limit
of validity prescribed by law which a court of competent
4
<PAGE> 5
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity, and if from any
circumstances Payee shall ever receive as interest an amount which would exceed
the highest lawful rate, such amount which would be excessive interest shall be
applied to the reduction of the unpaid principal balance due hereunder and not
to the payment of interest.
This Agreement and the rights and obligations of the parties hereunder
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of California, excluding its rules of conflicts
of law.
VIXEL CORPORATION,
a Delaware corporation
By: /s/ Gregory R. Olbright
-----------------------------------
Name: Gregory R. Olbright
---------------------------------
Title: CEO and President
--------------------------------
5
<PAGE> 6
AMENDMENT TO SECURED PROMISSORY NOTE
This Amendment to Secured Promissory Note ("Amendment") is made
effective as of the 29th day of March, 1998, by and between Vixel Corporation, a
Delaware corporation ("Maker"), with an address of 11911 North Creek Parkway
South, Bothell, Washington 98011, and Western Digital Corporation, a Delaware
corporation ("Payee"), with an address of 8105 Irvine Center Drive, Irvine,
California 92618.
RECITALS
A. Payee made a loan ("Loan") to Maker in the amount of Two Million
Dollars ($2,000,000), as evidenced by a certain Secured
Promissory Note executed by Maker payable to Payee dated March
29, 1996 with simple interest upon the unpaid principal balance
thereof at the lesser of 8.44% per annum (calculated on the basis
of a 365-day year) or the maximum rate allowable by law
("Original Note"). The Original Note, as amended hereby, is
referred to as the "Note".
B. Maker has requested that Payee modify the Original Note to extend
the due date of the Original Note.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
to modify the Original Note as follows:
1. Representation Accurate. Maker represents and warrants that the above
recitals are true and accurate.
2. Principal Balance Verified. Maker and Payee agree that the principal
balance plus accrued interest of the Note as of this date is One Million Eight
Hundred Four Thousand Five Hundred Seventy-Two Dollars ($1,804,572) which
consists of One Million Six Hundred Forty-Nine Thousand Dollars ($1,649,000) of
remaining principal on the Original Note and One Hundred Fifty-Five Thousand
Five Hundred Seventy-Two Dollars ($155,572) of accrued interest. Maker confirms
its absolute and unconditional obligation to make all payments set forth in the
Note, and to perform its other obligations under the Note.
6
<PAGE> 7
3. Continuance of Security Interest. The repayment of the Note, and
performance of all of the Maker's other obligations to the Payee under that
certain Security Agreement dated March 29, 1996 as executed and delivered by
Maker (the "Security Agreement"), is secured, and shall continue to be secured,
inter alia, by the Security Agreement.
4. Maturity Date. Borrower and Lender agree that the original "Maturity
Date" of the Note is hereby amended to extend such Maturity Date to the first to
occur of : (i) an underwritten public offering of shares of Maker's capital
stock ("IPO") or (ii) March 30, 1999.
5. Interest Rate. Effective as of March 29, 1998 simple interest shall
accrue on the outstanding balance of the principal and accrued interest of the
Original Note at the rate of 8.69% per annum (calculated on the basis of a
365-day year) or the maximum rate allowable by law.
6. Further Assurances. Maker shall execute and deliver to Payee such
additional documents and agreements reasonably required by Payee and its counsel
from time to time to evidence and secure the Note and to evidence, perfect and
preserve the obligations of Maker pursuant to this Amendment and the Security
Agreement.
7. Ratification. The Original Note is hereby modified to be consistent
with this Amendment, and in the event of any inconsistency, the provisions of
this Amendment shall prevail and control. Borrower hereby ratifies, confirms,
and agrees that, the Note and the Security Agreement are, and continue to be, in
full force and effect and are enforceable in accordance with their respective
terms. This Amendment is secured by the Collateral (as defined in the Original
Note).
8. No Waiver. Execution of this Amendment by Payee shall be without
prejudice to Payee's rights at any time in the future to exercise any and all
rights conferred upon it by the Note and Security Agreement. Neither this
Amendment nor any provision hereof shall constitute, or shall be construed to
constitute, a waiver of any default, right, or remedy of Payee under the Note
subsequent to the date hereof. Any failure by Payee at any point in time during
the term of the Note, or this Amendment to insist upon strict and timely
compliance with the terms and provisions of each such document shall not be
deemed a waiver either expressed or implied by Payee of any of its rights under
any such document, nor shall the same excuse Maker's obligation to strictly and
timely perform its obligations hereunder and thereunder.
7
<PAGE> 8
9. Counterparts; Exhibits and Attachments. This Amendment may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which shall together constitute one and the same instrument.
10. Applicable Law. This Amendment is delivered in and shall be governed
by and construed according to the substantive laws and judicial decisions of,
the State of California (regardless of the place of business, residence,
location or domicile of the parties hereto or any of their constituent partners
or principals). The validity and effect of this Amendment shall be governed by
and construed in accordance with the laws of the State of California applicable
to contracts to be performed in that state.
11. Modifications; Severability. There are and were no oral or written
representations, warranties, understandings, stipulations, agreements, or
promises made by either party, or by any agent, employee, or other
representative of either party, pertaining to the subject matter of this
Amendment which have not been incorporated into this Amendment. This Amendment
shall not be modified, changed, terminated, amended, superseded, waived, or
extended except by a written instrument executed by the parties hereto. If any
term, covenant, or condition of this Amendment is held to be invalid, illegal,
or unenforceable as to a particular person, entity, or situation, this Amendment
shall, at the option of Payee, be construed and enforced without such provision,
but will be otherwise enforced to the fullest extent permitted by law as to such
person, entity, or situation, and this Amendment will also be enforced to the
fullest extent permitted by law as to any other person, entity, or situation.
This Amendment and the documents executed by the parties pursuant hereto contain
the final agreement of the parties with respect to the subject matter hereof.
12. Binding Effect. This Amendment shall be binding on and inure to the
benefit of the Maker, Payee and their respective heirs, personal
representatives, successors, and assigns.
13. Legal Representation. The Maker has been advised to retain legal
counsel with respect to entering into this Amendment. The Maker represents to
Payee that Maker has not relied on Payee or Payee's counsel in executing this
Amendment and that Maker has sought and received such legal counsel as they have
deemed necessary.
14. Time of Essence. Time is of the essence for the performance by Maker
of each of its obligations under this Amendment.
8
<PAGE> 9
15. No Partnership; No Additional Liability. Nothing contained in this
Amendment shall be construed as creating a joint venture or partnership between
Maker and Payee, and Payee shall have no right of control or supervision except
as it may exercise under the rights and remedies provided in the Original Note
and Security Agreement. Payee and Maker intend that the relationship between
them shall be solely that of creditor and debtor. Payee in no way shall be
responsible or liable for the debts, losses, obligations or duties of the Maker
with respect to the Collateral or otherwise. Maker, at all times, consistent
with the terms and provisions of this Amendment, shall be free to determine and
follow its own policies and practices in the conduct of its business.
16. Waivers by Borrower: Usury. Maker waives presentment, protest and
demand, notice of protest, demand and dishonor and non-payment of the
obligations set forth in this Amendment and agrees to pay all costs of
collection when incurred, including reasonable attorneys' fees and disbursements
and fees and costs of expert witnesses, and to perform and comply with each of
the covenants, conditions, provisions and agreements of the undersigned
contained in the Note and the Security Agreement. No extension of the time for
the payment of the obligations set forth in this Amendment or any installment
hereof made by agreement with any person now or hereafter liable for the payment
of the Note or the obligations set forth in this Amendment shall operate to
release, discharge, modify, change or affect the original liability under the
Note or the obligations set forth in this Amendment, either in whole or in part,
of any of the undersigned not a party to such agreement. In the event the
payments required to be made hereunder, whether such payments are characterized
as interest or otherwise, shall at any time exceed the limits permitted by any
law governing usury or any other law applicable to the Note, all such excess
sums paid by the Maker for the period in question shall, without further
agreement or notice between or by any part hereto, be applied to the principal
balance as a prepayment thereof without premium, or at Payee's option, returned
to Borrower.
17. Warranties and Representations of Maker. Maker hereby warrants and
represents to the Payee that:
(i) the person executing this Amendment on behalf of Maker has
full authority to execute this Amendment on behalf of Maker and to bind Maker
thereby; and
(ii) the execution and delivery by Maker of this Amendment and
the performance thereunder by Maker has not and will not result in a breach of,
or constitute a default under, any deed of trust, lease, bank loan, credit
arrangement, or other instrument or agreement to which Borrower is a party or by
which Maker or the Collateral may be bound or affected.
IN WITNESS WHEREOF, the parties have executed this Amendment as of March
29, 1998.
VIXEL CORPORATION,
a Delaware corporation
By: /s/ Stephen M. Smith
-------------------------------------
Its: Vice President of Finance
-------------------------------
WESTERN DIGITAL CORPORATION,
a Delaware corporation
By: /s/ Duston M. Williams
------------------------------------
Its: Chief Financial Officer
------------------------------------
9
<PAGE> 10
SECOND AMENDMENT TO SECURED PROMISSORY NOTE
This Second Amendment to Secured Promissory Note ("Amendment") is made
effective as of the 30th day of March, 1999, by and between Vixel Corporation, a
Delaware corporation ("Maker"), with an address of 11911 North Creek Parkway
South, Bothell, Washington 98011, and Western Digital Corporation, a Delaware
corporation ("Payee"), with an address of 8105 Irvine Center Drive, Irvine,
California 92618.
RECITALS
A. Payee made a loan ("Loan") to Maker in the amount of Two Million
Dollars ($2,000,000), as evidenced by a certain Secured
Promissory Note executed by Maker payable to Payee dated March
29, 1996 (the "Original Note"). Maker and Payee also entered into
that certain Amendment to Secured Promissory Note dated March 29,
1998 which extended the due date of the Note ("First Amendment").
The Original Note and First Amendment are collectively referred
to herein as the "Note".
B. Maker has requested that Payee amend the Note to again extend the
due date of the Note.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
and covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
to modify the Note as follows:
1. Representation Accurate. Maker represents and warrants that the above
recitals are true and accurate.
2. Principal Balance Verified. Maker and Payee agree that the principal
balance plus accrued interest of the Note as of March 30, 1999 is One Million
Nine Hundred Sixty-One Thousand Three Hundred Eighty-Nine Dollars ($1,961,389).
Maker confirms its absolute and unconditional obligation to make all payments
set forth in the Note, and to perform its other obligations under the Note.
3. Continuance of Security Interest. The repayment of the Note, and
performance of all of Maker's other obligations to Payee under that certain
Security Agreement dated March 29, 1996 as executed and delivered by Maker (the
"Security Agreement"), is secured, and shall continue to be secured, inter alia,
by the Security Agreement.
4. Maturity Date. Borrower and Lender agree that the original "Maturity
Date" of the Note is hereby amended to extend such Maturity Date to the first to
occur of (i) the closing of an underwritten public offering of shares of Maker's
capital stock ("IPO") or (ii) March 31, 2000.
5. Warrants. Upon execution of this Amendment, Maker shall issue to
Payee 16,490 warrants for Series E Preferred Stock of Maker in the form attached
hereto as Exhibit A (the "Warrants"). The Warrants shall have an exercise price
of $10 per share and shall expire on March 31, 2004. Maker represents that its
Series E Preferred Stock has the rights set forth in the Restated Certificate of
Incorporation attached hereto as Exhibit B and is currently convertible on a one
for one basis for common stock of Maker.
6. Further Assurances. Maker shall execute and deliver to Payee such
additional documents and agreements reasonably required by Payee and its counsel
from time to time to evidence and secure the
10
<PAGE> 11
Note and to evidence, perfect and preserve the obligations of Maker pursuant to
this Amendment, the Security Agreement and/or the Warrants.
7. Ratification. The Note is hereby modified to be consistent with this
Amendment, and in the event of any inconsistency, the provisions of this
Amendment shall prevail and control. Borrower hereby ratifies, confirms, and
agrees that, the Note and the Security Agreement are, and continue to be, in
full force and effect and are enforceable in accordance with their respective
terms. This Amendment is secured by the Collateral (as defined in the Note).
8. No Waiver. Execution of this Amendment by Payee shall be without
prejudice to Payee's rights at any time in the future to exercise any and all
rights conferred upon it by the Note and Security Agreement. Neither this
Amendment nor any provision hereof shall constitute, or shall be construed to
constitute, a waiver of any default, right, or remedy of Payee under the Note
subsequent to the date hereof. Any failure by Payee at any point in time during
the term of the Note, or this Amendment to insist upon strict and timely
compliance with the terms and provisions of each such document shall not be
deemed a waiver either expressed or implied by Payee of any of its rights under
any such document, nor shall the same excuse Maker's obligation to strictly and
timely perform its obligations hereunder and thereunder.
9. Counterparts; Exhibits and Attachments. This Amendment may be
executed in any number of counterparts, each of which shall be deemed an
original and all of which shall together constitute one and the same instrument.
10. Applicable Law. This Amendment is delivered in and shall be governed
by and construed according to the substantive laws and judicial decisions of,
the State of California (regardless of the place of business, residence,
location or domicile of the parties hereto or any of their constituent partners
or principals). The validity and effect of this Amendment shall be governed by
and construed in accordance with the laws of the State of California applicable
to contracts to be performed in that state.
11. Modifications; Severability. There are and were no oral or written
representations, warranties, understandings, stipulations, agreements, or
promises made by either party, or by any agent, employee, or other
representative of either party, pertaining to the subject matter of this
Amendment which have not been incorporated into this Amendment. This Amendment
shall not be modified, changed, terminated, amended, superseded, waived, or
extended except by a written instrument executed by the parties hereto. If any
term, covenant, or condition of this Amendment is held to be invalid, illegal,
or unenforceable as to a particular person, entity, or situation, this Amendment
shall, at the option of Payee, be construed and enforced without such provision,
but will be otherwise enforced to the fullest extent permitted by law as to such
person, entity, or situation, and this Amendment will also be enforced to the
fullest extent permitted by law as to any other person, entity, or situation.
This Amendment and the documents executed by the parties pursuant hereto contain
the final agreement of the parties with respect to the subject matter hereof.
12. Binding Effect. This Amendment shall be binding on and inure to the
benefit of Maker, Payee and their respective heirs, personal representatives,
successors, and assigns.
13. Legal Representation. Maker has been advised to retain legal counsel
with respect to entering into this Amendment. Maker represents to Payee that
Maker has not relied on Payee or Payee's counsel in executing this Amendment and
that Maker has sought and received such legal counsel as it has deemed
necessary.
14. Time of Essence. Time is of the essence for the performance by Maker
of each of its obligations under this Amendment.
11
<PAGE> 12
15. No Partnership; No Additional Liability. Nothing contained in this
Amendment shall be construed as creating a joint venture or partnership between
Maker and Payee, and Payee shall have no right of control or supervision except
as it may exercise under the rights and remedies provided in the Note and
Security Agreement. Payee and Maker intend that the relationship between them
shall be solely that of creditor and debtor. Payee in no way shall be
responsible or liable for the debts, losses, obligations or duties of the Maker
with respect to the Collateral or otherwise. Maker, at all times, consistent
with the terms and provisions of this Amendment, shall be free to determine and
follow its own policies and practices in the conduct of its business.
16. Waivers by Maker: Usury. Maker waives presentment, protest and
demand, notice of protest, demand and dishonor and non-payment of the
obligations set forth in this Amendment and agrees to pay all costs of
collection when incurred, including reasonable attorneys' fees and disbursements
and fees and costs of expert witnesses, and to perform and comply with each of
the covenants, conditions, provisions and agreements of the undersigned
contained in the Note and the Security Agreement. No extension of the time for
the payment of the obligations set forth in this Amendment or any installment
hereof made by agreement with any person now or hereafter liable for the payment
of the Note or the obligations set forth in this Amendment shall operate to
release, discharge, modify, change or affect the original liability under the
Note or the obligations set forth in this Amendment, either in whole or in part,
of any of the undersigned not a party to such agreement. In the event the
payments required to be made hereunder, whether such payments are characterized
as interest or otherwise, shall at any time exceed the limits permitted by any
law governing usury or any other law applicable to the Note, all such excess
sums paid by the Maker for the period in question shall, without further
agreement or notice between or by any part hereto, be applied to the principal
balance as a prepayment thereof without premium, or at Payee's option, returned
to Borrower.
17. Warranties and Representations of Maker. Maker hereby warrants and
represents to the Payee that:
(i) the person executing this Amendment on behalf of Maker has
full authority to execute this Amendment on behalf of Maker and to bind Maker
thereby; and
(ii) the execution and delivery by Maker of this Amendment and
the Warrants and the performance thereunder by Maker has not and will not result
in a breach of, or constitute a default under, any deed of trust, lease, bank
loan, credit arrangement, or other instrument or agreement to which Maker is a
party or by which Maker or the Collateral may be bound or affected.
IN WITNESS WHEREOF, the parties have executed this Amendment as of March
30, 1999.
VIXEL CORPORATION,
a Delaware corporation
By: /s/ Kurtis L. Adams
-------------------------------------
Its: Chief Financial Officer
--------------------------------
WESTERN DIGITAL CORPORATION,
a Delaware corporation
By: /s/ Duston M. Williams
-------------------------------------
Its: Senior Vice President and
Chief Financial Officer
12
<PAGE> 1
EXHIBIT 10.4
MASTER LEASE AGREEMENT
Lessor: TRANSAMERICA BUSINESS CREDIT CORPORATION
RIVERWAY II
WEST OFFICE TOWER
WEST HIGGINS
ROSEMONT, ILLINOIS 60018
Lessee: VIXEL CORPORATION
325 INTERLOCKEN PARKWAY, BUILDING A
BROOMFIELD, COLORADO 80021
The lessor pursuant to this Master Lease Agreement ("Agreement") dated as of May
20, 1997, is Transamerica Business Credit Corporation ("Lessor"). All equipment,
together with all present and future additions, parts, accessories, attachments,
substitutions, repairs, improvements, and replacements thereof or thereto, which
are the subject of a Lease (as defined in the next sentence) shall be referred
to as "Equipment." Simultaneous with the execution and delivery of this
Agreement, the parties are entering into one or more Lease Schedules (each, a
"Schedule") which refer to and incorporate by reference this Agreement, each of
which constitutes a lease (each, a "Lease") for the Equipment specified therein.
Additional details pertaining to each Lease are specified in the applicable
Schedule. Each Schedule that the parties hereafter enter into shall constitute a
Lease. Except as provided in Paragraph 1 below, Lessor has no obligation to
enter into any additional leases with, or extend any future financing to,
Lessee.
1. LEASE. Subject to and upon all of the terms and conditions of this
Agreement and each Schedule, Lessor hereby agrees to lease to Lessee up to
$7,000,000 in Equipment and Lessee hereby agrees to lease from Lessor the
Equipment for the Term (as defined in Paragraph 2 below) thereof. The timing and
financial scope of Lessor's obligation to enter into Leases hereunder are
further limited as set forth in the Commitment Letter executed by Lessor and
Lessee, dated as of May 2, 1997 and attached hereto as Exhibit A (the
"Commitment Letter") and incorporated herein by this reference.
2. TERM. Each Lease shall be effective and the term of each Lease
("Term") shall commence on the commencement date specified in the applicable
Schedule (which date shall not be prior to delivery, acceptance and funding in
each case) and, unless sooner terminated (as hereinafter provided), shall expire
at the end of the term specified in such Schedule; provided, however, that
obligations due to be performed by Lessee during the Term shall continue until
they have been performed in full. Schedules will only be executed after the
delivery of the Equipment to Lessee or upon completion of deliveries of items of
such Equipment with aggregate cost of not less than $75,000.00.
3. RENT. Lessee shall pay as rent to Lessor, for use of the Equipment
during the Term, rental payments equal to the sum of all rental payments
including, without limitation, security deposits, advance rents, and interim
rents payable in the amounts and on the dates specified in the applicable
Schedule ("Rent"). If any Rent or other amount payable by Lessee is not paid
within five days after the day on which it becomes payable, Lessee will pay on
demand, as a late charge, an amount equal to 2% of such unpaid Rent or other
amount but only to the extent permitted by applicable law. All payments provided
for herein shall be payable to Lessor at its address specified above, or at any
other place designated by Lessor. Notwithstanding the Lease Repayment Terms set
forth in the Commitment Letter, the Monthly Rent Payments (fixed as of each
Lease Term Commencement) shall be adjusted for each Lease commensurate to the
change in the weekly average of the interest rates of four-year U.S. Treasury
Securities (as published in the Wall Street Journal) from the week ending March
7, 1997 to the week preceding the date of such Lease Term Commencement.
<PAGE> 2
One half of Lessee's Application Fee of $70,000 paid pursuant to the Commitment
Letter, less amounts (not to exceed $5,000) applied pursuant to Paragraph 22
below, shall be applied on a pro-rata basis (based upon the amount of each Lease
compared to the total Commitment) toward the last month's rent payment paid in
advance on the Lease Term Commencement for each Lease.
4. LEASE NOT CANCELABLE; LESSEE'S OBLIGATIONS ABSOLUTE. No Lease may be
canceled or terminated except as expressly provided herein. So long as Lessor
has not wrongfully or unlawfully interfered with Lessee's quiet enjoyment of the
Equipment, Lessee's obligation to pay all Rent due or to become due hereunder
shall be absolute and unconditional and shall not be subject to any delay,
reduction, set-off, defense, counterclaim, or recoupment for any reason
whatsoever, including any failure of the Equipment or any representations by the
manufacturer or the vendor thereof. If the Equipment is unsatisfactory for any
reason, Lessee shall make any claim solely against the manufacturer or the
vendor thereof and shall, nevertheless, pay Lessor all Rent payable hereunder.
5. SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be
responsible for the selection and use of, and results obtained from, the
Equipment and any other associated equipment or services.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN
OR CONDITION OF THE EQUIPMENT OR ITS MERCHANTABILITY, SUITABILITY, QUALITY, OR
FITNESS FOR A PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH WARRANTY. LESSEE
SPECIFICALLY WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSOR FOR BREACH OF ANY
WARRANTY WHATSOEVER. ONCE ACCEPTED BY LESSEE, LESSEE LEASES THE EQUIPMENT "AS
IS." IN NO EVENT SHALL LESSOR HAVE ANY LIABILITY, NOR SHALL LESSEE HAVE ANY
REMEDY AGAINST LESSOR, FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE CAUSED
DIRECTLY OR INDIRECTLY BY THE EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR
THE OPERATION, MAINTENANCE, OR REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS
THAT TERM IS USED IN SECTION 2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE, AS
AMENDED FROM TIME TO TIME ("UCC"). Lessor grants to Lessee, for the sole purpose
of prosecuting a claim or receiving any other benefits under the warranty, the
benefits of any and all warranties made available by the manufacturer or the
vendor of the Equipment to the extent assignable.
7. DELIVERY. Lessor hereby appoints Lessee as Lessor's agent for the
sole and limited purpose of accepting delivery of the Equipment from each vendor
thereof. Lessee shall pay any and all delivery and installation charges. Lessor
shall not be liable to Lessee for any delay in, or failure of, delivery of the
Equipment.
8. PURCHASE OBLIGATION. Subject to Paragraphs 14 and 20, Lessee shall
purchase all, but not less than all, the Equipment covered by the applicable
Lease on the date specified therefor in the applicable Schedule ("Purchase
Date"). The purchase price for such Equipment shall be 10% of the Equipment Cost
as set forth in the applicable Schedule. On the Purchase Date, Lessee shall pay
to Lessor the purchase price, together with all sales and other taxes applicable
to the transfer of the Equipment and any other amount payable and arising
hereunder, in immediately available funds, whereupon Lessor shall transfer to
Lessee, without recourse or warranty of any kind, express or implied, all of
Lessor's right, title, and interest in and to such Equipment on an "As Is, Where
Is" basis and prepare and file with all applicable authorities any UCC
termination statements that Lessee may reasonably request.
9. OWNERSHIP; INSPECTION; MARKING; FINANCING STATEMENTS. Lessee shall
affix to the Equipment any labels supplied by Lessor indicating ownership of
such Equipment. The Equipment is and shall be the sole property of Lessor.
Lessee shall have no right, title, or interest therein, except as lessee under a
Lease. The Equipment is and shall at all times be and remain personal property
and shall not become a fixture. Lessee shall obtain and record such instruments
and take such steps as may be necessary to prevent any person from acquiring any
rights in the Equipment by reason of the Equipment being claimed or deemed to be
real property. Upon request by Lessor, Lessee shall use reasonable commercial
efforts to obtain and deliver to Lessor
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valid and effective waivers, in recordable form, by the owners, landlords, and
mortgagees of the real property upon which the Equipment is located or
certificates of Lessee that it is the owner of such real property or that such
real property is neither leased nor mortgaged. Lessee shall make the Equipment
and its maintenance records available for inspection by Lessor at reasonable
times and upon reasonable notice. Lessee shall execute and deliver to Lessor for
filing any UCC financing statements or similar documents Lessor may reasonably
request with respect to the Equipment.
10. EQUIPMENT USE. Lessee agrees that the Equipment will be operated by
competent, qualified personnel in connection with Lessee's business for the
purpose for which the Equipment was designed and in accordance with applicable
operating instructions, laws, and government regulations, and that Lessee shall
use all reasonable precautions to prevent loss or damage to the Equipment from
fire and other hazards. Lessee shall procure and maintain in effect all orders,
licenses, certificates, permits, approvals, and consents required by federal,
state, or local laws or by any governmental body, agency, or authority in
connection with the delivery, installation, use, and operation of the Equipment.
11. MAINTENANCE. Lessee, at its sole cost and expense, shall keep the
Equipment in a suitable environment as specified by the manufacturer's
guidelines or the equivalent, shall meet all recertification requirements, and
shall maintain the Equipment in its original condition and working order,
ordinary wear and tear excepted. At the reasonable request of Lessor, Lessee
shall furnish all proof of maintenance.
12. ALTERATION; MODIFICATIONS; PARTS. Lessee may materially alter or
modify the Equipment only with the prior written consent of Lessor. Any
alteration shall be removed and the Equipment restored to its normal, unaltered
condition at Lessee's expense (without damaging the Equipment's originally
intended function or its value) prior to its return to Lessor pursuant to
Paragraph 13 below. Any part installed in connection with warranty or
maintenance service or which cannot be removed in accordance with the preceding
sentence shall be the property of Lessor.
13. RETURN OF EQUIPMENT. Except for Equipment that has suffered a
Casualty Loss (as defined in Paragraph 14 below) and is not required to be
repaired pursuant to Paragraph 14 below or Equipment purchased by Lessee
pursuant to Paragraph 8 above, upon demand by Lessor pursuant to Paragraph 21
below, Lessee shall contact Lessor for shipping instructions and, at Lessee's
own risk, immediately return the Equipment, freight prepaid, to a location in
the continental United States specified by Lessor. At the time of such return to
Lessor, the Equipment shall (i) be in the operating order, repair, and condition
as required by or specified in the original specifications and warranties of
each manufacturer and vendor thereof, ordinary wear and tear excepted, (ii) meet
all recertification requirements, and (iii) be capable of being promptly
assembled and operated by a third party purchaser or third party lessee without
further repair, replacement, alterations, or improvements, and in accordance and
compliance with any and all statutes, laws, ordinances, rules, and regulations
of any governmental authority or any political subdivision thereof applicable to
the use and operation of the Equipment. The provisions of this Paragraph 13 are
of the essence of the Lease, and upon application to any court of equity having
jurisdiction in the premises, Lessor shall be entitled to a decree against
Lessee requiring specific performance of the covenants of Lessee set forth in
this Paragraph 13. If Lessee fails to return the Equipment when required, the
terms and conditions of the Lease shall continue to be applicable and Lessee
shall continue to pay Rent until the Equipment is received by Lessor or
otherwise purchased by Lessee in accordance with this Agreement.
14. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at its own
expense, liability and property damage insurance relating to the Equipment,
insuring against such risks as are customarily insured against on the type of
equipment leased hereunder by businesses in which Lessee is engaged in such
amounts, in such form, and with insurers satisfactory to Lessor; provided,
however, that the amount of insurance against damage or loss shall not be less
than the greater of (a) the replacement value of the Equipment and (b) the
stipulated loss value of the Equipment specified in the applicable Schedule
("Stipulated Loss Value"). Each liability insurance policy shall provide
coverage (including, without limitation, personal injury coverage) of not less
than $1,000,000 for each occurrence, and shall name Lessor as an additional
insured; and each property damage policy shall name Lessor and Lessee as loss
payees as their interests may appear and all policies shall contain a clause
requiring the insurer to give Lessor at least thirty days' prior written notice
of any alteration in the terms or
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cancellation of the policy. Lessee shall furnish to Lessor a certificate of
insurance, and upon reasonable request, a copy of each insurance policy (with
endorsements) or other evidence satisfactory to Lessor that the required
insurance coverage is in effect; provided, however, Lessor shall have no duty to
ascertain the existence of or to examine the insurance policies to advise Lessee
if the insurance coverage does not comply with the requirements of this
Paragraph. If Lessee fails to insure the Equipment as required, Lessor shall
have the right but not the obligation to obtain such insurance, and the cost of
the insurance shall be for the account of Lessee due as part of the next due
Rent. Lessee consents to Lessor's release, upon its failure to obtain
appropriate insurance coverage, of any and all information necessary to obtain
insurance with respect to the Equipment or Lessor's interest therein.
Until the Equipment is purchased by Lessee as provided in Paragraph 8
above or returned to Lessor pursuant to Paragraph 13 above, Lessee shall bear
the entire risk of theft or destruction of, or damage to, the Equipment
including, without limitation, any condemnation, seizure, or requisition of
title or use ("Casualty Loss"). No Casualty Loss shall relieve Lessee from its
obligations to pay Rent except as provided in clause (b) below. When any
Casualty Loss occurs, Lessee shall immediately notify Lessor and, at the option
of Lessor, shall promptly (a) place such Equipment in good repair and working
order; or (b) pay Lessor an amount equal to the Stipulated Loss Value of such
Equipment and all other amounts (excluding Rent) payable by Lessee hereunder,
together with a late charge on such amounts at a rate per annum equal to the
rate imputed in the Rent payments hereunder (as reasonably determined by Lessor)
from the date of the Casualty Loss through the date of payment of such amounts,
whereupon Lessor shall transfer to Lessee, without recourse or warranty (express
or implied), all of Lessor's interest, if any, in and to such Equipment on an
"AS IS, WHERE IS" basis. The proceeds of any insurance payable with respect to
the Equipment shall be applied, at the option of Lessee, if no Event of Default
has occurred and is continuing, and otherwise at the option of Lessor, either
towards (i) repair of the Equipment or (ii) payment of any of Lessee's
obligations hereunder. Lessee hereby appoints Lessor as Lessee's limited
attorney-in-fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts issued with respect to any Casualty Loss under
any insurance policy relating to the Equipment. Lessor may only use such power
upon and during the continuance of an Event of Default.
15. TAXES. Lessee shall pay when due, and indemnify and hold Lessor
harmless from, all sales, use, excise, and other taxes, charges, and fees
(including with respect to the Equipment, without limitation, licensing,
registration, titling, personal property, stamp, levies, imposts, duties,
charges, or withholdings of any nature), and if resulting from an act or
omission of Lessee, any fines, penalties, or interest thereon, imposed or levied
by any governmental body, agency, or tax authority upon or in connection with
the Equipment, its purchase, ownership, delivery, leasing, possession, use, or
relocation of the Equipment or otherwise in connection with the transactions
contemplated by each Lease or the Rent thereunder, excluding (a) any income,
franchise, payroll, withholding, business and occupation or any other tax, duty
or fee on the net or gross income, capital gains or gross receipts (other than
gross income or receipts taxes in the nature or a sales, use or property tax) of
Lessor or (b) any of the above relating to a payment by Lessor to its employees,
agents or assigns. Upon request, Lessee will provide proof of payment. Unless
Lessor elects otherwise, Lessor will pay all property taxes on the Equipment for
which Lessee shall reimburse Lessor promptly upon request. Lessee shall timely
prepare and file all reports and returns which are required to be made with
respect to any obligation of Lessee under this Paragraph 15. Lessee shall, to
the extent permitted by law, cause all billings of such fees, taxes, levies,
imposts, duties, withholdings, and governmental charges to be made to Lessor in
care of Lessee. Upon request, Lessee will provide Lessor with copies of all such
billings. Lessee shall have the option to contest any of such taxes diligently
and in good faith so long as Lessee maintains adequate reserves for such taxes
measured in accordance with GAAP.
16. LESSOR'S PAYMENT. If Lessee fails to perform its obligations under
Paragraph 14 or 15 above, or Paragraph 22 below, Lessor shall have the right to
substitute performance, in which case Lessee shall immediately reimburse Lessor
therefor.
17. GENERAL INDEMNITY. Each Lease is a net lease. Therefore, Lessee
shall indemnify Lessor and its successors and assigns against, and hold Lessor
and its successors and assigns harmless from, any and all claims, actions,
damages, obligations, liabilities, and all costs and expenses, including,
without limitation, reasonable legal fees of outside counsel, incurred by Lessor
or its successors and assigns arising out of each Lease including, without
limitation, the purchase, ownership, delivery, lease, possession, maintenance,
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condition, use, or return of the Equipment, or arising by operation of law,
except that Lessee shall not be liable for any claims, actions, damages,
obligations, and costs and expenses determined by a non-appealable, final order
of a court of competent jurisdiction to have occurred as a result of the gross
negligence or willful misconduct of Lessor or its successors and assigns. Lessee
agrees that upon written notice by Lessor of the assertion of any claim, action,
damage, obligation, liability, or lien, Lessee shall assume full responsibility
for the defense thereof, provided that Lessor's failure to give such notice
shall not limit or otherwise affect its rights hereunder except to the extent
Lessee incurs a loss as a direct result of such failure. Any payment pursuant to
this Paragraph (except for any payment of Rent) shall be of such amount as shall
be necessary so that, after payment of any taxes required to be paid thereon by
Lessor, including taxes on or measured by the net income of Lessor, the balance
will equal the amount due hereunder. The provisions of this Paragraph with
regard to matters arising during a Lease shall survive the expiration or
termination of such Lease.
18. ASSIGNMENT BY LESSEE. Except in connection with a merger allowed
under Paragraph 20(j) below, Lessee shall not, without the prior written consent
of Lessor, (a) assign, transfer, pledge, or otherwise dispose of any Lease or
Equipment, or any interest therein; (b) sublease or lend any Equipment or permit
it to be used by anyone other than Lessee and its employees, agents,
representatives, contractors and other authorized persons; or (c) move any
Equipment from the location specified for it in the applicable Schedule, except
that Lessee may move Equipment to another location within the United States
provided that Lessee has delivered to Lessor (A) prior written notice thereof
and (B) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to Lessor) necessary or, in the opinion
of the Lessor, desirable to protect Lessor's interest in such Equipment.
Notwithstanding anything to the contrary in the immediately preceding sentence,
Lessee may keep any Equipment consisting of motor vehicles or rolling stock at
any location in the United States.
19. ASSIGNMENT BY LESSOR. Lessor may assign its interest or grant a
security interest in any Lease and the Equipment individually or together, in
whole or in part. If Lessee is given written notice of any such assignment, it
shall immediately make all payments of Rent and other amounts hereunder directly
to such assignee. Each such assignee shall have all of the rights of Lessor
under each Lease assigned to it. Lessee shall not assert against any such
assignee any set-off, defense, or counterclaim that Lessee may have against
Lessor or any other person. Notwithstanding any such assignment by Lessor,
Lessor shall not be relieved of its obligations under any Lease.
20. DEFAULT; NO WAIVER. Lessee or any guarantor of any or all of the
obligations of Lessee hereunder (together with Lessee, the "Lease Parties")
shall be in default under each Lease upon the occurrence of any of the following
events (each, an "Event of Default"): (a) Lessee fails to pay within five days
of when due any amount required to be paid by Lessee under or in connection with
any Lease; (b) any of the Lease Parties fails in any material respect to perform
any other provision under or in connection with a Lease or violates any of the
covenants or agreements of such Lease Party under or in connection with a Lease;
(c) any representation made or financial information delivered or furnished by
any of the Lease Parties under or in connection with a Lease shall prove to have
been inaccurate in any material respect when made; (d) any of the Lease Parties
makes an assignment for the benefit of creditors, whether voluntary or
involuntary, or consents to the appointment of a trustee or receiver, or if
either shall be appointed for any of the Lease Parties or for a substantial part
of its property without its consent and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for sixty days
following the commencement thereof; (e) any petition or proceeding is filed by
or against any of the Lease Parties under any Federal or State bankruptcy or
insolvency code or similar law and, in the case of any such involuntary petition
or proceeding, such petition or proceeding remains undismissed or unstayed for
sixty days following the filing or commencement thereof, or any of the Lease
Parties takes any action authorizing any such petition or proceeding; (f) any of
the Lease Parties fails to pay when due any indebtedness for borrowed money or
under conditional sales or installment sales contracts or similar agreements,
leases, or obligations evidenced by bonds, debentures, notes, or other similar
agreements or instruments to any creditor (including Lessor under any other
agreement) after any and all applicable cure periods therefor shall have elapsed
and only if the amount involved exceeds $500,000; (g) any judgment shall be
rendered against any of the Lease Parties which shall remain unpaid or unstayed
for a period of sixty days; (h) any of the Lease Parties shall dissolve,
liquidate, wind up or cease its business; (i) any of the Lease Parties shall
amend or modify its name, unless such Lease Party promptly delivers
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to Lessor written notice of such amendment or modification and executed
financing statements (in form and substance satisfactory to the Lessor); (j) any
of the Lease Parties shall merge or consolidate with or sell substantially all
of its assets to any other entity in which the shareholders of such Lease Party
(including spouses, children or trusts of or for such shareholders) immediately
prior to such transaction own less than 50% of the voting securities of the
surviving entity or purchaser or make any material change in its capital
structure, in each case without Lessor's prior written consent, which shall not
be unreasonably withheld; (k) any of the Lease Parties shall suffer any loss or
suspension of any material license, permit, or other right or asset, which loss
is reasnably likely to have a material adverse effect on Lessee's ability to
perform under this Agreement, fail generally to pay its debts as they mature, or
call a meeting for purposes of compromising its debts; (l) any of the Lease
Parties shall deny or disaffirm its obligations hereunder or under any of the
documents delivered in connection herewith; or (m) there is a change, which
change does not result from the sale of newly issued equity securities to
investors or from a transaction described in clause (j) above, in more than 50%
of the ownership of any equity interests of any of the Lease Parties on the date
hereof or more than 50% of such interests become subject to any contractual,
judicial or statutory lien, charge, security interest, or encumbrance.
21. REMEDIES. Upon the occurrence and continuation of an Event of
Default for ten days after notice for a payment Event of Default and for thirty
days after notice for all other Events of Default, Lessor shall have the right,
in its sole discretion, to exercise any one or more of the following remedies:
(a) terminate each Lease; (b) declare any and all Rent and other amounts then
due and any and all Rent and other amounts to become due under each Lease
(collectively, the "Lease Obligations") immediately due and payable; (c) take
possession of any or all items of Equipment, wherever located, without demand,
notice, court order, or other process of law, and without liability for entry to
Lessee's premises, for damage to Lessee's property, or otherwise; (d) demand
that Lessee immediately return any or all Equipment to Lessor in accordance with
Paragraph 13 above, and, for each day that Lessee shall fail to return any item
of Equipment, Lessor may demand an amount equal to the Rent payable for such
Equipment in accordance with Paragraph 13 above; (e) lease, sell, or otherwise
dispose of the Equipment in a commercially reasonable manner, with or without
notice and on public or private bid; (f) recover the following amounts from the
Lessee (as damages, including reimbursement of costs and expenses, liquidated
for all purposes and not as a penalty): (i) all costs and expenses of Lessor
reimbursable to it hereunder, including, without limitation, expenses of
disposition of the Equipment, reasonable legal fees, and all other amounts
specified in Paragraph 22 below; (ii) an amount equal to the sum of (A) any
accrued and unpaid Rent through the later of (1) the date of the applicable
default, (2) the date that Lessor has obtained possession of the Equipment, or
(3) such other date as Lessee has made an effective tender of possession of the
Equipment to Lessor (the "Default Date") and (B) if Lessor resells or re-lets
the Equipment, Rent at the periodic rate provided for in each Lease for the
additional period that it takes Lessor to resell or re-let all of the Equipment;
(iii) the present value of all future Rent reserved in the Leases and contracted
to be paid over the unexpired Term of the Leases and the purchase price of the
equipment as set forth in Paragraph 8 above, discounted at six percent compound
interest; and (iv) any indebtedness for Lessee's indemnity under Paragraph 17
above, plus a late charge at the rate specified in Paragraph 3 above, less the
amount received by Lessor, if any, upon sale or re-let of the Equipment; and (g)
exercise any other right or remedy to recover damages or enforce the terms of
the Leases. Lessor may pursue any other rights or remedies available at law or
in equity, including, without limitation, rights or remedies seeking damages,
specific performance, and injunctive relief. Any failure of Lessor to require
strict performance by Lessee, or any waiver by Lessor of any provision hereunder
or under any Schedule, shall not be construed as a consent or waiver of any
other breach of the same or of any other provision. Any amendment or waiver of
any provision hereof or under any Schedule or consent to any departure by Lessee
herefrom or therefrom shall be in writing and signed by Lessor.
No right or remedy is exclusive of any other provided herein or
permitted by law or equity. All such rights and remedies shall be cumulative and
may be enforced concurrently or individually from time to time.
22. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all costs and
expenses (including reasonable legal fees and expenses) incurred in connection
with the preparation, execution and delivery of this Agreement and other
agreement and transaction contemplated hereby, which expenses shall not exceed
$5,000.00 without the written consent of Lessee, and all costs and expenses in
protecting and enforcing Lessor's rights and interests in each Lease and the
Equipment, including, without limitation, reasonable legal fees of outside
counsel, collection, and remarketing fees and expenses incurred by Lessor in
enforcing the terms, conditions, or
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provisions of each Lease or upon the occurrence and continuation of an Event of
Default.
23. LESSEE'S WAIVERS. To the extent permitted by applicable law, Lessee
hereby waives any and all rights and remedies conferred upon a lessee by
Sections 2A-508 through 2A-522 of the UCC, provided, however, that Lessee shall
have the right to recover damages from Lessor for any breach of its obligations
under this Agreement. To the extent permitted by applicable law, Lessee also
hereby waives any rights now or hereafter conferred by statute or otherwise
which may require Lessor to sell, lease, or otherwise use any Equipment in
mitigation of Lessor's damages as set forth in Paragraph 21 above or which may
otherwise limit or modify any of Lessor's rights or remedies under Paragraph 21,
except that Lessee shall have the right to require Lessor to convey to Lessee,
without representation, warranty or recourse, all of Lessor's rights, title and
interest in and to the Equipment upon Lessor's receipt, following an event of
default and the exercise of the Lessor's remedies, of the amounts specified in
Paragraph 21(f). Any action by Lessee against Lessor for any default by Lessor
under any Lease shall be commenced within one year after any such cause of
action accrues.
24. NOTICES; ADMINISTRATION. Except as otherwise provided herein, all
notices, approvals, consents, correspondence, or other communications required
or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to Lessor, then to Transamerica Technology Finance Division,
76 Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to Lessor at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department, if to Lessee, then to Vixel Corporation, 325 Interlocken Parkway,
Building A, Broomfield, CO 80021, Attention: Mr. Mark Harrington, Chief
Financial Officer or such other address as shall be designated by Lessee or
Lessor to the other party. All such notices and correspondence shall be
effective when received.
25. REPRESENTATIONS. Lessee represents and warrants to Lessor that (a)
Lessee is duly organized, validly existing, and in good standing under the laws
of the State of its incorporation; (b) the execution, delivery, and performance
by Lessee of this Agreement are within Lessee's powers, have been duly
authorized by all necessary action, and do not and will not contravene (i)
Lessee's organizational documents or (ii) any law, regulation, rule, or
contractual restriction binding on or affecting Lessee; (c) no authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery, and
performance by Lessee of this Agreement; (d) each Lease constitutes the legal,
valid, and binding obligations of Lessee enforceable against Lessee in
accordance with its terms, except as may be limited by applicable bankruptcy,
reorganization, receivership, insolvency or other laws affecting the enforcement
of creditors' or lessors' rights generally; (e) the cost of each item of
Equipment does not exceed the fair and usual price for such type of equipment
purchased in like quantity and reflects all discounts, rebates, and allowances
for the Equipment (including, without limitation, discounts for advertising,
prompt payment, testing, or other services) given to the Lessee by the
manufacturer, supplier, or any other person; and (f) all information supplied by
Lessee to Lessor in connection herewith is correct and does not omit any
material statement necessary to insure that the information supplied is not
misleading.
26. FURTHER ASSURANCES. Lessee, upon the request of Lessor, will
execute, acknowledge, record, or file, as the case may be, such further
documents and do such further acts as may be reasonably necessary, desirable, or
proper to carry out more effectively the purposes of this Agreement. Lessee
hereby appoints Lessor as its attorney-in-fact to execute on behalf of Lessee
and authorizes Lessor to file without Lessee's signature any UCC financing
statements and amendments Lessor deems necessary and advisable with regard to
the Equipment.
27. FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as soon as
available, but not later than 120 days after the end of each fiscal year of
Lessee and its consolidated subsidiaries, the consolidated balance sheet, income
statement, and statements of cash flows and shareholders equity for Lessee and
its consolidated subsidiaries (the "Financial Statements") for such year,
reported on by independent certified public accountants without an adverse
qualification; and (b) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters in any fiscal year of Lessee
and its consolidated subsidiaries, the Financial Statements for such fiscal
quarter, together with a certification duly executed by a responsible officer of
Lessee that
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such Financial Statements have been prepared in accordance with generally
accepted accounting principles and are fairly stated in all material respects
(subject to normal year-end audit adjustments). Lessee shall also deliver to
Lessor as soon as available copies of all press releases and other similar
communications issued by Lessee.
28. CONSENT TO JURISDICTION. Lessee irrevocably submits to the
jurisdiction of any Illinois state or federal court sitting in Illinois for any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, and Lessee irrevocably agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
Illinois state or federal court.
29. WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
30. FINANCE LEASE. Lessee and Lessor agree that each Lease is a "Finance
Lease" as defined by Section 2A-103(g) of the UCC. Lessee acknowledges that
Lessee has reviewed and approved each written Supply Contract (as defined by UCC
2A-103(y)) covering Equipment purchased from each "Supplier" (as defined by UCC
2A-103(x)) thereof.
31. NO AGENCY. Lessee acknowledges and agrees that neither the
manufacturer or supplier, nor any salesman, representative, or other agent of
the manufacturer or supplier, is an agent of Lessor. No salesman,
representative, or agent of the manufacturer or supplier is authorized to waive
or alter any term or condition of this Agreement or any Schedule and no
representation as to the Equipment or any other matter by the manufacturer or
supplier shall in any way affect Lessee's duty to pay Rent and perform its other
obligations as set forth in this Agreement or any Schedule.
32. GOVERNING LAW; SEVERABILITY. EACH LEASE SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. IF ANY PROVISION SHALL BE HELD TO BE INVALID OR
UNENFORCEABLE, THE VALIDITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL
NOT IN ANY WAY BE AFFECTED OR IMPAIRED.
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LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THIS AGREEMENT AND THE SCHEDULE HERETO,
UNDERSTANDS THEM, AND AGREES TO BE BOUND BY THEIR TERMS AND CONDITIONS. FURTHER,
LESSEE AND LESSOR AGREE THAT THIS AGREEMENT, THE SCHEDULES DELIVERED AND SIGNED
BY LESSOR AND LESSEE IN CONNECTION HEREWITH FROM TIME TO TIME, AND THE
COMMITMENT LETTER ARE THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
BETWEEN THE PARTIES, SUPERSEDING ALL PROPOSALS OR PRIOR AGREEMENTS, ORAL OR
WRITTEN, AND ALL OTHER COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE
SUBJECT MATTER HEREOF. SHOULD THERE EXIST ANY INCONSISTENCY BETWEEN THE TERMS OF
THE COMMITMENT LETTER AND THIS AGREEMENT, THE TERMS OF THIS AGREEMENT SHALL
PREVAIL.
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be duly executed by their duly authorized officers as of the date
first written above.
VIXEL CORPORATION
By: /s/ Mark Harrington
---------------------------------
Name: Mark Harrington
Title: Chief Financial Officer
TRANSAMERICA BUSINESS CREDIT
CORPORATION
By: /s/ Gary P. Moro
---------------------------------
Name: Gary P. Moro
Title: Vice President
9
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EXHIBIT 10.5
M A S T E R L E A S E A G R E E M E N T
MASTER LEASE AGREEMENT (the "Master Lease") dated January 18, 1996 by and
between COMDISCO, INC. ("Lessor") and VIXEL CORPORATION ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. PROPERTY LEASED.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. TERM.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. RENT AND PAYMENT.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES.
4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT.
5.1 TITLE. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's
rights, but will not be obligated to perform any of the obligations of Lessor.
The Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and the
Secured Party continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. NET LEASE; TAXES AND FEES.
6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR.
7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided
re-certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
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.
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<PAGE> 2
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee
is a party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. DELIVERY AND RETURN OF EQUIPMENT.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. LABELING.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. INDEMNITY.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. RISK OF LOSS.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment. Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. DEFAULT, REMEDIES AND MITIGATION.
13.1 DEFAULT. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due
if that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the Lessee
in the Schedule or in any document or certificate furnished to the Lessor
hereunder if that failure or inaccuracy continues for ten (10) business days
after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary
Equipment Schedule or other agreement between Lessee and Lessor or its Assignee
or Secured Party.
13.2 REMEDIES. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable
Schedule by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default
Costs;
(c) with notice and demand, recover all sums due and accelerate and recover
the present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
(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
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Directors meeting within thirty (30) days following the date of such meeting
held during the term of this Master Lease.
14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 NOTICES. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 DEFINITIONS.
ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of
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.
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 lesser 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.
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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 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.
VIXEL CORPORATION COMDISCO, INC.,
as Lessee as Lessor
By: /s/ Gregory R. Olbright By: /s/ James P. Labe
---------------------------- -------------------------------------
Title: 1/16/96 Title: President, Venture Lease Division
------------------------ ---------------------------------
-4-
<PAGE> 5
ADDENDUM TO MASTER LEASE AGREEMENT
DATED JANUARY 18,1996
BY AND BETWEEN COMDISCO, INC., AS LESSOR AND
VIXEL CORPORATION AS LESSEE
The terms and conditions of the above referenced Agreement shall be
modified and amended as follows:
1. Section 5.3, "Assignment by Lessor"
In line 1 of subsection (b) before the word "Lessee", insert the words
"After receipt of written notice of assignment from Lessor,".
To the end of this Section, add the following sentence:
"Notwithstanding anything to the contrary herein, Comdisco will continue to
administer this Master Lease for at least one (1) year following the date
hereof."
2. Section 6.2, "Taxes and Fees"
To the end of this Section, add the following paragraph:
"Lessee shall not be liable for any taxes, fees or charges to the extent the
same result from any sale or assignment or grant of security interest by
Lessor, or to the extent any such action increases the taxes, fees or
charges that would otherwise by payable. Lessee shall have the right to
contest by proper legal proceedings any taxes levied, as agent for or in the
name of Lessor. Lessor will cooperate in any legal proceedings being
prosecuted by Lessee with regard to any taxes, but Lessee will pay the
expenses in such litigation. Lessee shall have the right to contest in good
faith by any appropriate proceeding the validity or the amount of taxes
unless such contest would adversely affect the title of the Lessor to the
Equipment or would subject it to forfeiture or sale. Lessee shall have the
rights to any refund received as a result of any such contest or
proceeding."
3. Section 7, "Care, Use and Maintenance: Attachments and Reconfigurations; and
Inspection by Lessor"
Subsection 7.1, second sentence insert "at commercially reasonable prices"
after "commercially available"; after the words "another party acceptable to
Lessor", add the words "including self-maintenance by Lessee"; last
sentence, insert the following at the end thereof: "or Lessee has exercised
its option to purchase such Equipment."
<PAGE> 6
4. Section 9, "Delivery and Return of Equipment"
In line 3 after the word "Schedule", add the words "and provided that the
Equipment is not purchased or the Master Lease extended as permitted by the
applicable Schedule,".
5. Section 11, "Indemnity"
First sentence, after the word "Equipment", delete the words "during the
term of this Master Lease or until Lessee's obligations under the Master
Lease terminate" and insert "arising from acts or events during the period
from the Commencement Date of each Summary Equipment Schedule until
re-delivery of the Equipment to Lessor in accordance with the terms of this
Master Lease." In line 9 after the words "negligent acts", add the words "or
willful misconduct".
6. Section 13.1, "Default"
In line 4 of Subsection (c) after the word "powers", add the words "which
petition or appointment is not dismissed or vacated within sixty (60)
days,".
7. Section 13.2, "Remedies"
In line 5 of Subsection (d) after the word "negligence", add the words "or
willful misconduct".
8. Section 14.1, "Board Attendance"
Delete subsection 14.1 in its entirety.
9. Section 14.2, "Financial Statements"
In lines 2 and 3, delete the words "the same information which Lessee
provides to its Board of Directors, but", and replace with the words
"reasonably detailed monthly financial statements."
In line 5 after the word "principles", add the parenthetical phrase "(except
that such financials will not include footnotes required by generally
accepted accounting principles)".
10. Section 14.4, "Merger and Sale Provisions"
In line 2, delete "sixty (60)" and replace with "thirty (30)".
To the end of this Section, add the following:
"Notwithstanding the foregoing, Lessor hereby consents to any Merger in
which the surviving entity has cash and liquid marketable securities of at
least five (5) times the remaining rental payments."
<PAGE> 7
11. Section 14.7, "Binding Nature"
To the end of the last sentence, add the words ", except as provided for in
this Agreement".
12. Section 14.18, "Definitions."
In line 3 of the definition "Merger" following the word "entity", add the
words ", provided that no such transactions shall constitute a Merger unless
the Lessee's stockholders, as constituted, immediately before any such
transaction, hold less than fifty percent (50%) of the outstanding voting
securities of the Lessee immediately following such transaction".
13. Add the following as a new Section 14.19, "Right of First Refusal and Right
to Match":
"Lessee agrees that Lessor will have the right of first refusal with regard
to any future lease transactions and the opportunity to match any bonafide
lease proposal from a third party. A bonafide lease proposal shall be deemed
to be an offer from an independent (not affiliated with any manufacturer)
qualified leasing company which actively is engaged in the business of
financing equipment ("Bonafide Proposal"). Lessee will provide Lessor in
writing with the terms of the Bonafide Proposal and Lessor will have three
(3) business days to match such proposal. In the event of a Bonafide
Proposal, if Lessor has timely matched such proposal, Lessee and Lessor
shall enter into a lease upon mutually agreeable terms and conditions."
14. Definition "Casualty Value", line 1, insert "present value of the" after the
words "greater of the" and line 2, insert "discounted at the U.S. Treasury
rate of comparable maturity to the remaining term" after the word "term".
VIXEL CORPORATION COMDISCO, INC.
as Lessee as Lessor
By: /s/ Gregory R. Olbright By: /s/ James P. Labe
------------------------------- -------------------------------
Title: CEO Title: President, Venture Lease
------------------------------- -------------------------------
Division
Date: 1/18/96 Date:
------------------------------- -------------------------------
<PAGE> 1
EXHIBIT 10.6
================================================================================
GREYROCK CAPITAL
A Division of NationsCredit Commercial Corporation
$7,500,000 Term Loan
provided to
VIXEL CORPORATION
October 2, 1998
================================================================================
1. Amendment to Loan Agreement between Greyrock Capital, a Division of
NationsCredit Commercial Corporation (formerly Greyrock Business Credit)
("Greyrock") and Vixel Corporation ("Borrower") dated October 2, 1998*.
2. Secured Promissory Note in the original principal amount of $7,500,000
made by Borrower to the order of Greyrock.
3. Warrant to Purchase Stock issued by Borrower to Greyrock.
4. Certified Resolution and Incumbency Certificate of Borrower.
- ------------
* Unless otherwise indicated, all documents are dated October 2, 1998.
<PAGE> 2
---------------------------
AMENDMENT TO LOAN DOCUMENTS
BORROWER: VIXEL CORPORATION
ADDRESS: 11911 NORTHCREEK PARKWAY S.
BOTHELL, WASHINGTON 98011
DATE: OCTOBER 2, 1998
THIS AMENDMENT TO LOAN DOCUMENTS is entered into between GREYROCK
CAPITAL, a division of NationsCredit Commercial Corporation (formerly Greyrock
Business Credit) ("GBC"), whose address is 10880 Wilshire Blvd., Suite 950, Los
Angeles, CA 90024 and the borrower named above ("Borrower").
The Parties agree to amend the Loan and Security Agreement between them,
dated November 26, 1997 (as amended, the "Loan Agreement"), as follows,
effective on the date hereof. (This Amendment, the Loan Agreement, any prior
written amendments to said agreements signed by GBC and the Borrower, and all
other written documents and agreements between GBC and the Borrower are referred
to herein collectively as the "Loan Documents". Capitalized terms used but not
defined in this Amendment, shall have the meanings set forth in the Loan
Agreement.)
1. Term Loan. Section 1 of the Schedule, which presently reads as
follows:
"1. Credit Limit (Section 1.1): An amount not to exceed the
lesser of: (i) $5,000,000 at any one time outstanding; or (ii)
80% of the amount of Borrower's Eligible Receivables (as defined
in Section 8 above)."
is amended to read as follows:
"1. CREDIT LIMIT (Section 1.1): An amount not to exceed the
lesser of $12,500,000 or the sum of (a) and (b) below:
"(a) The unpaid principal balance of the Term Loan in
the original principal amount of $7,500,000 being made
concurrently herewith by GBC to Borrower (the `Term
Loan') and evidenced by the Secured Promissory Note
(`Term Note') made by Borrower to the order of GBC,
being executed and delivered to GBC concurrently
herewith; plus
"(b) Loans (the "Revolving Loans") in an amount not to
exceed the lesser of (i) $5,000,000 at any one time
outstanding, or (ii) 80% of the amount of Borrower's
Eligible Receivables (as defined in Section 8 above)
"The Term Loan shall be made concurrently, in one disbursement.
GBC shall have no obligation to disburse the Term Loan if, at
the date of the disbursement, any Event of Default or event
which, with notice or passage of time or both, would constitute
an Event of Default has occurred and is continuing.
"The Term Loan shall bear interest and be repayable on the terms
set forth in the Term Note. The Term Loan once repaid may not be
reborrowed. The Term Loan and the Revolving Loans constitute
`Loans' for all purposes of this Agreement."
-1-
<PAGE> 3
GREY ROCK CAPITAL AMENDMENT TO LOAN DOCUMENTS
- --------------------------------------------------------------------------------
2. Interest-Revolving Loans. The portion of Section 2 of the Schedule,
which presently reads as follows:
"(ii) the interest charged for each month in which there are any
Loans outstanding shall be a minimum of $6,000 (regardless of
the amount of the Loans outstanding), and (iii) the interest
charged for each month in which there are no Loans outstanding
shall be $2,000 (even though there are no Loans outstanding)."
is amended to read as follows:
"(ii) the interest with respect to Revolving Loans charged for
each month in which there are any Revolving Loans outstanding
shall be a minimum of $6,000 (regardless of the amount of the
Revolving Loans outstanding), and (iii) the interest with
respect to Revolving Loans charged for each month in which there
are no Revolving Loans outstanding shall be $2,000 (even though
there are no Revolving Loans outstanding)."
3. Extension. The date "NOVEMBER 30, 1998" in Section 4 of the Schedule
is hereby amended by replacing said date with the date "SEPTEMBER 30, 1999."
Borrower may request an extension of such maturity date from September 30, 1999
to December 31, 1999, but any such extension shall be a matter of GBC's sole
discretion and any such extension shall only be granted in a written agreement
signed by GBC. In the event GBC grants such extension, GBC agrees not to charge
an additional fee for the same.
4. Fee; Warrants. In consideration for GBC entering into this Amendment
and making the Term Loan, the Borrower shall (i) concurrently pay GBC a fee in
the amount of $112,500, and (ii) on or before November 25, 1998, provide GBC
with five-year warrants to purchase 100,000 shares of Series E Preferred stock
of the Borrower, on the terms set forth in the Warrant to Purchase Stock
attached hereto as Exhibit A, at $10.00 per share. Said fee and warrants shall
be deemed fully earned on the date hereof, shall be in addition to all interest
and other fees, and shall be non-refundable. GBC is authorized to deduct the
foregoing fee from the proceeds of the Term Loan.
5. Representations True. Borrower represents and warrants to GBC that
all representations and warranties set forth in the Loan Agreement, as amended
hereby, are true and correct, except as set forth in Schedule A hereto. GBC
hereby waives any Event of Default (as defined in the Loan Agreement ) arising
by reason of the matters set forth on Schedule A hereto or the failure of
Borrower to notify GBC of the same, provided that Borrower shall (i) cure the
breaches set forth in Section 3.8 of Schedule A on or before November 30, 1998,
and (ii) cure the breaches set forth in Section 5.2 of Schedule A on or before
October 31, 1998. The foregoing waiver shall not extend to any other default or
Event of Default, whether or not similar to the foregoing, including without
limitation any future breach of any of the covenants or matters set forth on
Schedule A..
6. General Provisions. This Amendment, the Loan Agreement, and the other
Loan Documents set forth in full all of the representations and agreements of
the parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement and the other Loan Documents
shall continue in full force and effect and the same are hereby ratified and
confirmed.
-2-
<PAGE> 4
GREY ROCK CAPITAL AMENDMENT TO LOAN DOCUMENTS
- --------------------------------------------------------------------------------
Borrower: GBC:
VIXEL CORPORATION Greyrock Capital, a Division of
Nationscredit Commercial Corporation
By /s/ Gregory R. Olbright
-------------------------------
President or Vice President By /s/ Lisa Nagano
-------------------------------
Title Vice President
By /s/ James C. T. Linfield
-------------------------------
Secretary or Ass't Secretary
-3-
<PAGE> 5
[GREYROCK LOGO]
SECURED PROMISSORY NOTE
$7,500,000. LOS ANGELES, CALIFORNIA October 2, 1998
FOR VALUE RECEIVED, the undersigned (the Borrower) promises to pay to the
order of GREYROCK CAPITAL, a division of NationsCredit Commercial Corporation
(formerly Greyrock Business Credit) (Greyrock) at 10880 Wilshire Blvd. Suite
950, Los Angeles, CA 90024, or at such other address as the holder of this Note
shall direct, the principal sum of $7,500,000, or such lesser amount as may
represent the unpaid principal balance of the Term Loan made by Greyrock to
Borrower pursuant to the Loan and Security Agreement between the Borrower and
Greyrock dated NOVEMBER 26, 1997 (as amended, the Loan Agreement), payable on
the earlier of the following dates (the Maturity Date): (i) SEPTEMBER 30, 1999,
or (ii) the date the Loan Agreement terminates by its terms or is terminated by
either party in accordance with its terms. On the Maturity Date the entire
remaining unpaid principal balance of this Note, plus any and all accrued and
unpaid interest, shall be due and payable.
This Note shall bear interest on the unpaid principal balance hereof from
time to time outstanding at a rate equal to the following: The interest rate in
effect throughout each calendar month during the term of this Note shall be the
highest LIBOR Rate in effect during such month, plus 4.75% per annum, provided
that the interest rate in effect in each month shall not be less than 8% per
annum. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed. LIBOR Rate has the meaning set forth in the Loan
Agreement.
Accrued interest on this Note shall be payable monthly, in addition to the
principal payments provided above, commencing on OCTOBER 31, 1998, and
continuing on the last day of each succeeding month. Any accrued interest not
paid when due (including any cure period provided in the Loan Agreement) shall
bear interest at the same rate as the principal hereunder.
Principal of and interest on this Note shall be payable in lawful money of
the United States of America. If a payment hereunder becomes due and payable on
a Saturday, Sunday or legal holiday, the due date thereof shall be extended to
the next succeeding business day, and interest shall be payable thereon during
such extension.
In the event any payment of principal or interest on this Note is not paid
in full when due (including any cure period provided in the Loan Agreement), or
if any other default or event of default occurs and is continuing hereunder,
under the Loan Agreement or under any other present or future instrument,
document, or agreement between the Borrower and Greyrock (collectively, Events
of Default), Greyrock may, at its option, at any time thereafter, declare the
entire unpaid principal balance of this Note plus all accrued interest to be
immediately due and payable, without notice or demand. The acceptance of any
installment of principal or interest by Greyrock after the time when it becomes
due, as herein specified, shall not be held to establish a custom, or to waive
any rights of Greyrock to enforce payment when due of any further installments
or any other rights, nor shall any failure or delay to exercise any rights be
held to waive the same.
-1-
<PAGE> 6
GREYROCK CAPITAL SECURED PROMISSORY NOTE
- --------------------------------------------------------------------------------
All payments hereunder are to be applied first to costs and fees referred
to hereunder, second to the payment of accrued interest and the remaining
balance to the payment of principal. Greyrock shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments hereunder.
The Borrower agrees to pay all reasonable costs and expenses (including
without limitation attorney's fees) incurred by Greyrock in connection with or
related to this Note, or its enforcement, whether or not suit be brought, as
authorized in the Loan Agreement. The Borrower hereby waives presentment,
demand for payment, notice of dishonor, notice of nonpayment, protest, notice
of protest, and any and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, and
the Borrower hereby waives the benefits of any statute of limitations with
respect to any action to enforce, or otherwise related to, this Note.
This Note is secured by the Loan Agreement and all other present and
future security agreements between the Borrower and Greyrock. Nothing herein
shall be deemed to limit any of the terms or provisions of the Loan Agreement
or any other present or future document, instrument or agreement, between the
Borrower and Greyrock, and all of Greyrock's rights and remedies hereunder and
thereunder are cumulative.
In the event any one or more of the provisions of this Note shall for any
reason be held to be invalid, illegal or unenforceable, the same shall not
affect any other provision of this Note and the remaining provisions of this
Note shall remain in full force and effect.
No waiver or modification of any of the terms or provisions of this Note
shall be valid or binding unless set forth in a writing signed by a duly
authorized officer of Greyrock, and then only to the extent therein
specifically set forth.
GREYROCK AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO: (I)
THIS NOTE; OR (II) ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN
GREYROCK AND BORROWER; OR (III) ANY CONDUCT, ACTS OR OMISSIONS OF GREYROCK OR
BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
ANY OTHER PERSONS AFFILIATED WITH GREYROCK OR BORROWER; IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
This Note is payable in, and shall be governed by the laws of, the State
of California.
VIXEL CORPORATION
By: /s/ Gregory R. Olbright
-------------------------------------
President
By: /s/ James C.T. Linfield
-------------------------------------
Secretary
2
<PAGE> 7
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
(WHICH MAY BE COMPANY COUNSEL) IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
-------------------------
WARRANT TO PURCHASE STOCK
WARRANT TO PURCHASE 100,000 ISSUE DATE: NOVEMBER 25, 1998
SHARES OF THE SERIES E PREFERRED EXPIRATION DATE: NOVEMBER 25, 2003
STOCK OF VIXEL CORPORATION INITIAL EXERCISE PRICE: $10.00 PER SHARE
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, GREYROCK CAPITAL, A DIVISION OF NATIONSCREDIT
COMMERCIAL CORPORATION (FORMERLY GREYROCK BUSINESS CREDIT) ("Holder") is
entitled to purchase the number of fully paid and non-assessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth in this Warrant, and subject further
to Section 1.7 hereof.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 FAIR MARKET VALUE. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is more than ten percent (10%) greater than that determined by the
Board of Directors, then all fees and expenses of such investment banking firm
shall be paid by the Company. In all other circumstances, such fees and expenses
shall be paid by Holder.
1.4 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.5 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
-1-
<PAGE> 8
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
mutilation of this Warrant and, in the case of loss, theft or destruction, on
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company or, in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
1.6 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.6.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.6.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.6.3. NONASSUMPTION. If upon the closing of any Acquisition the
successor entity does not assume the obligations of this Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.7. REDEMPTION EVENT; WARRANT FOR COMMON SHARES AT HOLDER'S OPTION;
CONVERSION RATE APPLIES. If at the time the Holder intends to exercise this
Warrant a redemption of Series E Preferred shares of the Company is then slated
to occur or is occurring under the terms and provisions of subsection 6 of
section D of Article IV of the Restated Certificate of Incorporation of the
Company dated February __, 1998, then this Warrant, at the sole option of the
Holder, shall be considered to be exercisable for the same number of shares of
common stock of the Company as stated above regarding the number of shares of
Series E Preferred of the Company as modified by the most recent per share
conversion rate applicable to the Series E Preferred stock of the Company as set
forth in the certificate of incorporation of the Company; the per share exercise
price for such common shares shall be the same as is set forth above with
respect to the Series E Preferred stock of the Company.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Certificate of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which
-2-
<PAGE> 9
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article 2 including, without limitation, adjustments to the Warrant
Price and to the number of securities or property issuable upon exercise of the
new Warrant. The provisions of this Section 2.2 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 ADJUSTMENTS FOR DILUTING ISSUANCES. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment for "Dilutive Issuances" as set forth in
the Restated Certificate of Incorporation.
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder an amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 ADJUSTMENTS. Holder shall be entitled to the same rights with
respect to notices regarding adjustments as provided to the holders of Series E
Preferred Stock as set forth in the Company's Restated Certificate of
Incorporation.
2.8 NO RIGHTS AS SHAREHOLDERS. This Warrant does not entitle Holder to
any voting rights or other rights as a stockholder of the Company prior to the
exercise of the Holder's rights to purchase Preferred Stock as provided for
herein.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of
-3-
<PAGE> 10
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
common stock will be entitled thereto) or for determining rights to vote, if
any, in respect of the matters referred to in (c) and (d) above; (2) in the case
of the matters referred to in (c) and (d) above at least 20 days prior written
notice of the date when the same will take place (and specifying the date on
which the holders of common stock will be entitled to exchange their common
stock for securities or other property deliverable upon the occurrence of such
event); and (3) in the case of the matter referred to in (e) above, the same
notice as is given to the holders of such registration rights.gma
3.3 REGISTRATION AND INFORMATION RIGHTS. Substantially concurrently with
the issuance of this Warrant, the Company shall cause its Amended and Restated
Investors' Rights Agreement to be amended to make the Shares "Registrable
Securities" thereunder and Holder a "Holder" thereunder. By acceptance of this
Warrant, Holder shall be deemed a party to the Agreement and shall execute
counterpart signature pages thereto at the request of the Company.
ARTICLE 4. REPRESENTATIONS AND COVENANTS OF HOLDER. This Warrant has
been entered into by the Company in reliance upon the following representations
and covenants of Holder, which by its acceptance hereof the Holder hereby
confirms:
4.1 INVESTMENT PURPOSE. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of Holder's rights contained herein will
be acquired for investment and not with a view to the sale or distribution of
any part thereof, and the Holder has no present intention of selling or engaging
in any public distribution of the same except pursuant to a registration or
exemption.
4.2 PRIVATE ISSUE. Holder understands (i) that the Preferred Stock
issuable upon exercise of the Warrantholder's rights contained herein is
not registered under the 1933 Act or qualified under applicable state
securities laws on the ground that the issuance contemplated by this
Warrant Agreement will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's
reliance on such exemption is predicated on the representations set
forth in this Section 4.
4.3 FINANCIAL RISK. Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of its investment and has the ability to bear the economic
risks of its investment.
4.4 RISK OF NO REGISTRATION. Holder understands that if the Company does
not register with the Securities and Exchange Commission pursuant to
Section 12 of the 1933 Act, or file reports pursuant to Section 15(d) of
the Securities Exchange Act of 1934 (the "1934 Act"), or if a
registration statement covering the securities under the 1933 Act is not
in effect when it desires to sell (i) the rights to purchase Preferred
Stock pursuant to this Warrant Agreement, or (ii) the Preferred Stock
issuable upon exercise of the right to purchase, it may be required to
hold such securities for an indefinite period. The Holder also
understands that any sale of the rights of the Holder to purchase
Preferred Stock which might be made by it in reliance upon Rule 144
under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
4.5 ACCREDITED INVESTOR. Holder is an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Act, as presently in
effect.
ARTICLE 5. MISCELLANEOUS.
5.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or
in part, at any time and from time to time on or before the Expiration Date set
forth above.
5.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF
ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL
(WHICH MAY BE COMPANY COUNSEL) IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
-4-
<PAGE> 11
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
5.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, if reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holders notice of
proposed sale.
5.4 TRANSFER PROCEDURE. Subject to the provisions of Section 5.2 and
5.3, Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
5.5 NOTICES. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
5.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
5.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
5.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
VIXEL CORPORATION
BY /s/ Gregory R. Olbright
----------------------------------------------------
CHAIRMAN OF THE BOARD, PRESIDENT OR VICE PRESIDENT
BY /s/ Kurtis L. Adams
----------------------------------------------------
SECRETARY OR ASS'T SECRETARY
-5-
<PAGE> 12
GREYROCK CAPITAL WARRANT TO PURCHASE STOCK
- --------------------------------------------------------------------------------
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase ____________ shares of the
Common/Series ____ Preferred [strike one] Stock of __________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to _______ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
--------------------------
(Name)
--------------------------
--------------------------
(Address)
3. The undersigned represents it is acquiring the shares solely
for its own account and not as a nominee for any other party and not with a view
toward the resale or distribution thereof except in compliance with applicable
securities laws.
- -------------------------------------
(Signature)
- -------------------------------------
(Date)
-6-
<PAGE> 13
[GREYROCK LOGO]
CERTIFIED RESOLUTION AND INCUMBENCY CERTIFICATE
BORROWER: VIXEL CORPORATION, A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF DELAWARE
DATE: OCTOBER 2, 1998
I, the undersigned, Secretary or Assistant Secretary of the above-named
borrower, a corporation organized under the laws of the state set forth above,
do hereby certify that the following is a full, true and correct copy of
resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and
that said resolutions are still in full force and effect and have not been in
any way modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Greyrock Capital, a division
of NationsCredit Commercial Corporation (formerly Greyrock Business
Credit) ("Greyrock") ("Greyrock"), from time to time, such sum or sums of
money as, in the judgment of the officer or officers hereinafter
authorized hereby, this corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she
is hereby authorized, directed and empowered, in the name of this
corporation, to execute and deliver to Greyrock, and Greyrock is requested
to accept, the loan agreements, security agreements, notes, financing
statements, and other documents and instruments providing for such loans
and evidencing and/or securing such loans, with interest thereon, and said
authorized officers are authorized from time to time to execute renewals,
extensions and/or amendments of said loan agreements, security agreements,
and other documents and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, directed and empowered, as security for any and all
indebtedness of this corporation to Greyrock, whether arising pursuant to
this resolution or otherwise, to grant, transfer, pledge, mortgage,
assign, or otherwise hypothecate to Greyrock, or deed in trust for its
benefit, any property of any and every kind, belonging to this
corporation, including, but not limited to, any and all real property,
accounts, inventory, equipment, general intangibles, instruments,
documents, chattel paper, notes, money, deposit accounts, furniture,
fixtures, goods, and other property of every kind, and to execute and
deliver to Greyrock any and all grants, transfers, trust receipts, loan or
credit agreements, pledge agreements, mortgages, deeds of trust, financing
statements, security agreements and other hypothecation agreements, which
said instruments and the note or notes and other instruments referred to
in the preceding paragraph may contain such provisions, covenants,
recitals and agreements as Greyrock may require and said authorized
officers may approve, and the execution thereof by said authorized
officers shall be conclusive evidence of such approval; and that Greyrock
may conclusively rely upon a certified copy of these resolutions and a
certificate of the Secretary or Ass't Secretary of this corporation as to
the officers of this corporation and their offices and signatures, and
continue to conclusively rely on such certified copy of these resolutions
and said certificate for all past, present and future transactions until
written notice of any change hereto or thereto is given to Greyrock by
this corporation by certified mail, return receipt requested.
Stock Purchase Warrants.
RESOLVED FURTHER, that, in connection with the foregoing loans, this
corporation shall issue to Greyrock warrants to purchase 100,000 shares of
SERIES E PREFERRED stock of this corporation, at $10.00 per share, on the
terms and provisions of Greyrock's standard form Warrant to Purchase Stock
and related documents, with such changes therein as Greyrock and this
corporation shall agree; any officer of this corporation is hereby
authorized to execute and deliver such Warrant to Purchase Stock and
related documents, and all documents and instruments relating thereto, in
such form and containing such additional provisions as said authorized
officers may approve, and the execution thereof by said authorized
officers shall be conclusive evidence of such approval.
<PAGE> 14
GREYROCK CAPITAL CERTIFIED RESOLUTION
- --------------------------------------------------------------------------------
The undersigned further hereby certifies that the following persons are the duly
elected and acting officers of the corporation named above as borrower and that
the following are their actual signatures:
<TABLE>
<CAPTION>
NAMES OFFICE(S) ACTUAL SIGNATURES
- ----- --------- -----------------
<S> <C> <C>
GREGORY R. OLBRIGHT CEO & PRESIDENT x /s/ GREGORY R. OLBRIGHT
------------------------
JAMES C. T. LINFIELD SECRETARY x /s/ JAMES C. T. LINFIELD
------------------------
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or Assistant
Secretary on the date set forth above.
/s/ JAMES C. T. LINFIELD
---------------------------------
Secretary or Assistant Secretary
-2-
<PAGE> 15
- --------------------------------------------------------------------------------
[LOGO]
LOAN AND SECURITY AGREEMENT
BORROWER: VIXEL CORPORATION
ADDRESS: 11911 NORTHCREEK PARKWAY S., SUITE 100
BOTHELL, WASHINGTON 98011
DATE: NOVEMBER 26, 1997
This Loan and Security Agreement is entered into on the above date between
GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial Corporation
("GBC"), whose address is 10880 Wilshire Blvd. Suite 950, Los Angeles, CA 90024
and the borrower named above ("Borrower"), whose chief executive office is
located at the above address ("Borrower's Address"). The Schedule to this
Agreement (the "Schedule") being signed concurrently is an integral part of this
Agreement. (Definitions of certain terms used in this Agreement are set forth in
Section 8 below.)
1. LOANS.
1.1 LOANS. GBC will make loans to Borrower (the "Loans"), in amounts
determined by GBC in its * up to the amounts (the "Credit Limit") shown on the
Schedule, provided no Default or Event of Default has occurred and is
continuing. If at any time or for any reason the total of all outstanding Loans
and all other Obligations exceeds the Credit Limit, Borrower shall immediately
pay the amount of the excess to GBC, without notice or demand.
*GOOD FAITH BUSINESS JUDGMENT
1.2 INTEREST. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule, except where expressly set forth to the
contrary in this Agreement or in another written agreement signed by GBC and
Borrower. Interest shall be payable monthly, on the last day of the month.
Interest may, in GBC's discretion, be charged to Borrower's loan account, and
the same shall thereafter bear interest at the same rate as the other Loans.
1.3 FEES. Borrower shall pay GBC the fee(s) shown on the Schedule, which are
in addition to all interest and other sums payable to GBC and are not
refundable.
2. SECURITY INTEREST.
2.1 SECURITY INTEREST. To secure the payment and performance of all of the
Obligations when due, Borrower hereby grants to GBC a security interest in all
of Borrower's interest in the following, whether now owned or hereafter
acquired, and wherever located (collectively, the "Collateral"): All Inventory,
Equipment, Receivables, and General Intangibles, including, without limitation,
all of Borrower's Deposit Accounts, all money, all collateral in which GBC is
granted a security interest pursuant to any other present or future agreement,
all property now or at any time in the future in GBC's possession, and all
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties), all products of the foregoing, and all books and
records related to any of the foregoing.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
In order to induce GBC to enter into this Agreement and to make Loans,
Borrower represents and warrants to GBC as follows, and Borrower covenants that
the following representations will continue to be true, and that Borrower will
at all times comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. Borrower, if a corporation, is and will
continue to be, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Borrower is and will continue to
be qualified and licensed to do business in all jurisdictions in which any
failure to do so would have a material adverse effect on Borrower. The
execution, delivery and performance by Borrower of this Agreement, and all other
documents contemplated hereby (i) have been duly and validly authorized, (ii)
are enforceable against Borrower in accordance with their terms (except as
enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors'
rights generally), (iii) do not violate Borrower's articles or certificate of
incorporation, or Borrower's by-laws, or any law or any material agreement or
instrument which is binding upon Borrower or its property, and (iv) do not
constitute grounds for acceleration of any material indebtedness or obligation
under any material agreement or instrument which is binding upon Borrower or its
property.
3.2 NAME; TRADE NAMES AND STYLES. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give GBC 30 days' prior written notice before changing its name
or doing business under any other name. Borrower has complied, and will in the
-1-
<PAGE> 16
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 2
future comply, with all laws relating to the conduct of business under a
fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give GBC at least 30 days prior written
notice before opening any additional place of business, changing its chief
executive office, or moving any of the Collateral to a location other than
Borrower's Address or one of the locations set forth on the Schedule.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. GBC now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend GBC and the Collateral against all claims of others. Borrower is
not and will not become a lessee under any real property lease pursuant to which
the lessor may obtain any rights in any of the Collateral and no such lease now
prohibits, restrains, impairs or will prohibit, restrain or impair Borrower's
right to remove any Collateral from the leased premises. Whenever any Collateral
is located upon premises in which any third party has an interest (whether as
owner, mortgagee, beneficiary under a deed of trust, lien or otherwise),
Borrower shall, whenever requested by GBC, use its best efforts to cause such
third party to execute and deliver to GBC, in form acceptable to GBC, such
waivers and subordinations as GBC shall specify, so as to ensure that GBC's
rights in the Collateral are, and will continue to be, superior to the rights of
any such third party. Borrower will keep in full force and effect, and will
comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located.
3.5 MAINTENANCE OF COLLATERAL. Borrower will maintain the Collateral in good
working condition, ordinary wear and tear excepted, and Borrower will not use
the Collateral for any unlawful purpose. Borrower will immediately advise GBC in
writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. Borrower has maintained and will maintain at Borrower's
Address complete and accurate books and records, comprising an accounting system
in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION, STATEMENTS AND REPORTS. All financial statements now
or in the future delivered to GBC have been, and will be, prepared in conformity
with generally accepted accounting principles and now and in the future will
completely and fairly reflect the financial condition of Borrower, at the times
and for the periods therein stated *. Between the last date covered by any such
statement provided to GBC and the date hereof, there has been no material
adverse change in the financial condition or business of Borrower.
* , SUBJECT TO NORMAL YEAR-END ACCRUALS AND AUDIT ADJUSTMENTS
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. Borrower has timely
filed, and will timely file, all tax returns and reports required by applicable
law, and Borrower has timely paid, and will timely pay, all applicable taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
Borrower may, however, defer payment of any contested taxes, provided that
Borrower (i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (ii)
notifies GBC in writing of the commencement of, and any material development in,
the proceedings, and (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a lien upon any of the Collateral. Borrower is
unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or any other governmental agency. Borrower shall, at all
times, utilize the services of an outside payroll service providing for the
automatic deposit of all payroll taxes payable by Borrower.
3.9 COMPLIANCE WITH LAW. Borrower has complied, and will comply, in all
material respects, with all provisions of all applicable laws and regulations,
including, but not limited to, those relating to Borrower's ownership of real or
personal property, the conduct and licensing of Borrower's business, and all
environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in any material adverse change in
the financial condition or business of Borrower, or in any material impairment
in the ability of Borrower to carry on its business in substantially the same
manner as it is now being conducted. Borrower will promptly inform GBC in
writing of any claim, proceeding, litigation or investigation in the future
threatened or instituted by or against Borrower involving any single claim of *
or more, or involving ** or more in the aggregate.
<PAGE> 17
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 3
*$100,000 **$200,000
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for
lawful business purposes.
4. RECEIVABLES.
4.1 REPRESENTATIONS RELATING TO RECEIVABLES. Borrower represents and warrants
to GBC as follows: Each Receivable with respect to which Loans are requested by
Borrower shall, on the date each Loan is requested and made, represent an
undisputed, bona fide, existing, unconditional obligation of the Account Debtor
created by the sale, delivery, and acceptance of goods or the rendition of
services, in the ordinary course of Borrower's business.
4.2 REPRESENTATIONS RELATING TO DOCUMENTS AND LEGAL COMPLIANCE. Borrower
represents and warrants to GBC as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be, and all
signatories and endorsers have the capacity to contract. All sales and other
transactions underlying or giving rise to each Receivable shall comply with all
applicable laws and governmental rules and regulations. All signatures and
indorsements on all documents, instruments, and agreements relating to all
Receivables are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.
4.3 SCHEDULES AND DOCUMENTS RELATING TO RECEIVABLES. Borrower shall deliver to
GBC transaction reports and loan requests, schedules of all Receivables, and
schedules of collections, all on GBC's standard forms; provided, however, that
Borrower's failure to execute and deliver the same shall not affect or limit
GBC's security interest and other rights in all of Borrower's Receivables, nor
shall GBC's failure to advance or lend against a specific Receivable affect or
limit GBC's security interest and other rights therein. Together with each such
schedule, or later if requested by GBC, Borrower shall furnish GBC with copies
(or, at GBC's request, originals) of all contracts, orders, invoices, and other
similar documents, and all original shipping instructions, delivery receipts,
bills of lading, and other evidence of delivery, for any goods the sale or
disposition of which gave rise to such Receivables, and Borrower warrants the
genuineness of all of the foregoing. Borrower shall also furnish to GBC an aged
accounts receivable trial balance in such form and at such intervals as GBC
shall request. In addition, Borrower shall deliver to GBC the originals of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Receivables, immediately upon receipt
thereof and in the same form as received, with all necessary indorsements.
4.4 COLLECTION OF RECEIVABLES. Borrower shall have the right to collect all
Receivables, unless and until a Default or an Event of Default has occurred *.
Borrower shall hold all payments on, and proceeds of, Receivables in trust for
GBC, and Borrower shall deliver all such payments and proceeds to GBC, within
one business day after receipt of the same, in their original form, duly
endorsed, to be applied to the Obligations in such order as GBC shall determine.
* AND IS CONTINUING
4.5 DISPUTES. Borrower shall notify GBC promptly of all disputes or claims
relating to Receivables on the regular reports to GBC. Borrower shall not
forgive, or settle any Receivable for less than payment in full, or agree to do
any of the foregoing, except that Borrower may do so, provided that: (i)
Borrower does so in good faith, in a commercially reasonable manner, in the
ordinary course of business, and in arm's length transactions, which are
reported to GBC on the regular reports provided to GBC; (ii) no Default or Event
of Default has occurred and is continuing; and (iii) taking into account all
such settlements and forgiveness, the total outstanding Loans and other
Obligations will not exceed the Credit Limit.
4.6 RETURNS. Provided no Event of Default has occurred and is continuing, if
any Account Debtor returns any Inventory to Borrower in the ordinary course of
its business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the Account Debtor in the appropriate
amount (sending a copy to GBC). In the event any attempted return occurs after
the occurrence of any Event of Default *, Borrower shall (i) not accept any
return without GBC's prior written consent, (ii) hold the returned Inventory in
trust for GBC, (iii) segregate all returned Inventory from all of Borrower's
other property, (iv) conspicuously label the returned Inventory as GBC's
property, and (v) immediately notify GBC of the return of any Inventory,
specifying the reason for such return, the location and condition of the
returned Inventory, and on GBC's request deliver such returned Inventory to GBC.
* WHICH IS CONTINUING
4.7 VERIFICATION. GBC may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or GBC or such other name as GBC may choose, and GBC or its designee
may, at any time, notify Account Debtors that it has a security interest in the
Receivables.
4.8 NO LIABILITY. GBC shall not under any circumstances be responsible or
liable for any shortage or discrepancy in, damage to, or loss or destruction of,
any goods, the sale or other disposition of which gives rise to a Receivable, or
for any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Receivable, or for
settling any Receivable in good faith for less than the full amount thereof, nor
shall GBC be deemed to be responsible for any of Borrower's obligations under
any contract or agreement giving rise to a Receivable. Nothing herein shall,
however, relieve GBC from liability for its own gross negligence or willful
misconduct.
<PAGE> 18
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
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Page 4
5. ADDITIONAL DUTIES OF THE BORROWER.
5.1 INSURANCE. Borrower shall, at all times, insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to GBC, in such form and amounts as *, and
Borrower shall provide evidence of such insurance to GBC, so that GBC is
satisfied that such insurance is, at all times, in full force and effect. All
such insurance policies shall name GBC as an additional loss payee, and shall
contain a lenders loss payee endorsement in form reasonably acceptable to GBC.
Upon receipt of the proceeds of any such insurance **, GBC shall apply such
proceeds in reduction of the Obligations as GBC shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, GBC shall release to Borrower insurance proceeds with respect
to Equipment totaling less than $100,000, which shall be utilized by Borrower
for the replacement of the Equipment with respect to which the insurance
proceeds were paid. GBC may require reasonable assurance that the insurance
proceeds so released will be so used. If Borrower fails to provide or pay for
any insurance, GBC may, but is not obligated to, obtain the same at Borrower's
expense. Borrower shall promptly deliver to GBC copies of all reports made to
insurance companies.
* ARE CUSTOMARY IN BORROWER'S BUSINESS
** SUBJECT TO THE RIGHTS OF THE HOLDER OF THE SVB LIENS (AS DEFINED IN SECTION
8 BELOW)
5.2 REPORTS. Borrower, at its expense, shall provide GBC with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower (including budgets, sales projections, operating plans and other
financial documentation), as GBC shall from time to time reasonably specify.
5.3 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At reasonable times, and on one
business day's notice, GBC, or its agents, shall have the right to inspect the
Collateral, and the right to audit and copy Borrower's books and records. GBC
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but GBC shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing inspections and audits shall
be at Borrower's expense and the charge therefor shall be $600 per person per
day (or such higher amount as shall represent GBC's then current standard charge
for the same), plus reasonable out-of-pockets expenses. Borrower shall not be
charged more than $3,000 per audit (plus reasonable out-of-pockets expenses),
nor shall audits be done more frequently than four times per calendar year,
provided that the foregoing limits shall not apply after the occurrence of a
Default or Event of Default *, nor shall they restrict GBC's right to conduct
audits at its own expense (whether or not a Default or Event of Default has
occurred). Borrower will not enter into any agreement with any accounting firm,
service bureau or third party to store Borrower's books or records at any
location other than Borrower's Address, without first obtaining GBC's written
consent, which may be conditioned upon such accounting firm, service bureau or
other third party agreeing to give GBC the same rights with respect to access to
books and records and related rights as GBC has under this Agreement.
* WHICH IS CONTINUING
5.4 REMITTANCE OF PROCEEDS. All proceeds arising from the sale or other
disposition of any Collateral shall be delivered, in kind, by Borrower to GBC in
the original form in which received by Borrower not later than the following
business day after receipt by Borrower, to be applied to the Obligations in such
order as GBC shall determine; provided that, if no Default or Event of Default
has occurred and is continuing, and if no term loan is outstanding hereunder,
then Borrower shall not be obligated to remit to GBC the proceeds of the sale of
Equipment which is sold in the ordinary course of business, in a good-faith
arm's length transaction. Except for the proceeds of the sale of Equipment as
set forth above, Borrower shall not commingle proceeds of Collateral with any of
Borrower's other funds or property, and shall hold such proceeds separate and
apart from such other funds and property and in an express trust for GBC.
Nothing in this Section limits the restrictions on disposition of Collateral set
forth elsewhere in this Agreement.
5.5 NEGATIVE COVENANTS. Except as may be permitted in the Schedule, Borrower
shall not, without GBC's prior written consent, do any of the following: (i)
merge or consolidate with another corporation or entity; (ii) acquire any
assets, except in the ordinary course of business; (iii) enter into any other
transaction outside the ordinary course of business; (iv) sell or transfer any
Collateral, except that, provided no Default or Event of Default has occurred
and is continuing, Borrower may (a) sell finished Inventory in the ordinary
course of Borrower's business, and (b) sell Equipment in the ordinary course of
business, in good-faith arm's length transactions; (v) store any Inventory or
other Collateral with any warehouseman or other third party; (vi) sell any
Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent
basis; (vii) make any loans of any money or other assets *; (viii) incur any
debts, outside the ordinary course of business, which would have a material,
adverse effect on Borrower or on the prospect of repayment of the Obligations
**; (ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity; (x) pay or declare any dividends on Borrower's stock
(except for dividends payable solely in stock of Borrower); (xi) redeem, retire,
purchase or otherwise acquire, directly or indirectly, any of Borrower's
stock***; (xii) make any change in Borrower's capital structure which would have
a material adverse effect on Borrower or on the prospect of repayment of the
Obligations; or (xiii) dissolve or elect to dissolve; or (xiv) agree to do any
of the foregoing.
* OTHER THAN: (i) EXTENSIONS OF CREDIT IN THE NATURE OF ACCOUNTS RECEIVABLE OR
NOTES RECEIVABLE ARISING FROM THE SALE OR LEASE OF GOODS OR SERVICES IN THE
ORDINARY COURSE OF BUSINESS; (ii) INVESTMENTS (INCLUDING DEBT OBLIGATIONS)
RECEIVED IN CONNECTION WITH THE BANKRUPTCY OR REORGANIZATION OF CUSTOMERS OR
SUPPLIERS AND IN SETTLEMENT OF DELINQUENT OBLIGATIONS
<PAGE> 19
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 5
OF, AND OTHER DISPUTES WITH, CUSTOMERS OR SUPPLIERS ARISING IN THE ORDINARY
COURSE OF BUSINESS; AND (iii) INVESTMENTS CONSISTING OF (a) COMPENSATION OF
EMPLOYEES, OFFICERS AND DIRECTORS OF BORROWER SO LONG AS THE BOARD OF DIRECTORS
OF BORROWER DETERMINES THAT SUCH COMPENSATION IS IN THE BEST INTERESTS OF
BORROWER, (b) TRAVEL ADVANCES, EMPLOYEE RELOCATION LOANS AND OTHER EMPLOYEE
LOANS AND ADVANCES IN THE ORDINARY COURSE OF BUSINESS, (c) LOANS TO EMPLOYEES,
OFFICERS OR DIRECTORS RELATING TO THE PURCHASE OF EQUITY SECURITIES OF BORROWER,
(d) OTHER LOANS TO OFFICERS AND EMPLOYEES DULY AUTHORIZED BY THE BOARD OF
DIRECTORS
** OTHER THAN THE FOLLOWING (THE "PERMITTED INDEBTEDNESS"): (i) INDEBTEDNESS
OF BORROWER IN FAVOR OF GBC ARISING UNDER THIS AGREEMENT; (ii) THE EXISTING
INDEBTEDNESS OF THE BORROWER; (iii) INDEBTEDNESS TO TRADE CREDITORS, INCLUDING,
WITHOUT LIMITATION, AFFILIATES OF BORROWER, INCURRED IN THE ORDINARY COURSE OF
BUSINESS; (iv) OTHER INDEBTEDNESS OF BORROWER, NOT EXCEEDING $250,000 IN THE
AGGREGATE OUTSTANDING AT ANY TIME; (v) CONTINGENT OBLIGATIONS OF BORROWER
CONSISTING OF GUARANTEES (AND OTHER CREDIT SUPPORT) OF THE OBLIGATIONS OF
VENDORS AND SUPPLIERS OF BORROWER IN RESPECT OF TRANSACTIONS ENTERED INTO IN THE
ORDINARY COURSE OF BUSINESS; (vi) INDEBTEDNESS WITH RESPECT TO CAPITAL LEASE
OBLIGATIONS AND INDEBTEDNESS SECURED BY PERMITTED LIENS; (vii) GUARANTEES OF
EXISTING INDEBTEDNESS ASSOCIATED WITH THE "TRANSACTIONS" SET FORTH IN THE
SCHEDULE; (viii) EXTENSIONS, RENEWALS, REFUNDINGS, REFINANCINGS, MODIFICATIONS,
AMENDMENTS AND RESTATEMENTS OF ANY OF THE ITEMS OF PERMITTED INDEBTEDNESS (i)
THROUGH (vii) ABOVE, PROVIDED THAT THE PRINCIPAL AMOUNT THEREOF IS NOT INCREASED
OR THE TERMS THEREOF ARE NOT MODIFIED TO IMPOSE MORE BURDENSOME TERMS UPON
BORROWER
*** , PROVIDED THAT THE BORROWER MAY REDEEM OR REPURCHASE ITS SECURITIES IN
CONNECTION WITH ANY AGREEMENT APPROVED BY THE BORROWER'S BOARD OF DIRECTORS,
BETWEEN THE BORROWER AND ANY OFFICER, DIRECTOR, EMPLOYEE OR CONSULTANT, THAT THE
BORROWER ENTERED INTO IN THE ORDINARY COURSE OF BUSINESS WHEREIN THE BORROWER IS
OBLIGATED OR ENTITLED TO REPURCHASE FROM SUCH OFFICER, DIRECTOR, EMPLOYEE OR
CONSULTANT SHARES OF EQUITY SECURITIES OF THE BORROWER UPON SUCH PERSON'S
TERMINATION OF EMPLOYMENT OR SERVICES OR OTHER EVENT; PROVIDED THAT THE TOTAL
AMOUNT OF SUCH REDEMPTIONS AND REPURCHASES SHALL NOT EXCEED $250,000 IN ANY
FISCAL YEAR (EXCEPT THAT SUCH DOLLAR LIMIT SHALL NOT APPLY TO REDEMPTIONS AND
REPURCHASES IN CONNECTION WITH THE ARCXEL ACQUISITION (AS DEFINED IN SECTION 7
OF THE SCHEDULE).
5.6 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against GBC with respect to any Collateral or in any manner
relating to Borrower, Borrower shall, without expense to GBC, make available
Borrower and its officers, employees and agents, and Borrower's books and
records, without charge, to the extent that GBC may deem them reasonably
necessary in order to prosecute or defend any such suit or proceeding.
5.7 NOTIFICATION OF CHANGES. Borrower will promptly notify GBC in writing of
any change in its * officers or directors, the opening of any new bank account
or other deposit account, and any material adverse change in the business or
financial affairs of Borrower.
* EXECUTIVE
5.8 FURTHER ASSURANCES. Borrower agrees, at its expense, on request by GBC, to
execute all documents and take all actions, as GBC may deem reasonably necessary
or useful in order to perfect and maintain GBC's perfected security interest in
the Collateral, and in order to fully consummate the transactions contemplated
by this Agreement.
5.9 INDEMNITY. Borrower hereby agrees to indemnify GBC and hold GBC harmless
from and against any and all claims, debts, liabilities, demands, obligations,
actions, causes of action, penalties, costs and expenses (including attorneys'
fees), of every nature, character and description, which GBC may sustain or
incur based upon or arising out of any of the Obligations, any actual or alleged
failure to collect and pay over any withholding or other tax relating to
Borrower or its employees, any relationship or agreement between GBC and
Borrower, any actual or alleged failure of GBC to comply with any writ of
attachment or other legal process relating to Borrower or any of its property,
or any other matter, cause or thing whatsoever occurred, done, omitted or
suffered to be done by GBC relating to Borrower or the Obligations (except any
such amounts sustained or incurred as the result of the gross negligence or
willful misconduct of GBC or any of its directors, officers, employees, agents,
attorneys, or any other person affiliated with or representing GBC).
Notwithstanding any provision in this Agreement to the contrary, the indemnity
agreement set forth in this Section shall survive any termination of this
Agreement and shall for all purposes continue in full force and effect.
6. TERM.
6.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the "Maturity Date"); provided that the Maturity
Date shall automatically be extended, and this Agreement shall automatically and
continuously renew, for successive additional terms of one year each, unless one
party gives written notice to the other, not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this Agreement effective
on the next Maturity Date.
6.2 EARLY TERMINATION. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective three business days after written
notice of termination is given to GBC; or (ii) by GBC at any time after the
occurrence * of an Event of Default, effective immediately**. If this Agreement
is terminated by Borrower or by GBC under this Section 6.2, Borrower shall pay
to GBC a termination fee (the "Termination Fee") in the amount shown on the
Schedule. The Termination Fee shall be due and payable on the effective date of
termination and thereafter shall bear interest at a rate equal to the highest
rate applicable to any of the Obligations.
* AND DURING THE CONTINUATION
** WITH ONLY REASONABLY PROMPT, SUBSEQUENT NOTICE
<PAGE> 20
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Page 6
6.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding letters of
credit issued based upon an application, guarantee, indemnity or similar
agreement on the part of GBC, then on such date Borrower shall provide to GBC
cash collateral in an amount equal to 110% of the face amount of all such
letters of credit plus all interest, fees and costs due or (in GBC's estimation)
likely to become due in connection therewith, to secure all of the Obligations
relating to said letters of credit, pursuant to GBC's then standard form cash
pledge agreement. Notwithstanding any termination of this Agreement, all of
GBC's security interests in all of the Collateral and all of the terms and
provisions of this Agreement shall continue in full force and effect until all
Obligations have been paid and performed in full; provided that, without
limiting the fact that Loans are subject to the discretion of GBC, GBC may, in
its sole discretion, refuse to make any further Loans after termination. No
termination shall in any way affect or impair any right or remedy of GBC, nor
shall any such termination relieve Borrower of any Obligation to GBC, until all
of the Obligations have been paid and performed in full. Upon payment and
performance in full of all the Obligations and termination of this Agreement,
GBC shall promptly deliver to Borrower termination statements, requests for
reconveyances and such other documents as may be reasonably required to
terminate GBC's security interests.
7. EVENTS OF DEFAULT AND REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and Borrower shall give
GBC immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to GBC by Borrower or any of
Borrower's officers, employees or agents, now or in the future, shall be untrue
or misleading in a material respect+++; or (b) Borrower shall fail to pay any
Loan or any interest thereon or any other monetary Obligation* ; or (c) the
total Loans and other Obligations outstanding at any time shall exceed the
Credit Limit + ; or (d) Borrower shall fail to perform any non-monetary
Obligation which by its nature cannot be cured; or (e) Borrower shall fail to
perform any other non-monetary Obligation, which failure is not cured within 5
++ business days after the date performance is due; or (f) any levy, assessment,
attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made
on all or any part of the Collateral which is not cured within 10 days after the
occurrence of the same; or (g) any default or event of default occurs under any
obligation secured by a Permitted Lien, which is not cured within any applicable
cure period or waived in writing by the holder of the Permitted Lien; or (h)
Borrower breaches any material contract or obligation, which has or may
reasonably be expected to have a material adverse effect on Borrower's business
or financial condition; or (i) dissolution, termination of existence, insolvency
or business failure of Borrower or any Guarantor; or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by Borrower or
any Guarantor under any reorganization, bankruptcy, insolvency, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, now or in the future in effect; or (j) the commencement of any
proceeding against Borrower or any Guarantor under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 45 days after the date
commenced; or (k) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing; or (l) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset pledged by any third party to secure any or all of the
Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (m) Borrower makes any payment on account of any indebtedness
or obligation which has been subordinated to the Obligations other than as
permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits or
terminates its subordination agreement; or (n) there shall be a change in the
record or beneficial ownership of an aggregate of more than **** of the
outstanding shares of stock of Borrower, in one or more transactions, compared
to the ownership of outstanding shares of stock of Borrower in effect on the
date hereof, without the prior written consent of GBC; or (o) Borrower shall
generally not pay its debts as they become due, or Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which ** be fraudulent under any bankruptcy, fraudulent conveyance or similar
law; or (p) there shall be a material adverse change in Borrower's business or
financial condition. GBC may cease making any Loans hereunder during any of the
above cure periods, and thereafter if an Event of Default has occurred*** .
+ IF SUCH EXCESS IS NOT PAID TO GBC WITHIN FIVE BUSINESS DAYS AFTER THE DATE
SUCH EXCESS OCCURRED
++ TEN (10)
+++ WHEN MADE
* , WITHIN FIVE BUSINESS DAYS AFTER THE DATE DUE,
** IS REASONABLY LIKELY TO
*** AND IS CONTINUING
****50%
<PAGE> 21
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
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Page 7
7.2 REMEDIES. Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter *, GBC, at its option, and without notice or
demand of any kind (all of which are hereby expressly waived by Borrower), may
do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrower under this Agreement or any other document or
agreement; (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable, and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation; (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes GBC without judicial
process to enter onto any of Borrower's premises without interference to search
for, take possession of, keep, store, or remove any of the Collateral, and
remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge + for so long as GBC ** deems it
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; provided, however, that should GBC seek to
take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that GBC
retain possession of, and not dispose of, any such Collateral until after trial
or final judgment; (d) Require Borrower to assemble any or all of the Collateral
and make it available to GBC at places designated by GBC which are reasonably
convenient to GBC and Borrower, and to remove the Collateral to such locations
as GBC may ** deem advisable; (e) Complete the processing, manufacturing or
repair of any Collateral prior to a disposition thereof and, for such purpose
and for the purpose of removal, GBC shall have the right to use Borrower's
premises, vehicles, hoists, lifts, cranes, equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time GBC obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. GBC shall have the right to conduct
such disposition on Borrower's premises without charge +, for such time or times
as GBC deems reasonable, or on GBC's premises, or elsewhere and the Collateral
need not be located at the place of disposition. GBC may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale; (g) Demand payment
of, and collect any Receivables and General Intangibles comprising Collateral
and, in connection therewith, Borrower irrevocably authorizes GBC to endorse or
sign Borrower's name on all collections, receipts, instruments and other
documents, to take possession of and open mail addressed to Borrower and remove
therefrom payments made with respect to any item of the Collateral or proceeds
thereof, and, in GBC's *** discretion, to grant extensions of time to pay,
compromise claims and settle Receivables, General Intangibles and the like for
less than face value; and (h) Demand and receive possession of any of Borrower's
federal and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by GBC with respect to the
foregoing shall be added to and become part of the Obligations, shall be due on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. Without limiting any of GBC's rights and
remedies, from and after the occurrence of any Event of Default, the interest
rate applicable to the Obligations shall be increased by an additional four
percent per annum.
+ BY BORROWER
* WHILE SUCH EVENT OF DEFAULT IS CONTINUING
** REASONABLY
*** REASONABLE
7.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. Borrower and GBC
agree that a sale or other disposition (collectively, "sale") of any Collateral
which complies with the following standards will conclusively be deemed to be
commercially reasonable: (i) Notice of the sale is given to Borrower at least
* days prior to the sale, and, in the case of a public sale, notice of the sale
is published at least seven days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted; (ii) Notice of the
sale describes the collateral in general, non-specific terms; (iii) The sale is
conducted at a place designated by GBC, with or without the Collateral being
present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m; (v)
Payment of the purchase price in cash or by cashier's check or wire transfer is
required; (vi) With respect to any sale of any of the Collateral, GBC may (but
is not obligated to) direct any prospective purchaser to ascertain directly from
Borrower any and all information concerning the same. GBC shall be free to
employ other methods of noticing and selling the Collateral, in its discretion,
if they are commercially reasonable.
* TEN
7.4 POWER OF ATTORNEY. Upon the occurrence and during the continuance of any
Event of Default, without limiting GBC's other rights and remedies, Borrower
grants to GBC an irrevocable power of attorney coupled with an interest,
authorizing and permitting GBC (acting through any of its employees, attorneys
or agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but GBC agrees to exercise the
following powers in a commercially reasonable manner: (a) Execute on behalf of
Borrower any documents that GBC may, in its sole discretion, deem advisable in
order to perfect and
<PAGE> 22
GREYROCK BUSINESS CREDIT
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Page 8
maintain GBC's security interest in the Collateral, or in order to exercise a
right of Borrower or GBC, or in order to fully consummate all the transactions
contemplated under this Agreement, and all other present and future agreements;
(b) Execute on behalf of Borrower any document exercising, transferring or
assigning any option to purchase, sell or otherwise dispose of or to lease (as
lessor or lessee) any real or personal property which is part of GBC's
Collateral or in which GBC has an interest; (c) Execute on behalf of Borrower,
any invoices relating to any Receivable, any draft against any Account Debtor
and any notice to any Account Debtor, any proof of claim in bankruptcy, any
Notice of Lien, claim of mechanic's, materialman's or other lien, or assignment
or satisfaction of mechanic's, materialman's or other lien; (d) Take control in
any manner of any cash or non-cash items of payment or proceeds of Collateral;
endorse the name of Borrower upon any instruments, or documents, evidence of
payment or Collateral that may come into GBC's possession; (e) Endorse all
checks and other forms of remittances received by GBC; (f) Pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; (g) Grant extensions of time to pay,
compromise claims and settle Receivables and General Intangibles for less than
face value and execute all releases and other documents in connection therewith;
(h) Pay any sums required on account of Borrower's taxes or to secure the
release of any liens therefor, or both; (i) Settle and adjust, and give releases
of, any insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, Borrower to give GBC the same rights of
access and other rights with respect thereto as GBC has under this Agreement;
and (k) Take any action or pay any sum required of Borrower pursuant to this
Agreement and any other present or future agreements. Any and all reasonable
sums paid and any and all reasonable costs, expenses, liabilities, obligations
and reasonable attorneys' fees incurred by GBC with respect to the foregoing
shall be added to and become part of the Obligations, shall be payable on
demand, and shall bear interest at a rate equal to the highest interest rate
applicable to any of the Obligations. In no event shall GBC's rights under the
foregoing power of attorney or any of GBC's other rights under this Agreement be
deemed to indicate that GBC is in control of the business, management or
properties of Borrower.
7.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale
or other disposition of the Collateral shall be applied by GBC first to the
reasonable costs, expenses, liabilities, obligations and attorneys' fees
incurred by GBC in the exercise of its rights under this Agreement, second to
the interest due upon any of the Obligations, and third to the principal of the
Obligations, in such order as GBC shall determine in its sole discretion. Any
surplus shall be paid to Borrower or other persons legally entitled thereto;
Borrower shall remain liable to GBC for any deficiency. If GBC, in its sole
discretion, directly or indirectly enters into a deferred payment or other
credit transaction with any purchaser at any sale of Collateral, GBC shall have
the option, exercisable at any time, in its sole discretion, of either reducing
the Obligations by the principal amount of purchase price or deferring the
reduction of the Obligations until the actual receipt by GBC of the cash
therefor.
7.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, GBC shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between GBC and Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
GBC of one or more of its rights or remedies shall not be deemed an election,
nor bar GBC from subsequent exercise or partial exercise of any other rights or
remedies. The failure or delay of GBC to exercise any rights or remedies shall
not operate as a waiver thereof, but all rights and remedies shall continue in
full force and effect until all of the Obligations have been fully paid and
performed.
8. DEFINITIONS. As used in this Agreement, the following terms have the
following meanings:
"Account Debtor" means the obligor on a Receivable.
"Affiliate" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.
"Agreement" and "this Agreement" means this Loan and Security Agreement and
all modifications and amendments thereto, extensions thereof, and replacements
therefor.
"Business Day" means a day on which GBC is open for business.
"Code" means the Uniform Commercial Code as adopted and in effect in the State
of California from time to time.
"Collateral" has the meaning set forth in Section 2.1 above.
"Default" means any event which with notice or passage of time or both, would
constitute an Event of Default.
"Deposit Account" has the meaning set forth in Section 9105 of the Code.
"Eligible Receivables" means unconditional Receivables arising in the
ordinary course of Borrower's business from the completed sale of goods or
rendition of services, which GBC * shall deem eligible for borrowing, based on
such considerations as GBC may from time to time deem appropriate*.
* , IN ITS GOOD FAITH BUSINESS JUDGMENT
"Equipment" means all of Borrower's present and hereafter acquired machinery,
molds, machine tools, motors, furniture, equipment, furnishings, fixtures, trade
fixtures,
<PAGE> 23
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 9
motor vehicles, tools, parts, dyes, jigs, goods and other tangible personal
property (other than Inventory) of every kind and description used in Borrower's
operations or owned by Borrower and any interest in any of the foregoing, and
all attachments, accessories, accessions, replacements, substitutions, additions
or improvements to any of the foregoing, wherever located.
"Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.
"General Intangibles" means all general intangibles of Borrower, whether now
owned or hereafter created or acquired by Borrower, including, without
limitation, all choices in action, causes of action, corporate or other business
records, Deposit Accounts, inventions, designs, drawings, blueprints, patents,
patent applications, trademarks and the goodwill of the business symbolized
thereby, names, trade names, trade secrets, goodwill, copyrights, registrations,
licenses, franchises, customer lists, security and other deposits, rights in all
litigation presently or hereafter pending for any cause or claim (whether in
contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Borrower against GBC, rights to purchase or sell real
or personal property, rights as a licensor or licensee of any kind, royalties,
telephone numbers, proprietary information, purchase orders, and all insurance
policies and claims (including life insurance, key man insurance, credit
insurance, liability insurance, property insurance and other insurance), tax
refunds and claims, computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or granted to Borrower,
all rights to indemnification and all other intangible property of every kind
and nature (other than Receivables).
"Guarantor" means any Person who has guaranteed any of the Obligations.
"Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property, wherever located, to be furnished under
any contract of service or held for sale or lease (including all raw materials,
work in process, finished goods and goods in transit), and all materials and
supplies of every kind, nature and description which are or might be used or
consumed in Borrower's business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise
or other personal property, and all warehouse receipts, documents of title and
other documents representing any of the foregoing.
"LIBOR Rate" means (i) the one-month London Interbank Offered Rate for
deposits in U.S. dollars, as shown each day in The Wall Street Journal (Eastern
Edition) under the caption "Money Rates - London Interbank Offered Rates
(LIBOR)"; or (ii) if the Wall Street Journal does not publish such rate, the
offered one-month rate for deposits in U.S. dollars which appears on the Reuters
Screen LIBOR Page as of 10:00 a.m., New York time, each day, provided that if at
least two rates appear on the Reuters Screen LIBO Page on any day, the "LIBOR
Rate" for such day shall be the arithmetic mean of such rates; or (iii) if the
Wall Street Journal does not publish such rate on a particular day and no such
rate appears on the Reuters Screen LIBO Page on such day, the rate per annum at
which deposits in U.S. dollars are offered to the principal London office of The
Chase Manhattan Bank, N.A. in the London interbank market at approximately 11:00
A.M., London time, on such day in an amount approximately equal to the
outstanding principal amount of the Loans, for a period of one month, in each of
the foregoing cases as determined in good faith by GBC, which determination
shall be conclusive absent manifest error.
"Obligations" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to GBC, whether evidenced by this Agreement or any note
or other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by GBC in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorney's
fees, expert witness fees, audit fees, letter of credit fees, loan fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other present or future instrument or
agreement between Borrower and GBC.
"Permitted Liens" means the following: (i) purchase money security interests
in specific items of Equipment; (ii) leases of specific items of Equipment;
(iii) liens for taxes not yet payable; (iv) additional security interests and
liens which are subordinate to the security interest in favor of GBC and are
consented to in writing by GBC (which consent shall not be unreasonably
withheld); (v) security interests being terminated substantially concurrently
with this Agreement; (vi) liens of materialmen, mechanics, warehousemen,
carriers, or other similar liens arising in the ordinary course of business and
securing obligations which are not delinquent; * (vii) liens incurred in
connection with the extension, renewal or refinancing of the indebtedness
secured by liens of the type described above in clauses (i) or (ii) above,
provided that any extension, renewal or replacement lien is limited to the
property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase; (viii)
Liens in favor of customs and revenue authorities which secure payment of
customs duties in connection with the importation of goods. GBC will have the
right to require, as a condition to its consent under subparagraph (iv) above,
that the holder of the additional security interest or lien sign an
intercreditor agreement on GBC's then standard form, acknowledge that the
security interest is subordinate to the security interest in favor of GBC, and
agree not to take any action to enforce its subordinate security interest so
long as any Obligations remain outstanding, and that Borrower agree that any
uncured default in any obligation secured by the subordinate security interest
shall also constitute an Event of Default under this Agreement.
<PAGE> 24
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 10
*(vi-1) SECURITY INTERESTS IN FAVOR OF SILICON VALLEY BANK, MMC/GATX
PARTNERSHIP NO.1, AND MEIER MITCHELL & COMPANY IN SPECIFIC EQUIPMENT (THE "SVB
LIENS"), (vi-2) SECURITY INTERESTS IN EQUIPMENT SHOWN ON THE UCC SEARCHES IN THE
NAME OF THE BORROWER IN THE STATES OF COLORADO, WASHINGTON AND CALIFORNIA, DATED
AS OF OCTOBER 20, 1997, OCTOBER 17, 1997, AND NOVEMBER 12, 1997, RESPECTIVELY.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents and all other forms of
obligations at any time owing to Borrower, all guaranties and other security
therefor, all merchandise returned to or repossessed by Borrower, and all rights
of stoppage in transit and all other rights or remedies of an unpaid vendor,
lienor or secured party.
Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with
generally accepted accounting principles, consistently applied. All other terms
contained in this Agreement, unless otherwise indicated, shall have the meanings
provided by the Code, to the extent such terms are defined therein.
9. GENERAL PROVISIONS.
9.1 INTEREST COMPUTATION. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by GBC (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by GBC on account of the Obligations three Business Days after receipt
by GBC of immediately available funds. GBC shall not, however, be required to
credit Borrower's account for the amount of any item of payment which is
unsatisfactory to GBC in its discretion, and GBC may charge Borrower's Loan
account for the amount of any item of payment which is returned to GBC unpaid.
9.2 APPLICATION OF PAYMENTS. All payments with respect to the Obligations may
be applied, and in GBC's sole discretion reversed and re-applied, to the
Obligations, in such order and manner as GBC shall determine in its sole
discretion.
9.3 CHARGES TO ACCOUNT. GBC may, in its discretion, require that Borrower pay
monetary Obligations in cash to GBC, or charge them to Borrower's Loan account,
in which event they will bear interest at the same rate applicable to the Loans.
9.4 MONTHLY ACCOUNTINGS. GBC shall provide Borrower monthly with an account of
advances, charges, expenses and payments made pursuant to this Agreement. *
account shall be deemed correct, accurate and binding on Borrower and an account
stated (except for reverses and reapplications of payments made and corrections
of errors discovered by GBC), unless Borrower notifies GBC in writing to the
contrary within sixty days after each account is rendered, describing the nature
of any alleged errors or admissions.
* IN THE ABSENCE OF MANIFEST ERROR SUCH
9.5 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service or
by regular first-class mail, or certified mail return receipt requested,
addressed to GBC or Borrower at the addresses shown in the heading to this
Agreement, or at any other address designated in writing by one party to the
other party. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one business day
following delivery to the private delivery service, or two business days
following the deposit thereof in the United States mail, with postage prepaid.
9.6 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
9.7 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between Borrower and GBC and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
9.8 WAIVERS. The failure of GBC at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other
present or future agreement between Borrower and GBC shall not waive or diminish
any right of GBC later to demand and receive strict compliance therewith. Any
waiver of any default shall not waive or affect any other default, whether prior
or subsequent, and whether or not similar. None of the provisions of this
Agreement or any other agreement now or in the future executed by Borrower and
delivered to GBC shall be deemed to have been waived by any act or knowledge of
GBC or its agents or employees, but only by a specific written waiver signed by
an authorized officer of GBC and delivered to Borrower. Borrower waives demand,
protest, notice of protest and notice of default or dishonor, notice of payment
and nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by GBC on which Borrower is or may in any way be liable, and
notice of any action taken by GBC, unless expressly required by this Agreement.
9.9 AMENDMENT. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of GBC.
<PAGE> 25
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 11
9.10 TIME OF ESSENCE. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.
9.11 ATTORNEYS FEES AND COSTS. Borrower shall reimburse GBC for all reasonable
attorneys' fees and all filing, recording, search, title insurance, appraisal,
audit, and other reasonable costs incurred by GBC, pursuant to, or in connection
with, or relating to this Agreement (whether or not a lawsuit is filed),
including, but not limited to, any reasonable attorneys' fees and costs GBC
incurs in order to do the following: prepare and negotiate this Agreement and
the documents relating to this Agreement; obtain legal advice * in connection
with this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce GBC's
security interest in, the Collateral; and otherwise represent GBC in any
litigation ** relating to Borrower. If either GBC or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its reasonable costs and attorneys'
fees, including (but not limited to) reasonable attorneys' fees and costs
incurred in the enforcement of, execution upon or defense of any order, decree,
award or judgment. All attorneys' fees and costs to which GBC may be entitled
pursuant to this Paragraph shall immediately become part of Borrower's
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations.
*REASONABLY REQUIRED
**BROUGHT BY A THIRD PARTY
9.12 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and GBC; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of GBC, and any prohibited assignment shall be
void. No consent by GBC to any assignment shall release Borrower from its
liability for the Obligations.
9.13 JOINT AND SEVERAL LIABILITY. If Borrower consists of more than one
Person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
9.14 LIMITATION OF ACTIONS. [Intentionally Deleted.]
9.15 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in
this Agreement for convenience. Borrower and GBC acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. The term "including",
whenever used in this Agreement, shall mean "including (but not limited to)".
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty or ambiguity in any term or provision of this Agreement shall be
construed strictly against GBC or Borrower under any rule of construction or
otherwise.
9.16 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of GBC and Borrower shall
be governed by the laws of the State of California. As a material part of the
consideration to GBC to enter into this Agreement, Borrower (i) agrees that all
actions and proceedings relating directly or indirectly to this Agreement shall,
at GBC's option, be litigated in courts located within California, and that the
exclusive venue therefor shall be Los Angeles County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights Borrower may have to object to the
jurisdiction of any such court, or to transfer or change the venue of any such
action or proceeding.
<PAGE> 26
GREYROCK BUSINESS CREDIT
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Page 12
9.17 MUTUAL WAIVER OF JURY TRIAL. BORROWER AND GBC EACH HEREBY WAIVE THE RIGHT
TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN
ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR
AGREEMENT BETWEEN GBC AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF GBC OR
BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR
ANY OTHER PERSONS AFFILIATED WITH GBC OR BORROWER, IN ALL OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
BORROWER:
VIXEL CORPORATION
BY /s/ Stephen M. Smith
---------------------------------------
PRESIDENT OR VICE PRESIDENT
GBC:
GREYROCK BUSINESS CREDIT,
A DIVISION OF NATIONSCREDIT COMMERCIAL CORPORATION
BY /s/ Lisa Nagano
---------------------------------------
TITLE V.P.
-------------------------------------
46,339-3
<PAGE> 27
LETTER AGREEMENT - AMENDMENT TO LOAN AGREEMENT
November 26, 1997
Greyrock Business Credit
10880 Wilshire Blvd. Suite 950
Los Angeles, CA 90024
Gentlemen:
Reference is made to the Loan and Security Agreement between us of even
date (the "Loan Agreement"). (Capitalized terms used in this Letter Agreement,
which are not defined, shall have the meanings set forth in the Loan Agreement.)
This will confirm our agreement to amend the Loan Agreement as follows:
1. Exclusion of Certain Equipment. The following sentence is hereby
added to the Loan Agreement at the end of the definition of "Equipment" in
Section 8 of the Loan Agreement: "Notwithstanding anything in this Agreement to
the contrary, the terms `Equipment' and `Collateral' shall not include
equipment in which the Borrower has granted security interests to Silicon
Valley Bank, MMC/GATX Partnership No. 1, and Meier Mitchell & Company (the
'Silicon Equipment')."
2. Conforming Change. Because the Collateral does not include the
Silicon Equipment, the following clause is hereby deleted from the definition
of Permitted Liens in Section 8 of the Loan Agreement: "(vi-l) security
interests in favor of Silicon Valley Bank, MMC/GATX Partnership No. 1, and
Meier Mitchell & Company in specific Equipment (the `SVB Liens')."
As herein expressly modified the Loan Agreement shall continue in full
force and effect and the same is hereby ratified and confirmed. This Letter
Agreement and the other written agreements and documents between us set forth
in full all of the representations and agreements of the parties with respect
to the subject matter hereof and supersede all prior discussions, oral
representations, oral agreements and oral understandings between the parties
with respect to the subject matter hereof. This Letter Agreement may not be
modified or amended, nor may any rights hereunder be waived, except in a
writing signed by the parties hereto.
Sincerely yours,
VIXEL CORPORATION
By /s/ Stephen M. Smith
-------------------------------------
Title VP Finance
----------------------------------
Accepted and agreed:
GREYROCK BUSINESS CREDIT, a Division of
NationsCredit Commercial Corporation
By /s/ Lisa Nagano
------------------------------------
Title V.P.
----------------------------------
<PAGE> 28
[GREYROCK BUSINESS CREDIT LOGO]
A NATIONSBANK COMPANY
CERTIFIED RESOLUTION AND INCUMBENCY CERTIFICATE
BORROWER: VIXEL CORPORATION, A CORPORATION
ORGANIZED UNDER THE LAWS OF THE STATE OF
DELAWARE
DATE: NOVEMBER 26, 1997
I, the undersigned, Secretary or Assistant Secretary of the above-named
borrower, a corporation organized under the laws of the state set forth above,
do hereby certify that the following is a full, true and correct copy of
resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and
that said resolutions are still in full force and effect and have not been in
any way modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from GREYROCK BUSINESS CREDIT, a
Division of NationsCredit Commercial Corporation ("GBC"), from time to
time, such sum or sums of money as, in the judgment of the officer or
officers hereinafter authorized hereby, this corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or she is
hereby authorized, directed and empowered, in the name of this corporation,
to execute and deliver to GBC, and GBC is requested to accept, the loan
agreements, security agreements, notes, financing statements, and other
documents and instruments providing for such loans and evidencing and/or
securing such loans, with interest thereon, and said authorized officers
are authorized from time to time to execute renewals, extensions and/or
amendments of said loan agreements, security agreements, and other
documents and instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, directed and empowered, as security for any and all
indebtedness of this corporation to GBC, whether arising pursuant to this
resolution or otherwise, to grant, transfer, pledge, mortgage, assign, or
otherwise hypothecate to GBC, or deed in trust for its benefit, any
property of any and every kind, belonging to this corporation, including,
but not limited to, any and all real property, accounts, inventory,
equipment, general intangibles, instruments, documents, chattel paper,
notes, money, deposit accounts, furniture, fixtures, goods, and other
property of every kind, and to execute and deliver to GBC any and all
grants, transfers, trust receipts, loan or credit agreements, pledge
agreements, mortgages, deeds of trust, financing statements, security
agreements and other hypothecation agreements, which said instruments and
the note or notes and other instruments referred to in the preceding
paragraph may contain such provisions, covenants, recitals and agreements
as GBC may require and said authorized officers may approve, and the
execution thereof by said authorized officers shall be conclusive evidence
of such approval; and that GBC may conclusively rely upon a certified copy
of these resolutions and a certificate of the Secretary or Ass't Secretary
of this corporation as to the officers of this corporation and their
offices and signatures, and continue to conclusively rely on such certified
copy of these resolutions and said certificate for all past, present and
future transactions until written notice of any change hereto or thereto is
given to GBC by this corporation by certified mail, return receipt
requested.
The undersigned further hereby certifies that the following persons are the
duly elected and acting officers of the corporation named above as borrower and
that the following are their actual signatures:
<TABLE>
<CAPTION>
NAMES OFFICE(S) ACTUAL SIGNATURES
- ----- --------- -----------------
<S> <C> <C>
Stephen M. Smith VP Finance /s/ STEPHEN M. SMITH
Greg Olbright CEO & President /s/ GREGORY R. OLBRIGHT
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or
Assistant Secretary on the date set forth above.
/s/ Stephen M. Smith
-------------------------------------
Secretary or Assistant Secretary
<PAGE> 29
[GREYROCK BUSINESS CREDIT LOGO]
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: VIXEL CORPORATION
ADDRESS: 11911 NORTHCREEK PARKWAY S., SUITE 100
BOTHELL, WASHINGTON 98011
DATE: NOVEMBER 26, 1997
This Schedule is an integral part of the Loan and Security Agreement between
GREYROCK BUSINESS CREDIT, A DIVISION OF NATIONSCREDIT COMMERCIAL CORPORATION
("GBC") and the above-borrower ("Borrower") of even date.
================================================================================
1. CREDIT LIMIT
(Section 1.1): An amount not to exceed the lesser of: (i) $5,000,000
at any one time outstanding; or (ii) 80% of the amount
of Borrower's Eligible Receivables (as defined in
Section 8 above).
================================================================================
2. INTEREST
INTEREST RATE (Section 1.2):
The interest rate in effect throughout each calendar
month during the term of this Agreement shall be the
highest "LIBOR Rate" in effect during such month, plus
4.75% per annum, provided that (i) the interest rate in
effect in each month shall not be less than 8% per
annum, and (ii) the interest charged for each month in
which there are any Loans outstanding shall be a
minimum of $6,000 (regardless of the amount of the
Loans outstanding), and (iii) the interest charged for
each month in which there are no Loans outstanding
shall be $2,000 (even though there are no Loans
outstanding). Interest shall be calculated on the basis
of a 360-day year for the actual number of days
elapsed. "LIBOR Rate" has the meaning set forth in
Section 8 above.
================================================================================
3. FEES (Section 1.3/Section 6.2):
Loan Fee: $40,000, payable concurrently herewith.
-1-
<PAGE> 30
GREYROCK BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Termination Fee: $6,000 per month for each month (or portion thereof)
from the effective date of termination to the Maturity
Date
NSF Check Charge: $15.00 per item.
Wire Transfers: $15.00 per transfer.
================================================================================
4. MATURITY DATE
(Section 6.1): NOVEMBER 30, 1998, subject to automatic renewal as
provided in Section 6.1 above, and early termination
as provided in Section 6.2 above.
================================================================================
5. REPORTING
(Section 5.2):
Borrower shall provide GBC with the following:
1. Annual financial statements, as soon as available,
and in any event within 90 days following the end
of Borrower's fiscal year, certified by
independent certified public accountants
acceptable to GBC.
2. Quarterly unaudited financial statements, as soon
as available, and in any event within 30 days
after the end of each fiscal quarter of Borrower.
3. Monthly unaudited financial statements, as soon as
available, and in any event within 30 days after
the end of each month.
4. Monthly Receivable agings, aged by invoice date,
within 10 days after the end of each month
(subject to month end adjustments in the ordinary
course of business).
5. Monthly accounts payable agings, aged by invoice
date, and outstanding or held check registers
within 10 days after the end of each month
(subject to month end adjustments in the ordinary
course of business).
================================================================================
6. BORROWER INFORMATION:
PRIOR NAMES OF BORROWER
(Section 3.2): Photonics Research, Inc.
PRIOR TRADE NAMES OF BORROWER
(Section 3.2): None
EXISTING TRADE NAMES OF BORROWER
(Section 3.2): None
-2-
<PAGE> 31
GREYROCK BUSINESS CREDIT SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
OTHER LOCATIONS AND
ADDRESSES (Section 3.3): 325 Interlocken Parkway, Bldg. A, Bloomfield,
CO 80021
411 N. Sam Houston Pkwy East, Suite 335, Houston,
TX 77060
MATERIAL ADVERSE
LITIGATION (Section 3.10): None. For disclosure purposes only, Borrower
advises GBC that it has been named as the
defendant in a complaint filed by Methode
Electronics, Inc. ("Methode") on October 7, 1997
in the United States District Court for the
Northern District of Illinois (the "Complaint"),
in which Methode claims that Borrower's Giga-bit
Interface Converter product infringes U.S. Patent
No. 5,546,281 ("Removable Optoelectronic
Module"), of which Methode is the assignee. In
the Complaint, Methode seeks declaratory and
injunctive relief and treble damages for alleged
willful infringement by Borrower of the patents
in question.
Borrower has filed with the court a motion to
dismiss the Methode action for lack of personal
jurisdiction, or, alternatively, to transfer the
case to the United States District Court for the
Western District of Washington.
Borrower does not believe the foregoing will
result in any material adverse change in the
financial condition or business of Borrower, or
in any material impairment in the ability of
Borrower to carry on its business in
substantially the same manner as it is now being
conducted.
================================================================================
7. OTHER PROVISIONS:
(1) NEGATIVE COVENANTS - EXCEPTIONS. The
following transactions (the "Transactions")
shall be permitted transactions under Section
5.5 and will not require the consent of GBC:
(a) The acquisition by Borrower of 100% of
the outstanding capital stock of Arcxel
Technologies, Inc., a California corporation,
on substantially the terms set forth on the
Letter of Intent entitled "Proposed Merger of
Arcxel and Vixel" attached hereto as Exhibit
A (the "Arcxel Acquisition"); and
(b) The sale of Borrower of its Broomfield,
Colorado facility and the business and
assets, including intellectual property,
related to the design, manufacturing and
marketing of vertical cavity laser diodes and
integrated photodetectors.
(c) Borrower maintaining inventory at third
party completion sites in the ordinary course
of business.
(2) INTELLECTUAL PROPERTY. Borrower represents
and warrants that, except for the assets being
sold related to the design, manufacturing and
marketing of vertical cavity laser diodes and
integrated photodetectors, Borrower has no
patents, patent applications, copyrights
(registered or unregistered), copyright
applications, or
-3-
<PAGE> 32
Greyrock Business Credit Schedule to Loan and Security Agreement
- --------------------------------------------------------------------------------
software. Borrower will promptly advise GBC upon
acquiring any of the foregoing.
Borrower: GBC:
VIXEL CORPORATION GREYROCK BUSINESS CREDIT,
a Division of NationsCredit Commercial
Corporation
By /s/ Stephen M. Smith 11/28/97
-------------------------------
President or Vice President By /s/ Lisa Nagano
-------------------------------------
Title VP
----------------------------------
-4-
<PAGE> 33
[GREYROCK BUSINESS CREDIT LOGO]
PLEDGE AGREEMENT
(SECURITIES)
PLEDGOR: VIXEL CORPORATION
ADDRESS: 11911 NORTHCREEK PARKWAY S.
SUITE 100
BOTHELL, WA 98011
DATE: FEBRUARY 9, 1998
THIS PLEDGE AGREEMENT ("Pledge Agreement"), dated the above date, is
entered into at between GREYROCK BUSINESS CREDIT, a Division of NationsCredit
Commercial Corporation ("GBC"), whose address is 10880 Wilshire Blvd. Suite
950, Los Angeles, CA 90024, and the pledgor named above ("Pledgor"), whose
address is set forth above.
1. PLEDGE OF SECURITIES. Pledgor hereby pledges to GBC and grants GBC a
security interest in the stock certificates and other securities listed on
Exhibit A hereto, together with duly executed instruments of assignment thereof
to GBC (which, together with all replacements and substitutions therefor are
hereinafter referred to as the "Securities"), and all rights and remedies
relating to, or arising out of, any and all of the foregoing, and all proceeds
thereof (collectively, the "Collateral") to secure the payment and performance
of all "Obligations" (collectively, the "Obligations"), as defined in the Loan
and Security Agreement between GBC and Pledgor dated November 26, 1997, and all
extensions and renewals and modifications thereof (the "Loan Agreement"). Any
and all stock dividends, rights, warrants, options, puts, calls, conversion
rights and other securities and any and all property and money distributed or
delivered with respect to the Securities or issued upon the exercise of any
puts, calls, conversion rights, options, warrants or other rights included in
or pertaining to the Securities shall be included in the term "Securities" as
used herein and shall be subject to this Pledge Agreement, and Pledgor shall
deliver the same to GBC immediately upon receipt thereof together with any
necessary instruments of transfer; provided, however, that until an Event of
Default as hereinafter defined) shall occur, Pledgor may retain any dividends
paid in cash or its equivalent, with respect to any stock included in the
Securities and any interest paid with respect to any bonds, debentures or other
evidences of indebtedness included in the Securities. Pledgor hereby
acknowledges that the acceptance of the pledge of the Securities by GBC shall
not constitute a commitment of any kind by GBC to permit Pledgor to incur
Obligations.
2. VOTING AND OTHER RIGHTS. Pledgor shall have the right to exercise all
voting rights with respect to the Securities, provided no Event of Default (as
hereinafter defined) has occurred. Upon the occurrence of any Event of Default,
GBC shall have the right (but not any obligation) to exercise all voting rights
with respect to the Securities. Provided no Event of Default has occurred,
Pledgor shall have the right to exercise all puts, calls, straddles, conversion
rights, options, warrants, and other rights and remedies with respect to the
Securities, provided Pledgor obtains the prior written consent of GBC thereto.
GBC shall have no responsibility or liability whatsoever for the exercise of,
or failure to exercise, any puts, calls, straddles, conversion rights, options,
warrants, rights to vote or consent, or other rights with respect to any of the
Securities. Whether or not an Event of Default has occurred, GBC shall have the
right from time to time to transfer all or any part of the Securities to GBC's
own name or the name of its nominee.
3. REPRESENTATIONS AND WARRANTIES. Pledgor hereby represents and
warrants to GBC that Pledgor now has, and * throughout the term of this
Agreement will at all times have, good title to the Securities and the other
Collateral, free and clear of any and all security interests, liens and claims
of any kind whatsoever**.
*(SUBJECT TO SECTION 2 ABOVE)
**EXCEPT THOSE IN FAVOR OF GBC
4. EVENTS OF DEFAULT. If any one or more of the following events shall
occur, any such event shall constitute an Event of Default and Pledgor shall
provide
<PAGE> 34
GREYROCK BUSINESS CREDIT PLEDGE AGREEMENT
- --------------------------------------------------------------------------------
GBC with immediate notice thereof: (a) Any warranty, representation, statement,
report or certificate made or delivered to GBC by Pledgor or any of Pledgor's
officers, employees or agents now or hereafter is incorrect, false, untrue or
misleading in any material respect; or (b) Pledgor shall fail to promptly pay
or perform when due part or all of any of the Obligations, or any default or
event of default shall occur under the Loan Agreement or any other present or
future instrument, document or agreement between GBC and Pledgor.
5. REMEDIES. If an Event of Default shall occur, Pledgor shall give
immediate written notice thereof to GBC. Upon the occurrence of an Event of
Default, and at any time thereafter*, GBC shall have the right, without notice
to or demand upon Pledgor, to exercise any one or more of the following
remedies: (a) accelerate and declare all or any part of the Obligations to be
immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any agreement or instrument evidencing or
relating to any of the same; (b) sell or otherwise dispose of the Securities,
and other Collateral, at a public or private sale, for cash, or other property,
or on credit, with the authority to adjourn or postpone any such sale from time
to time without notice other than oral announcement at the time scheduled for
sale. GBC may directly or through any affiliate purchase the Securities, and
other Collateral, at any such public disposition, and if permissible under
applicable law, at any private disposition. Pledgor and GBC hereby agree that
it shall conclusively be deemed commercially reasonable for GBC, in connection
with any sale or disposition of the Securities, to impose restrictions and
conditions as to the investment intent of a purchaser or bidder, the ability of
a purchaser or bidder to bear the economic risk of an investment in the
Securities, the knowledge and experience in business and financial matters of a
purchaser or bidder, the access of a purchaser or bidder to information
concerning the issuer of the Securities, as well as legend conditions and stop
transfer instructions restricting subsequent transfer of the Securities, and
any other restrictions or conditions which GBC believes to be necessary or
advisable in order to comply with any state or federal securities or other
laws. Pledgor acknowledges that the foregoing restrictions may result in fewer
proceeds being received upon such sale then would otherwise be the case.
Pledgor hereby agrees to provide to GBC any and all information required by GBC
in connection with any sales of Securities by GBC hereunder. If, after the
occurrence of any Event of Default, Rule 144 promulgated by the Securities and
Exchange Commission (or any other similar rule) is available for use by GBC in
connection with the sales of any Securities hereunder. Pledgor agrees not to
utilize Rule 144 in the sale of any securities held by Pledgor of the same
class as the Securities, without the prior written consent of GBC. Any and all
attorneys' fees, expenses, costs, liabilities and obligations incurred by GBC
in connection with the foregoing shall be added to and become a part of the
Obligations and shall be due from Pledgor to GBC upon demand.
*WHILE AN EVENT OF DEFAULT IS CONTINUING
6. REMEDIES, CUMULATIVE; NO WAIVER. The failure of GBC to enforce any of
the provisions of this Agreement at any time or for any period of time shall
not be construed to be a waiver of any such provision or the right thereafter
to enforce the same. All remedies hereunder shall be cumulative and shall be in
addition to all rights, powers and remedies given to GBC by law.
7. TERM. This Agreement and GBC's rights hereunder shall continue in
full force and effect until all of the Obligations have been fully paid,
performed and discharged and the Loan Agreement and all other agreements
between Borrower and GBC have terminated. Upon termination, GBC shall return the
Collateral to Pledgor, with any necessary instruments of transfer.
8. REVIVOR. If any payment made on any of the Obligations shall for any
reason be required to be returned by GBC, whether on the ground that such
payment constituted a preference or for any other reason, then for purposes of
this Agreement, and notwithstanding any prior termination of this Agreement,
such payment on shall be treated as not having been made, and this Agreement
shall in all respects be effective with respect to the Obligations, as though
such payment had not been made; and if any of the Collateral been released or
returned to Pledgor, then Pledgor shall return such Collateral to GBC, to be
held and dealt with in accordance with the terms of this Agreement.
9. GENERAL PROVISIONS. This Agreement and the documents referred to
herein are the entire and only agreements between Pledgor and GBC with respect
to the subject matter hereof, and all representations, warranties, agreements,
or undertakings heretofore or contemporaneously made, with respect to the
subject matter hereof, which are not set forth herein or therein, are
superseded hereby. The terms and provisions hereof may not be waived, altered,
modified, or amended except in a writing executed by Pledgor and GBC. All
rights, benefits and privileges hereunder shall inure to the benefit of and be
enforceable by GBC and its successors and assigns and shall be binding upon
Pledgor and its successors and assigns; provided that Pledgor may not transfer
any of its rights hereunder without the prior written consent of GBC. Paragraph
headings are used herein for convenience only. Pledgor acknowledges that the
same may not describe completely the subject matter of the applicable
paragraphs and the same shall not be used in any manner to construe, limit,
define or interpret any term or provision hereof. Pledgor shall upon demand
reimburse GBC for all reasonable costs, fees and expenses (including without
limitation attorneys' fees, whether or not suit be brought), which are incurred
by GBC in connection with, or arising out of, this Agreement. This Agreement
and all acts and transactions pursuant hereto and the rights and obligations of
the
-2-
<PAGE> 35
GREYROCK BUSINESS CREDIT PLEDGE AGREEMENT
- --------------------------------------------------------------------------------
parties hereto shall be governed, construed, and interpreted in accordance with
the internal laws (and not conflict of laws rules) of the State of California.
Pledgor hereby agrees that all actions or proceedings relating directly or
indirectly hereto may, at the option of GBC, be litigated in courts located
within said State, and Pledgor hereby expressly consents to the jurisdiction of
any such court and consents to the service of process in any such action or
proceeding by personal delivery or by certified or registered mailing directed
to Pledgor at its last address known to GBC.
10. MUTUAL WAIVER OF RIGHT TO JURY TRIAL. GBC AND PLEDGOR EACH HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN GBC AND PLEDGOR; OR (iii) ANY CONDUCT,
ACTS OR OMISSIONS OF GBC OR PLEDGOR OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH GBC OR
PLEDGOR; IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.
PLEDGOR:
VIXEL CORPORATION
By /s/ Stephen M. Smith
-----------------------------
Title VP Finance
-------------------------
GBC:
GREYROCK BUSINESS CREDIT
Division of NationsCredit Commercial Corporation
By /s/ Lisa Nagano
-----------------------------
Title VP
-------------------------
EXHIBIT A
All "securities", "financial assets", "securities accounts", and "security
entitlements" (as those terms are defined in Division 8 of the California
Uniform Commercial Code in effect on the date hereof), including without
limitation any of the foregoing maintained at NationsBanc Montgomery
Securities, Inc., all "investment property" (as that term is defined in
Division 9 of the California Uniform Commercial Code in effect on the date
hereof), all rights and remedies related to, or arising out of, any and all of
the foregoing, and all proceeds of any of the foregoing.
-3-
<PAGE> 1
EXHIBIT 10.7
[KTOC LETTERHEAD]
July 31, 1997
Mr. Pat Doneen
Director, Business Development and
Systems Operations
VIXEL CORPORATION
11911 Northcreek Parkway South, Suite 100
Bothell, Washington 98011
Dear Mr. Doneen:
Enclosed please find the form of "Key Terms--Turnkey Manufacturing" you provided
to us with our proposed changes as marked on this form. If these changes and
the matters discussed in this letter are acceptable, please sign in the space
below and return a copy of this letter to me together with a copy of the
Key-Terms--Turnkey Manufacturing initialed by our changes.
The entire agreement between the parties consists solely of this letter
agreement, the enclosed Key-Terms--Turnkey Manufacturing and the Key
Relationship Elements--Turnkey Manufacturing form previously signed by the
parties. Any changes to this agreement must be in a written instrument signed
by both parties and no correspondence, purchase orders, etc. will add to or
modify this agreement unless agreed to by both parties in writing.
Please call me with any questions. I look forward to hearing from you.
Very truly yours,
/s/ CATHY O'LEARY
- ------------------------
Cathy O'Leary
Executive Vice President
AGREED TO:
VIXEL CORPORATION
BY: /s/ PAT DONEEN
- --------------------------------------
NAME: Pat Doneen
- --------------------------------------
TITLE: Director of Supplier Management
- --------------------------------------
<PAGE> 2
KEY RELATIONSHIP ELEMENTS
TURNKEY MANUFACTURING
A. ORDERS
o Vixel to provide maximum 9 month purchase order visibility, added in
3 month increments, at beginning of each quarter.
o Minimum 5 month coverage on blanket purchase agreement.
o Minimum 12 month forecast visibility provided.
o Vixel to provide weekly rolling MPS updates:
o first 3 months, weekly quantities.
o next 9 months, monthly quantities.
B. FINISHED GOODS
o K-Tec to manage finished goods buffer at no carrying charges.
o Goal is to keep level to 1 - 2 weeks.
o Vixel agrees to carrying charges if month end quantity > 2 months
demand, to be negotiated in good faith.
o Invoiced when shipped from finished goods.
C. REPORTS & DATA
<TABLE>
<CAPTION>
INITIALLY GOAL
--------- ----
<S> <C> <C>
o Quality Weekly Real-time
o yields
o pareto
o Finished Goods Weekly Daily
o WIP Weekly Daily
o Raw Material Weekly Daily
o o on hand
o on order
o forecasted
o shortages
o Failure Analysis Weekly Daily
o Shipments/Delivery Weekly Daily
</TABLE>
Other reports provided as necessary as relationship develops and needs have
been defined.
D. MATERIALS MANAGEMENT
o K-Tec to provide visibility to suppliers consistent with Vixel MPS.
o Visibility to suppliers to be provided to Vixel.
o Help preserve and participate in strategic supplier relationships.
o K-Tec to initiate and drive lead-time reduction process with all long
lead-time materials.
Agreed To: /s/ PAT DONEEN 5/5/97 Vixel
------------------------
Agreed To: /s/ CATHY O'LEARY K-Tec
------------------------
<PAGE> 3
KEY RELATIONSHIP ELEMENTS
TURNKEY MANUFACTURING
E. REVIEWS
o Business Reviews Quarterly
o Pricing Reviews Quarterly
o Operations Reviews Weekly
o DFM Reviews As necessary
o DFT Reviews As necessary
o Mfg. Technical Reviews As necessary
F. TEAM
o K-Tec to provide top-rated team.
o K-Tec to provide team continuity.
o Inform Vixel of changes to team.
o Provide means for Vixel to provide feedback and/or score team
performance.
G. LOCAL PRESENCE
o K-Tec to accommodate visits by Vixel working team as deemed
necessary by Vixel.
o K-Tec to allow and house a Vixel product engineer.
o Vixel to welcome and accommodate K-Tec team as necessary for
work in Washington.
H. MANUFACTURING AGREEMENT
o K-Tec and Vixel to execute manufacturing agreement within 45
days.
I. PRICING
o Committed to 6 quarters of pricing.
o Reviewed, and adjusted as appropriate, quarterly.
J. COST REDUCTIONS
o Vixel receives 100% of Vixel-initiated cost reductions.
o Vixel receives 50% of K-Tec-initiated cost reductions.
K. PERFORMANCE
o K-Tec to execute business to attached performance requirements.
Agreed To: /s/ PAT DONEEN 5/5/97 Vixel
-------------------------------------
Agreed to: /s/ CATHY O'LEARY K-Tec
------------------------------------
<PAGE> 4
KEY RELATIONSHIP ELEMENTS
TURNKEY MANUFACTURING
L. RMA/FAILURE ANALYSIS
o K-Tec to administer RMA's and provide failure analysis, per
attached performance requirements.
o K-Tec to own and manage swap stock inventory to allow
performance targets to be met.
o K-Tec agrees to maintain and repair (@ agreeable cost) non-K-Tec
units, (e.g.; initial units built at Solectron - qty.: <100
boxes, <1000 boards).
M. OTHER
o Vixel desires to be used as customer reference.
Agreed To: /s/ PAT DONEEN 5/5/97 Vixel
-------------------------------------
Agreed to: /s/ CATHY O'LEARY K-Tec
------------------------------------
<PAGE> 5
VIXEL TURNKEY MANUFACTURING PERFORMANCE TARGETS
Vixel Product: "Tinman" HUB
------------------
<TABLE>
<CAPTION>
PARAMETER Q297 Q397 Q497 Q198 Q298 Q398
--------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
LEADTIME 8 wk 6 wk 5 wk 4 wk 4 wk 3 wk
UPSIDE %
<15 days 20% 20% 25% 25% 25% 25%
15-30 days 30% 30% 50% 50% 50% 50%
31-60 days 50% 50% 100% 100% 150% 150%
WARRANTY 1 yr 1 yr 1 yr 1 yr 1 yr 1 yr
Extended to 3 yr Cost TBD
ON-TIME DELIVERY 100% 100% 100% 100% 100% 100%
QUALITY
SMT Yield 85% 92% 95% 95% 95.5% 96%
ICT Yield 87% 92% 95% 95% 95.5% 96%
PWB FQA 99% 99% 99% 99% 99% 99%
Mech. Assembly 99% 99% 99.2% 99.2% 99.5% 99.5%
Functional Test 93% 93.5% 93.8% 94% 94.5% 95%
FQA 99% TBD TBD TBD TBD TBD
DPPM Rate <6000 4000 2000 1800 1500 1200
COMMITTED CAPACITY
Available 1.5k/mo 3k/mo 6k/mo 7k/mo 7k/mo 9k/mo
FA/RMA RESPONSE (FIELD RETURNS)
Acknowledge 2 days 2 days 2 days 1 day 1 day 1 day
Replacement 4 days 3 days 3 days 3 days 3 days 3 days
Verification 3 days 3 days 3 days 2 days 2 days 2 days
Root Cause 3 wks 3 wks 2 wks 2 wks 2 wks 2 wks
Corrective Action tbd tbd tbd tbd tbd tbd
RMA Cycle Time 8 days 8 days 7 days 7 days 6 days 6 days
</TABLE>
Date: 05/09/97
Rev: 97-5.0
<PAGE> 6
KEY TERMS
TURNKEY MANUFACTURING
1.0 CANCELLATION
o Vixel may cancel any Purchase Orders
o Upon a cancellation, Vixel and K-Tec agree to negotiate in good faith
Vixel's liability within 15 days of cancellation notice.
o Vixel liability will not exceed the following:
-- contract price for all finished goods.
-- material cost, material margin and labor cost incurred for all
work-in-process
-- cost plus 8% mark-up of any raw material inventory on order or on
hand.
o K-Tec shall undertake a reasonable effort for a period not to exceed 30
days to cancel all applicable component purchase orders and reduce
component inventory through returns, or allocate components to
alternative programs.
2.0 RESCHEDULE
o Vixel has right to reschedule product at no charge, if the reschedule
results in less than 2 months of additional finished goods inventory on
top of the finished goods buffer managed by K-Tec, as described in
Section B
o Reschedules resulting in more than this amount of finished goods
inventory will be received by Vixel.
o Reschedules of greater than 6 months from original schedule date will be
treated as cancellations.
3.0 TERM
o Agreement commenced on 5/13/97.
o Initial term is 12 months.
o Will be automatically renewed for successive 6 month increments.
4.0 TERMINATION
o Agreement will terminate upon written notice.
o 120 days notice shall be given by K-Tee of its intention to terminate
this Agreement.
o 60 days notice shall be given by Vixel of its intention to terminate
this Agreement.
5.0 PAYMENT TERM
o Net 30 days from Invoice Date.
AGREED TO: /s/ Pat Doneen 7/15/97 Vixel
--------------------------------------------------------
AGREED TO: /s/ Cathy O'Leary 10/97 K-Tec
--------------------------------------------------------
<PAGE> 7
KEY TERMS
TURNKEY MANUFACTURING
6.0 ENGINEERING/MANUFACTURING CHANGES
- Vixel may request engineering change to product.
- Vixel is responsible for ensuring changes properly documented and
communicated to K-Tec.
- Changes resulting in price changes of greater than 5% will result in
a change to the contract price at the time the change becomes
effective.
- Changes resulting in price changes of less than 5% will be treated as
a piece price variance, with appropriate price adjustment and
payments reconciled at the quarterly pricing review.
- K-Tec is encouraged to suggest ECO's under the following guidelines:
= proposed changes given in writing.
= no changes made without written approval from Vixel.
= Vixel agrees to approve or disapprove of suggested changes
within 14 days of receipt.
7.0 WARRANTY
- K-Tec warrants for a period of one (1) year from the date of assembly
and test of the Product, that (i) the Product will conform to the
specifications applicable at the time of its assembly and test; (ii)
such Product will be of good material and workmanship and free from
defects; (iii) such Product will be free and clear of all liens and
encumbrances and that K-Tec will convey good and marketable title to
such Product. In the event that any Product manufactured shall not be
in conformity with the foregoing warranties, K-Tec shall, at K-Tec's
option, either credit Vixel for any such nonconformity (not to exceed
the purchase price paid by Vixel for such Product plus expenses
associated with the return of the defective Products), or, at K-Tec's
expense, replace, repair, or correct such Product. The shipment of any
non-conforming Products from Vixel's customers' premises to K-Tec
shall be at K-Tec's expense so long as shipments are within the
continental United States and K-Tec shall be responsible for
in-transit risks of loss or damage.
8.0 FORCE MAJEURE
- Neither party shall be liable for any failure or delay in its
performance under this Agreement due to acts of God, acts of civil or
military authority, fires, floods, earthquakes, riots, wars or any
other cause beyond the reasonable control of the delayed party
provided that the delayed party: (i) gives the other party written
notice of such cause within fifteen (15) days of the discovery of the
event; and (ii) uses its reasonable efforts to remedy such delay in
its performance. In the event that K-Tec fails to deliver Products to
Vixel due to such causes and fails to provide within the five (5) day
notification a plan for remedy which is acceptable to Vixel, Vixel may
suspend this agreement in whole or in part for the duration of such
delaying cause and, at its option, buy the products from another
source and deduct the quantity so purchased from any unsatisfied
Purchase Order to K-Tec.
AGREED TO: /s/ Pat Doneen 7/15/97 Vixel
-----------------------------------------
AGREED TO: /s/ Cathy O'Leary K-Tec
-----------------------------------------
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and between VIXEL
CORPORATION ("the Company"), a Delaware corporation, and JAY O'DONALD ("the
Employee") (collectively, the "Parties"), effective as of February 17, 1998
("Effective Date").
WITNESSETH
WHEREAS, the Company desires to employ Employee and to assure itself of the
continued services of Employee; and
WHEREAS, Employee desires to be employed by the Company under the terms and
conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company hereby employs Employee as Vice
President Product Development, Switching Products. Employee shall have the
responsibilities, duties and authorities that are customarily associated with
such position. The Company may modify Employee's duties and objectives at its
discretion from time to time.
2. COMPENSATION. The Company agrees to pay Employee compensation (including base
salary, and bonuses, if any) as follows. This compensation scheme and amount may
be changed by the Company from time to time.
2.1 SALARY. Employee's monthly base salary will be $12,292 (an
annualized rate of $147,500) ("Base Salary") payable at such times as the
Company's payroll obligations are normally paid. Employee's salary will be
reviewed annually. However, unless the Company implements a salary reduction
applicable to all other officers of the Company, in which case any reduction to
Employee's salary will be proportionate to the salary reduction of all such
officers as a group, Employee's salary will not be reduced.
2.2 SAVINGS PLAN. The Company may make quarterly matching contribution
payments into the Company's savings plan (the "Plan"). This amount may be
adjusted from time to time and/or the Plan may be terminated at the sole
election of the Company. A copy of the Plan is available upon Employee's
request.
2.3 BENEFITS. The Company also agrees to provide Employee with benefits
consistent with Company policy and practice for its Employees, including
participation in the Company's group health, life, and disability insurance
plans for Employee and Employee's dependents. Details about these benefits are
provided in the Company's employee handbook and summary plan descriptions.
<PAGE> 2
2.4 ADDITIONAL COMPENSATION. The Company may, but has no obligation to,
also award Employee discretionary compensation, bonuses and benefits
("Additional Compensation"). The amount of the Additional Compensation, if any,
and the criteria for determining the amount of the Additional Compensation, if
any, shall be at the sole discretion of the Company.
2.5 REPURCHASE RIGHT. (a) In the event Employee voluntarily terminates
his employment with the Company, or is terminated for Cause (as defined below)
any time after the Effective Date, then the Company shall have the right at any
time within ninety (90) days after such termination to repurchase from employee
or his personal representative, as the case may be (the "Repurchase Right"),
(i) up to 114,696 shares of Common Stock, at the purchase
price paid by Employee, provided, however, that on the last day of each month
following the Effective Date in which the Employee remains employed by the
Company, 4,779 shares of Common Stock, up to a total of 114,696 shares, shall be
fully vested in Employee and shall no longer be subject to the Company's
Repurchase Right in accordance with the vesting schedule attached hereto as
Exhibit A; and
(ii) up to 170,158 shares of Common Stock issued pursuant
to the exercise of stock options, at the exercise price per share paid by
Employee, (together with the 114,696 shares of Common Stock referred to in the
preceding paragraph, the "Shares"); provided, however, that on the last day of
each month following the Effective Date in which the Employee remains employed
by the Company, 5,868 shares of Common Stock, up to a total of 170,158 shares,
shall be fully vested in Employee and shall no longer be subject to the
Company's Repurchase Right in accordance with the vesting schedule attached
hereto as Exhibit A. For purposes of this Agreement, "Cause" shall mean (i)
fraud, (ii) misappropriation of funds of a material nature for personal gain,
(iii) commission of a crime involving dishonesty, fraud, larceny or
embezzlement, (iv) material breach of Section 3 or Section 6 of this Agreement,
and (v) the willful refusal to carry out the reasonable directions of the Board
of Directors within a reasonable time after receipt of notice from the Board,
setting forth the instructions in sufficient detail. Notwithstanding the
foregoing, Employee shall not be deemed to have been terminated for Cause
pursuant to clause (v) above unless and until there shall have been delivered to
Employee a copy of a resolution, duly adopted by the Board of Directors at a
meeting of the Board of Directors called and held (after five (5) days' notice
to the Employee of such meeting and an opportunity for him, together with his
counsel, to be heard before the Board of Directors at such meeting) for the
purposes of finding that in the good faith opinion of the Board of Directors the
Employee was guilty of the conduct set forth in clause (v) above.
(b) The Company shall be entitled to pay for any Shares purchased
pursuant to its Repurchase Right at the Company's option in cash or by offset
against any indebtedness owing to the Company by Employee (including without
limitation any Note given in payment for the Shares).
2.
<PAGE> 3
(c) 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 Employee's employment for any reason, with or without
cause.
(d) The Repurchase Right shall be exercised by written notice
signed by an officer of the Company or by any assignee or assignees of the
Company and delivered or mailed as provided in Section 8. Such notice shall
identify the number of shares to be purchased and shall notify Employee of the
time, place and date for settlement of such purchase, which shall be scheduled
by the Company within the time period specified in Section 2.5(a) herein.
(e) If, from time to time during the term of the Repurchase
Right:
(i) There is any stock dividend or other distribution of
cash and/or property, stock split or other change in the character or amount of
any of the outstanding securities of the Company; or
(ii) There is any consolidation, merger or sale of all, or
substantially all of the assets of the Company;
then, in such event, any and all new, substituted or additional securities or
other property to which Employee is entitled by reason of its ownership of the
Shares shall be immediately subject to the Repurchase Right with the same force
and effect as the Shares.
(f) All certificates representing the Shares subject to the
provisions of this Agreement shall have endorsed thereon legends in
substantially the following forms (in addition to any other legend which may be
required by other agreements between the parties hereto):
(i) "The shares represented by this certificate are
subject to an option set forth in an agreement between the Company and the
registered holder, or his predecessor in interest, a copy of which is on file at
the principal office of the Company. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares."
(ii) "The securities represented by this certificate have
not been registered under the Securities Act of 1933. They may not be sold,
offered for sale, pledged or hypothecated in the absence of an effective
registration statement as to the securities under said Act or an opinion of
counsel satisfactory to the Company that such registration is not required."
(iii) Any legend required by appropriate blue sky
officials.
(g) Employee shall not transfer by sale, assignment,
hypothecation, donation or otherwise any of the Shares or any interest therein
subject to the Repurchase Right without the prior express written consent of the
Company. Notwithstanding the foregoing, Employee shall be permitted to transfer
the Shares or any interest therein to a trust established for the sole benefit
of Employee or any of Employee's spouse, children or grandchildren, or to a
limited liability
3.
<PAGE> 4
company or partnership of which Employee's spouse, children or grandchildren
and/or trusts for their benefit will be the members or general and limited
partners; provided that any such transferee furnishes a written agreement to be
bound by and comply with the provisions of this Section 2.5.
(h) The Repurchase Right in this Section 2.5 shall inure to the
benefit of the successors and assigns of the Company, and subject to the
restrictions on transfer herein set forth, shall be binding upon the Employee,
his successors and assigns. In the event that the Company shall be prohibited by
Delaware corporate law or other legal restriction from exercising the Repurchase
Right, the Repurchase Right shall be assignable by the Company to stockholders
of the Company who are also represented on the Board of Directors of the
Company.
3. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT OBLIGATIONS. Employee agrees
to execute, and to be bound by, a Proprietary Information and Inventions
Agreement ("Proprietary Information Agreement") in the form attached hereto as
Exhibit B, the terms of which are incorporated herein by reference.
4. EMPLOYEE HANDBOOK. By signing this Agreement, Employee acknowledges that he
has received, read and agrees to be bound by, the Company's employee handbook.
Employee agrees to abide by all Company policies and procedures.
5. ADDITIONAL ACTIVITIES. Employee agrees that during the period of Employee's
employment by the Company, Employee will not, without the Company's express
written consent, engage in any employment or business activity other than for
the Company that would adversely affect Employee's ability to perform his
obligations hereunder.
6. COVENANT NOT TO COMPETE.
6.1 Employee agrees that during his employment with the Company whether
full-time or half-time and for a period of twenty-four (24) months after the
Effective Date, not to directly or indirectly participate in, engage in (whether
as an employee, consultant, proprietor, partner, director or otherwise), have
any ownership interest in, participate in the financing, operation, management
or control of, or otherwise deal or become associated with (collectively, the
"Restricted Activities") any person, firm, corporation or business that engages
in a "Restricted Business" (as defined below).
Notwithstanding the foregoing, Employee shall not be prohibited from
engaging in a Restricted Activity with a business unit(s) of an enterprise that
does not engage in a Restricted Business. Further, nothing herein shall prohibit
Employee from purchasing or otherwise acquiring up to (but not more than) one
percent of any class of securities of any enterprise if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934.
6.2 As used herein, the term "Restricted Business" shall mean the
design, development, marketing or sales of network storage interconnect and
switch systems including
4.
<PAGE> 5
but not limited to interconnect hardware, storage resource management software,
and network storage switch, hub, and bridge software.
6.3 In the event that any provision of this Section is more restrictive
than permitted by the law of the jurisdiction in which the Company seeks
enforcement thereof, the provisions of this Section shall be limited only to
that extent that a judicial determination finds the same to be unreasonable or
otherwise unenforceable. Such invalidity or unenforceability shall not affect
any other terms herein, but such term shall be deemed deleted, and such deletion
shall not affect the validity of the other terms hereof. In addition, if any one
or more of the terms contained in this Section shall for any reason be held to
be excessively broad or of an overly long duration that term shall be construed
in a manner to enable it to be enforced to the extent compatible with applicable
law. Moreover, notwithstanding any judicial determination that any provision of
this Section is not specifically enforceable, the parties intend that the
Company shall nonetheless be entitled to recover monetary damages as a result of
any breach hereof.
7. AT-WILL RELATIONSHIP; TERMINATION OF EMPLOYMENT. Employee and the Company
each acknowledge that either Party has the right to terminate Employee's
employment with the Company at any time for any reason whatsoever, with or
without cause or advance notice. This at-will employment relationship cannot be
changed except in a written instrument signed by a duly authorized officer of
the Company.
8. NOTICES. All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or delivered by registered or certified
mail (return receipt requested), or private overnight mail (delivery confirmed
by such service), to the following addresses, or to such other address as either
Party shall designate by notice in writing to the other in accordance herein: if
to the Company: 11911 Northcreek Parkway South, Suite 100, Bothell, WA 98011,
Attention: President; if to Employee: at such address provided to the Company by
the Employee.
9. ARBITRATION. To ensure rapid and economical resolution of any and all
disputes directly or indirectly arising out of or in any way connected with
Employee's employment with the Company or the termination of that employment,
with the sole exception of disputes which arise under Section 2.5, Section 6 or
Employee's Proprietary Information Agreement, (collectively, the "Arbitrable
Claims"), the Company and Employee each agree that any and all such disputes,
whether of law or fact of any nature whatsoever, shall be resolved by final and
binding arbitration under the procedures set forth in Exhibit C to this
Agreement and the then existing American Arbitration Association ("AAA")
arbitration procedures (except insofar as they are inconsistent with the
procedures set forth in Exhibit C). The Arbitrable Claims shall include, but
shall not be limited to: any and all such claims related to salary, bonuses,
commissions, vacation pay, fringe benefits, expense reimbursements, severance
benefits, or any other form of compensation; claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act, as amended ("ADEA"); the federal Americans with Disabilities Act
of 1990; the California Fair Employment and Housing Act, as amended; tort law;
5.
<PAGE> 6
contract law; wrongful discharge; discrimination; fraud; defamation; and
emotional distress; and breach of the implied covenant of good faith and fair
dealing. Employee and the Company acknowledge and agree that any and all rights
they may otherwise have to resolve such Arbitrable Claims by jury trial, by a
court, or in any forum other than the AAA, are hereby expressly waived.
10. GENERAL.
10.1 ENTIRE AGREEMENT. This Agreement sets forth the complete, final and
exclusive embodiment of the entire agreement between Employee and the Company
with respect to the subject matter hereof. This Agreement is entered into
without reliance upon any promise, warranty or representation, written or oral,
other than those expressly contained herein, and it supersedes any other such
promises, warranties, representations or agreements. This Agreement may not be
amended or modified except in a written instrument signed by Employee and a duly
authorized officer or director of the Company.
10.2 SEVERABILITY. If a court of competent jurisdiction determines that
any term or provision of this Agreement is invalid or unenforceable, then the
remaining terms and provisions shall be unimpaired. Such court shall have the
authority to modify or replace the invalid or unenforceable term or provision
with a valid and enforceable term or provision which most accurately represents
the Parties' intention with respect to the invalid or unenforceable term or
provision.
10.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors and administrators of
each Party, and inure to the benefit of each Party, its heirs, successors and
assigns. However, because of the unique and personal nature of Employee's duties
under this Agreement, Employee may not delegate the performance of his duties
under this Agreement.
10.4 APPLICABLE LAW. This Agreement shall be deemed to have been entered
into, and it shall be construed and enforced in accordance with the laws of the
State of California as applied to contracts made and to be performed entirely
within California.
10.5 FORUM. Any action to enforce or requiring interpretation of this
Agreement must be brought in a forum located within the State of California.
10.6 HEADINGS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, all of which together shall constitute one
and the same instrument.
6.
<PAGE> 7
IN WITNESS WHEREOF, the Parties have duly authorized and caused this
Agreement to be executed as follows:
JAY O'DONALD VIXEL CORPORATION,
a Delaware corporation
By: /s/ Jay O'Donald By: /s/ Stephen M. Smith
-------------------------------- --------------------------------
Dated: February 17, 1998 Title: Vice President, Finance
----------------------------- -----------------------------
Dated:
-----------------------------
7.
<PAGE> 8
EXHIBIT A
VESTING SCHEDULE
The 114,696 shares of restricted founder's Common Stock subject to the
Company's Repurchase Right shall vest as follows:
<TABLE>
<CAPTION>
Number of Shares Date of Earliest Vesting
<S> <C>
4,779 02/28/98
4,779 03/31/98
4,779 04/30/98
4,779 05/31/98
4,779 06/30/98
4,779 07/31/98
4,779 08/31/98
4,779 09/30/98
4,779 10/31/98
4,779 11/30/98
4,779 12/31/98
4,779 01/31/99
4,779 02/28/99
4,779 03/31/99
4,779 04/30/99
4,779 05/31/99
4,779 06/30/99
4,779 07/31/99
4,779 08/31/99
</TABLE>
1.
<PAGE> 9
<TABLE>
<CAPTION>
Number of Shares Date of Earliest Vesting
<S> <C>
4,779 09/30/99
4,779 10/31/99
4,779 11/30/99
4,779 12/31/99
4,779 01/31/2000
</TABLE>
The 170,158 shares of Common Stock issued pursuant to the exercise of
stock options subject to the Company's Repurchase Right shall vest as follows:
<TABLE>
<CAPTION>
Number of Shares Date of Earliest Vesting
<S> <C>
5,868 02/28/98
5,868 03/31/98
5,868 04/30/98
5,868 05/31/98
5,868 06/30/98
5,868 07/31/98
5,868 08/31/98
5,868 09/30/98
5,868 10/31/98
5,868 11/30/98
5,868 12/31/98
5,868 01/31/99
5,868 02/28/99
5,868 03/31/99
5,868 04/30/99
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
Number of Shares Date of Earliest Vesting
<S> <C>
5,868 05/31/99
5,868 06/30/99
5,868 07/31/99
5,868 08/31/99
5,868 09/30/99
5,868 10/31/99
5,868 11/30/99
5,868 12/31/99
5,868 01/31/2000
5,868 02/28/2000
5,868 03/31/2000
5,868 04/30/2000
5,868 05/31/2000
5,854 06/30/2000
</TABLE>
<PAGE> 11
EXHIBIT B
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an Employee of VIXEL CORPORATION (the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now and
hereafter paid to me, I agree to the following:
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of my
employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of the
Company ("Board"), any proprietary information of the Company. I will obtain the
Board's written approval before publishing or submitting for publication any
material (written, verbal or otherwise) that relates to any work at the Company
and/or incorporates any proprietary information. I hereby recognize that all
Proprietary Information will be the sole property of the Company and its
assigns.
(b) PROPRIETARY INFORMATION. The term "Proprietary Information" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the company.
Notwithstanding the foregoing, it is understood that, "Proprietary Information"
does not include, and at all such times I am free to use to whatever extent and
in whichever way I wish information (a) which is generally known to the public
or in the trade or industry, (b) is known to me at the time of its first
disclosure to me by the Company (c) becomes known to me lawfully from a third
party without any restriction on disclosure, and (d) my own, skill, knowledge,
know-how and experience.
(c) THIRD PARTY INFORMATION. I recognize that the Company has received
and in the future will receive Proprietary Information from third parties
subject to a duty on the Company's part to maintain the confidentiality of such
information and, in some cases, to use it only for certain limited purposes. I
agree that I owe the Company and such third parties, both during the term of my
employment and thereafter, a duty to hold all such Proprietary Information in
the strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or corporation
or use it for the benefit of anyone other than the Company or such third party,
unless expressly authorized to act otherwise by an officer of the Company.
(d) FORMER EMPLOYER INFORMATION. I agree that I will not, during my
employment with the Company, in breach of any agreement or unlawfully use or
disclose any confidential information or trade secrets of my former or
concurrent employers or companies, if any, and that I will not bring onto the
premises of the Company any unpublished documents or any property belonging to
my former or concurrent employers or companies unless previously and
specifically consented to in writing by the particular employer or company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS
(a) INVENTIONS AND ORIGINAL WORKS RETAINED BY ME. I have attached hereto
as Exhibit A a complete disclosure of all inventions, original works of
authorship, developments, improvements, and trade secrets that I have, alone or
jointly with others, conceived, developed or reduced to practice or caused to be
conceived, developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or the property
of third parties and that I wish to have excluded from the scope of this
Agreement. If disclosure of an item on Exhibit A would cause me to violate any
prior confidentiality agreement, I understand that I am not to disclose such on
Exhibit A but in the applicable space on Exhibit A I am only to disclose a
cursory name for each such invention, a listing of all parties to whom it
belongs and the fact that full disclosure as to such inventions has not been
made for that reason. A
1.
<PAGE> 12
space is provided on Exhibit A for such purpose. If no disclosure is attached, I
represent that there are no such inventions.
(b) INVENTIONS AND ORIGINAL WORKS ASSIGNED TO THE COMPANY. I agree that
I will make prompt written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assign to the Company all my
right, title and interest in and to any ideas, inventions, original works of
authorship, developments, improvements or trade secrets which I may solely or
jointly conceive or reduce to practice, or cause to be conceived or reduced to
practice, as a consequence of and during the period of my employment with the
Company. I recognize that, in the event of a specifically applicable state law,
regulation, rule or public policy ("Specific Inventions Law"), this Agreement
will not be deemed to require assignment of any invention which qualifies fully
for protection under a Specific Inventions Law by virtue of the fact that any
such invention was, for example, developed entirely on my own time without using
the Company's equipment, supplies, facilities or trade secrets and neither
related to the Company's actual or anticipated business, research or
development, nor resulted from work performed by me for the Company. In the
absence of a Specific Inventions Law, the preceding sentence will not apply.
(c) WORKS MADE FOR HIRE. I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are "works made for
hire," as that term is defined in the United States Copyright Act (17 U.S.C.
Section 101). To the extent that any original works of authorship created by me
for the company and in furtherance of my employment by the Company would be
deemed not to be "works made for hire," unless specially ordered or
commissioned, I and the Company hereby mutually agree that such works are
specially ordered or commissioned. To the extent that such works are not deemed
to be "works made for hire," as that term is defined in the Copyright Act
because, for example, I am deemed to be an independent contractor and/or such
works do not fall within the category of works which are commissionable as
"works made for hire," I hereby assign to the Company, as author, all of my
right, title and interest in the Copyright to such works.
(d) INVENTIONS AND ORIGINAL WORKS ASSIGNED TO THE UNITED STATES. I
hereby assign to the United States government all my right, title and interest
in and to any and all inventions, original works of authorship, developments,
improvements or trade secrets whenever full title to same is required to be in
the United States by a contract between the Company and the United States or any
of its agencies.
(e) OBTAINING LETTERS PATENT, COPYRIGHT REGISTRATIONS AND OTHER
PROTECTIONS.
(i) I will assist the Company in every proper way to obtain and
enforce United States and foreign proprietary rights relating to any and all
inventions, original works of authorship, developments, improvements or trade
secrets of the Company in any and all countries. To that end I will execute,
verify and deliver (A) such documents and perform such other acts (including
appearing as a witness) as Company may reasonably request for use in applying
for, obtaining, perfecting, evidencing, sustaining and enforcing such
proprietary rights and the assignment thereof and (B) assignments of such
proprietary rights to the Company or its designee. Company shall reimburse me
for my reasonable expenses in conjunction with the foregoing.
(ii) My obligation to assist the Company with respect to
proprietary rights in any and all countries shall continue beyond the
termination of my employment, but the Company shall compensate me at a
reasonable rate after my termination for the time actually spent by me at the
Company's request on such assistance.
(iii) In the event the Company is unable for any reason, after
reasonable effort, to secure my signature on any document needed in connection
with the actions specified in the preceding paragraph, I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney-in-fact, to act for and on my behalf lawfully to execute
and file any such documents and to do all other lawfully permitted acts to
further the purposes of the preceding paragraph with the same legal force and
effect as if executed by me. Such appointment is coupled with an interest. I
hereby waive and quitclaim to the Company any and all claims of any nature
whatsoever which I now or may hereafter have for infringement of any proprietary
rights assigned to the Company.
<PAGE> 13
(f) OBLIGATION TO KEEP THE COMPANY INFORMED. In addition to my
obligations under paragraph 2(b) above, during the period of my employment and
for one (1) year after termination of my employment for any reason, unless
prohibited by a subsequent employer (if such invention or improvement was not
conceived or reduced to practice as a consequence of and during my employment
with the Company), I will promptly disclose to the Company in summary form and
in writing all patent applications filed by me or on my behalf. At the time of
each such disclosure, I will advise the Company in writing of any inventions
that I believe fully qualify for protection under a Specific Inventions Law, if
any. I will at that time provide to the Company in writing all evidence
necessary to substantiate that belief. The Company will keep in confidence and
will not disclose to third parties without my consent any proprietary
information disclosed in writing to the Company pursuant to this Agreement. I
will preserve the confidentiality of any such invention that does not qualify
fully for protection under a Specific Inventions Law, if any. I agree to keep
and maintain adequate and current records (in the form of notes, sketches,
drawings and in any other form that may be required by the Company) of all
proprietary information developed by me and all inventions made by me during the
period of my employment at the Company, which records shall be available to and
remain the sole property of the Company at all times.
3. NO CONFLICTS OR SOLICITATION
(a) In addition to the obligations set forth in Section 6 of the
Employment Agreement dated of even date herewith (the "Employment Agreement"), I
agree that during the period of my employment by the Company I will not, without
the Company's express written consent, engage or prepare to engage in any
activity in competition with the Company or concurrently accept employment,
provide services to, or establish a business relationship with a business or
individual engaged in or preparing to engage in competition with the Company.
For the period of my employment by the Company and for one (1) year after the
date of termination of my employment by the Company I will not (a) induce any
executive, director, consultant or independent contractor of the Company to
leave the service of the Company or (b) solicit the business of any client or
customer of the Company (other than on behalf of the Company). If any
restriction set forth in this Section is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
4. NO CONFLICTING OBLIGATIONS
I represent that my performance of all the terms of this Agreement and as an
Employee of the Company does not and will not breach any agreement or obligation
of mine relating to any time prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict with this Agreement or my employment.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company (and will
not keep in my possession, recreate or deliver to anyone else) any and all
devices, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, together with all copies thereof (in whatever medium
recorded) belonging to the Company, its successors or assigns whether kept at
the Company, home or elsewhere. I further agree that any property situated on
the Company's premises and owned by the Company, including disks and other
storage media, filing cabinets or other work areas, is subject to inspection by
Company personnel at any time with or without notice. Prior to leaving, I will
cooperate with the Company in completing and signing the Company's termination
statement for technical and management personnel confirming the above and my
obligations under this Agreement.
6. NOTIFICATION OF NEW EMPLOYER
In the event that I leave the employ of the Company, I hereby consent to the
notification of my new employer of my rights and obligations under this
Agreement.
7. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access to and
become acquainted with the proprietary information of the Company, the Company
shall have the right to enforce this Agreement and any of its provisions by
injunction,
<PAGE> 14
specific performance or other equitable relief, without bond and without
prejudice to any other rights and remedies that the Company may have for a
breach of this Agreement.
8. GENERAL PROVISIONS
(a) NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at any time, with or without
cause.
(b) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will
be governed by and construed according to the laws of the State of California,
excluding conflicts of laws principles. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in
____________________ Counties for any lawsuit filed there against me by the
Company arising from or relating to this Agreement.
(c) ENTIRE AGREEMENT. This Agreement, Exhibit 1 attached hereto and the
Employment Agreement hereby incorporated herein, set forth the final, complete
and exclusive agreement and understanding between the Company and me relating to
the subject matter hereof and supersedes all prior and contemporaneous
understandings and agreements relating to its subject matter. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, will be effective unless in writing and signed by both the Company
and me. Any subsequent change or changes in my duties, salary or compensation
will not affect the validity or scope of this Agreement.
(d) SEVERABILITY. If one or more of the provisions in this Agreement are
deemed unenforceable by law, then the remaining provisions will continue in full
force and effect.
(e) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors and its assigns.
(f) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
(g) WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
(h) NOTICE. All notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery or, if sent by certified or registered mail, postage prepaid,
three (3) days after the date of mailing.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT 1 TO THIS AGREEMENT.
Dated:________________________
________________________________________
Signature
________________________________________
JAY O'DONALD
________________________________________
Address
________________________________________
ACCEPTED AND AGREED TO:
Vixel Corporation
11911 Northcreek Parkway South, Suite 100
Bothell, WA 98011
By:_____________________________________
Title:__________________________________
<PAGE> 15
EXHIBIT 1
TO: VIXEL CORPORATION
FROM: ___________________________
RE: PRIOR INVENTIONS
DATE: ___________________________
1. Except as listed in Section 2 below the following is a complete
disclosure of all inventions or improvements relevant to the subject matter of
my employment by Vixel Corporation (the "Company") that have been made or
conceived or first reduced to practice by me alone or jointly with others prior
to my engagement by the Company:
[ ] No inventions or improvements.
[ ] See below.
[ ] Additional sheets attached.
3. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following parties:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
INVENTION OR IMPROVEMENT PARTY RELATIONSHIP
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
1.
- ---------------------------------------------------------------------------------------------
2.
- ---------------------------------------------------------------------------------------------
3.
- ---------------------------------------------------------------------------------------------
</TABLE>
[ ] Additional sheets attached.
1.
<PAGE> 16
I. I propose to bring to my employment the following devices, materials
and documents of a former employer or other person to whom I have an obligation
of confidentiality that are not generally available to the public, which
materials and documents may be used in my employment pursuant to the express
written authorization of my former employer or such other person (a copy of
which is attached hereto):
[ ] No inventions or improvements.
[ ] See below.
[ ] Additional sheets attached.
Date:________________________ Very truly yours,
___________________________________
JAY O'DONALD
2.
<PAGE> 17
EXHIBIT C
ARBITRATION PROCEDURE
1. The Parties agree that any dispute that arises in connection with this
Agreement or the termination of this Agreement shall be resolved by binding
arbitration in the manner described below.
2. A Party intending to seek resolution of any dispute under the Agreement by
arbitration shall provide a written demand for arbitration to the other Party,
which demand shall contain a brief statement of the issues to be resolved.
3. The arbitration shall be conducted by the American Arbitration Association
("AAA"). At the request of either Party, subject to paragraph ten (10) below
regarding judicial enforcement of the decree or judgment of an award rendered by
the arbitrator, arbitration proceedings will be conducted in the utmost secrecy
and, in such case, all documents, testimony and records shall be received, heard
and maintained by the arbitrator(s) in secrecy under seal, available for
inspection only by the Parties to the arbitration, their respective attorneys,
and their respective expert consultants or witnesses who shall agree, in advance
and in writing, to receive all such information confidentially and to maintain
such information in secrecy, and make no use of such information except for the
purposes of the arbitration, unless compelled by legal process.
4. The arbitrator(s) is required to disclose any circumstances that might
preclude the arbitrator from rendering an objective and impartial determination.
5. The Party demanding arbitration shall promptly request that AAA conduct a
scheduling conference within fifteen (15) days of the date of that Party's
written demand for arbitration or on the first available date thereafter on the
arbitrator's calendar. The arbitration hearing shall be held within thirty (30)
days after the scheduling conference or on the first available date thereafter
on the arbitrator's calendar. Nothing in this paragraph shall prevent a Party
from at any time seeking temporary equitable relief, from AAA or any court of
competent jurisdiction, to prevent irreparable harm pending the resolution of
the arbitration.
6. Discovery shall be conducted as follows: (a) prior to the arbitration any
Party may make a written demand for lists of the witnesses to be called and the
documents to be introduced at the hearing; (b) the lists must be served within
fifteen (15) days of the date of receipt of the demand, or one (1) day prior to
the arbitration, whichever is earlier; and (c) each Party may take no more than
two depositions (pursuant to the procedures of California law) with a maximum of
five hours of examination time per deposition, and no other form of
pre-arbitration discovery shall be permitted.
1.
<PAGE> 18
7. It is the intent of the Parties that the Federal Arbitration Act ("FAA")
shall apply to the enforcement of this provision unless it is held inapplicable
by a court with jurisdiction over the dispute, in which event California law
with regard to arbitration shall apply.
8. The arbitrator(s) shall apply California law, and shall be able to decree any
and all relief of an equitable nature, including but not limited to such relief
as a temporary restraining order, a preliminary injunction, a permanent
injunction, or repletion of Company property. The arbitrator(s) shall also be
able to award actual, general or consequential damages, but shall not award any
other form of damage (e.g., punitive damages).
9. Each Party shall pay its pro rata share of the arbitrator's fees and
expenses, in addition to other expenses of the arbitration approved by the
arbitrator, pending the resolution of the arbitration. The losing party shall
pay the other Party's reasonable attorneys' fees while each party shall be
responsible for its own witness fees and other expenses incurred for its own
benefit. The arbitrator(s) shall have authority to award the payment of such
witness fees and other expenses to the prevailing Party, as appropriate in the
discretion of the arbitrator.
10. The arbitrator(s) shall render a written award setting forth the reasons for
the arbitration decision. The decree or judgment of an award rendered by the
arbitrator may be entered and enforced in any court having jurisdiction over the
Parties. The award of the arbitrator(s) shall be final and binding upon the
Parties without appeal or review except as permitted by the FAA, or if the FAA
is not applicable, as permitted by California law.
11. The Parties agree that the arbitration procedures set forth in this Exhibit
C shall be superseded and replaced by any change the Company makes to its
arbitration procedures that are generally applicable to its employees, provided
that any such change is no more restrictive on the Employee than the procedures
set forth herein.
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and between VIXEL
CORPORATION ("the Company"), a Delaware corporation, and STUART BERMAN ("the
Employee") (collectively, the "Parties"), effective as of February 17, 1998
("Effective Date").
WITNESSETH
WHEREAS, the Company desires to employ Employee and to assure itself of the
continued services of Employee; and
WHEREAS, Employee desires to be employed by the Company under the terms and
conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company hereby employs Employee as Vice
President and Chief Technical Officer. Employee shall have the responsibilities,
duties and authorities that are customarily associated with such position. The
Company may modify Employee's duties and objectives at its discretion from time
to time.
2. COMPENSATION. The Company agrees to pay Employee compensation (including base
salary, and bonuses, if any) as follows. This compensation scheme and amount may
be changed by the Company from time to time.
2.1 SALARY. Employee's monthly base salary will be $12,083 (an
annualized rate of $145,000) ("Base Salary") payable at such times as the
Company's payroll obligations are normally paid. Employee's salary will be
reviewed annually. However, unless the Company implements a salary reduction
applicable to all other officers of the Company, in which case any reduction to
Employee's salary will be proportionate to the salary reduction of all such
officers as a group, Employee's salary will not be reduced.
2.2 SAVINGS PLAN. The Company may make quarterly matching contribution
payments into the Company's savings plan (the "Plan"). This amount may be
adjusted from time to time and/or the Plan may be terminated at the sole
election of the Company. A copy of the Plan is available upon Employee's
request.
2.3 BENEFITS. The Company also agrees to provide Employee with benefits
consistent with Company policy and practice for its Employees, including
participation in the Company's group health, life, and disability insurance
plans for Employee and Employee's dependents. Details about these benefits are
provided in the Company's employee handbook and summary plan descriptions.
1.
<PAGE> 2
2.4 ADDITIONAL COMPENSATION. The Company may, but has no obligation to,
also award Employee discretionary compensation, bonuses and benefits
("Additional Compensation"). The amount of the Additional Compensation, if any,
and the criteria for determining the amount of the Additional Compensation, if
any, shall be at the sole discretion of the Company.
2.5 REPURCHASE RIGHT. (a) In the event Employee voluntarily terminates
his employment with the Company, or is terminated for Cause (as defined below),
any time after the Effective Date, then the Company shall have the right at any
time within ninety (90) days after such termination to repurchase from employee
or his personal representative, as the case may be (the "Repurchase Right"),
(i) up to 353,645 shares of Common Stock, at the purchase
price paid by Employee; provided, however, that on the last day of each month
following the Effective Date in which the Employee remains employed by the
Company, 14,736 shares of Common Stock, up to a total of 353,645 shares, shall
be fully vested in Employee and shall no longer be subject to the Company's
Repurchase Right, in accordance with the vesting schedule attached hereto as
Exhibit A; and
(ii) up to 124,347 shares of Common Stock issued pursuant
to the exercise of stock options, at the exercise price per share paid by
Employee, (together with the 353,645 shares of Common Stock referred to in the
preceding paragraph, the "Shares"); provided, however, that on the last day of
each month following the Effective Date in which the Employee remains employed
by the Company, 4,288 shares of Common Stock, up to a total of 124,347 shares,
shall be fully vested in Employee and shall no longer be subject to the
Company's Repurchase Right, in accordance with the vesting schedule attached
hereto as Exhibit A. For purposes of this Agreement, "Cause" shall mean (i)
fraud, (ii) misappropriation of funds of a material nature for personal gain,
(iii) commission of a crime involving dishonesty, fraud, larceny or
embezzlement, (iv) material breach of Section 3 or Section 6 of this Agreement,
and (v) the willful refusal to carry out the reasonable directions of the Board
of Directors within a reasonable time after receipt of notice from the Board,
setting forth the instructions in sufficient detail. Notwithstanding the
foregoing, Employee shall not be deemed to have been terminated for Cause
pursuant to clause (v) above unless and until there shall have been delivered to
Employee a copy of a resolution, duly adopted by the Board of Directors at a
meeting of the Board of Directors called and held (after five (5) days' notice
to the Employee of such meeting and an opportunity for him, together with his
counsel, to be heard before the Board of Directors at such meeting) for the
purposes of finding that in the good faith opinion of the Board of Directors the
Employee was guilty of the conduct set forth in clause (v) above.
(b) The Company shall be entitled to pay for any Shares purchased
pursuant to its Repurchase Right at the Company's option in cash or by offset
against any indebtedness owing to the Company by Employee (including without
limitation any Note given in payment for the Shares).
<PAGE> 3
(c) 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 Employee's employment for any reason, with or without
cause.
(d) The Repurchase Right shall be exercised by written notice
signed by an officer of the Company or by any assignee or assignees of the
Company and delivered or mailed as provided in Section 8. Such notice shall
identify the number of shares to be purchased and shall notify Employee of the
time, place and date for settlement of such purchase, which shall be scheduled
by the Company within the time period specified in Section 2.5(a) herein.
(e) If, from time to time during the term of the Repurchase
Right:
(i) There is any stock dividend or other distribution of
cash and/or property, stock split or other change in the character or amount of
any of the outstanding securities of the Company; or
(ii) There is any consolidation, merger or sale of all, or
substantially all of the assets of the Company;
then, in such event, any and all new, substituted or additional securities or
other property to which Employee is entitled by reason of its ownership of the
Shares shall be immediately subject to the Repurchase Right with the same force
and effect as the Shares.
(f) All certificates representing the Shares subject to the
provisions of this Agreement shall have endorsed thereon legends in
substantially the following forms (in addition to any other legend which may be
required by other agreements between the parties hereto):
(i) "The shares represented by this certificate are
subject to an option set forth in an agreement between the Company and the
registered holder, or his predecessor in interest, a copy of which is on file at
the principal office of the Company. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares."
(ii) "The securities represented by this certificate have
not been registered under the Securities Act of 1933. They may not be sold,
offered for sale, pledged or hypothecated in the absence of an effective
registration statement as to the securities under said Act or an opinion of
counsel satisfactory to the Company that such registration is not required."
(iii) Any legend required by appropriate blue sky
officials.
(g) Employee shall not transfer by sale, assignment,
hypothecation, donation or otherwise any of the Shares or any interest therein
subject to the Repurchase Right without the prior express written consent of the
Company. Notwithstanding the foregoing, Employee shall be permitted to transfer
the Shares or any interest therein to a trust established for the sole benefit
of Employee or any of Employee's spouse, children or grandchildren, or to a
limited liability
<PAGE> 4
company or partnership of which Employee's spouse, children or grandchildren
and/or trusts for their benefit will be the members or general and limited
partners; provided that any such transferee furnishes a written agreement to be
bound by and comply with the provisions of this Section 2.5.
(h) The Repurchase Right in this Section 2.5 shall inure to the
benefit of the successors and assigns of the Company, and subject to the
restrictions on transfer herein set forth, shall be binding upon the Employee,
his successors and assigns. In the event that the Company shall be prohibited by
Delaware corporate law or other legal restriction from exercising the Repurchase
Right, the Repurchase Right shall be assignable by the Company to stockholders
of the Company who are also represented on the Board of Directors of the
Company.
3. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT OBLIGATIONS. Employee agrees
to execute, and to be bound by, a Proprietary Information and Inventions
Agreement ("Proprietary Information Agreement") in the form attached hereto as
Exhibit B, the terms of which are incorporated herein by reference.
4. EMPLOYEE HANDBOOK. By signing this Agreement, Employee acknowledges that he
has received, read and agrees to be bound by, the Company's employee handbook.
Employee agrees to abide by all Company policies and procedures.
5. ADDITIONAL ACTIVITIES. Employee agrees that during the period of Employee's
employment by the Company, Employee will not, without the Company's express
written consent, engage in any employment or business activity other than for
the Company that would adversely affect Employee's ability to perform his
obligations hereunder.
6. COVENANT NOT TO COMPETE.
6.1 Employee agrees that during his employment with the Company whether
full-time or half-time and for a period of twenty-four (24) months after the
Effective Date, not to directly or indirectly participate in, engage in (whether
as an employee, consultant, proprietor, partner, director or otherwise), have
any ownership interest in, participate in the financing, operation, management
or control of, or otherwise deal or become associated with (collectively, the
"Restricted Activities") any person, firm, corporation or business that engages
in a "Restricted Business" (as defined below).
Notwithstanding the foregoing, Employee shall not be prohibited from
engaging in a Restricted Activity with a business unit(s) of an enterprise that
does not engage in a Restricted Business. Further, nothing herein shall prohibit
Employee from purchasing or otherwise acquiring up to (but not more than) one
percent of any class of securities of any enterprise if such securities are
listed on any national or regional securities exchange or have been registered
under Section 12(g) of the Securities Exchange Act of 1934.
6.2 As used herein, the term "Restricted Business" shall mean the
design, development, marketing or sales of network storage interconnect and
switch systems including
<PAGE> 5
but not limited to interconnect hardware, storage resource management software,
and network storage switch, hub, and bridge software.
6.3 In the event that any provision of this Section is more restrictive
than permitted by the law of the jurisdiction in which the Company seeks
enforcement thereof, the provisions of this Section shall be limited only to
that extent that a judicial determination finds the same to be unreasonable or
otherwise unenforceable. Such invalidity or unenforceability shall not affect
any other terms herein, but such term shall be deemed deleted, and such deletion
shall not affect the validity of the other terms hereof. In addition, if any one
or more of the terms contained in this Section shall for any reason be held to
be excessively broad or of an overly long duration that term shall be construed
in a manner to enable it to be enforced to the extent compatible with applicable
law. Moreover, notwithstanding any judicial determination that any provision of
this Section is not specifically enforceable, the parties intend that the
Company shall nonetheless be entitled to recover monetary damages as a result of
any breach hereof.
7. AT-WILL RELATIONSHIP; TERMINATION OF EMPLOYMENT. Employee and the Company
each acknowledge that either Party has the right to terminate Employee's
employment with the Company at any time for any reason whatsoever, with or
without cause or advance notice. This at-will employment relationship cannot be
changed except in a written instrument signed by a duly authorized officer of
the Company.
8. NOTICES. All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or delivered by registered or certified
mail (return receipt requested), or private overnight mail (delivery confirmed
by such service), to the following addresses, or to such other address as either
Party shall designate by notice in writing to the other in accordance herein: if
to the Company: 11911 Northcreek Parkway South, Suite 100, Bothell, WA 98011,
Attention: President; if to Employee: at such address provided to the Company by
the Employee.
9. ARBITRATION. To ensure rapid and economical resolution of any and all
disputes directly or indirectly arising out of or in any way connected with
Employee's employment with the Company or the termination of that employment,
with the sole exception of disputes which arise under Section 2.5, Section 6 or
Employee's Proprietary Information Agreement, (collectively, the "Arbitrable
Claims"), the Company and Employee each agree that any and all such disputes,
whether of law or fact of any nature whatsoever, shall be resolved by final and
binding arbitration under the procedures set forth in Exhibit C to this
Agreement and the then existing American Arbitration Association ("AAA")
arbitration procedures (except insofar as they are inconsistent with the
procedures set forth in Exhibit C). The Arbitrable Claims shall include, but
shall not be limited to: any and all such claims related to salary, bonuses,
commissions, vacation pay, fringe benefits, expense reimbursements, severance
benefits, or any other form of compensation; claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act, as amended ("ADEA"); the federal Americans with Disabilities Act
of 1990; the California Fair Employment and Housing Act, as amended; tort law;
<PAGE> 6
contract law; wrongful discharge; discrimination; fraud; defamation; and
emotional distress; and breach of the implied covenant of good faith and fair
dealing. Employee and the Company acknowledge and agree that any and all rights
they may otherwise have to resolve such Arbitrable Claims by jury trial, by a
court, or in any forum other than the AAA, are hereby expressly waived.
10. GENERAL.
10.1 ENTIRE AGREEMENT. This Agreement sets forth the complete, final and
exclusive embodiment of the entire agreement between Employee and the Company
with respect to the subject matter hereof. This Agreement is entered into
without reliance upon any promise, warranty or representation, written or oral,
other than those expressly contained herein, and it supersedes any other such
promises, warranties, representations or agreements. This Agreement may not be
amended or modified except in a written instrument signed by Employee and a duly
authorized officer or director of the Company.
10.2 SEVERABILITY. If a court of competent jurisdiction determines that
any term or provision of this Agreement is invalid or unenforceable, then the
remaining terms and provisions shall be unimpaired. Such court shall have the
authority to modify or replace the invalid or unenforceable term or provision
with a valid and enforceable term or provision which most accurately represents
the Parties' intention with respect to the invalid or unenforceable term or
provision.
10.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors and administrators of
each Party, and inure to the benefit of each Party, its heirs, successors and
assigns. However, because of the unique and personal nature of Employee's duties
under this Agreement, Employee may not delegate the performance of his duties
under this Agreement.
10.4 APPLICABLE LAW. This Agreement shall be deemed to have been entered
into, and it shall be construed and enforced in accordance with the laws of the
State of California as applied to contracts made and to be performed entirely
within California.
10.5 FORUM. Any action to enforce or requiring interpretation of this
Agreement must be brought in a forum located within the State of California.
10.6 HEADINGS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10.7 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, all of which together shall constitute one
and the same instrument.
<PAGE> 7
IN WITNESS WHEREOF, the Parties have duly authorized and caused this
Agreement to be executed as follows:
STUART BERMAN VIXEL CORPORATION,
a Delaware corporation
By: /s/ STUART BERMAN By: /s/ STEPHEN M. SMITH
-------------------------------- --------------------------------
Dated: 2/17/98 Title: VP Finance
----------------------------- -----------------------------
Dated:
-----------------------------
<PAGE> 8
EXHIBIT A
VESTING SCHEDULE
The 353,645 shares of restricted founder's Common Stock subject to the Company's
Repurchase Right shall vest as follows:
<TABLE>
Number of Shares Date of Earliest Vesting
<S> <C>
14,736 02/28/98
14,736 03/31/98
14,736 04/30/98
14,736 05/31/98
14,736 06/30/98
14,736 07/31/98
14,736 08/31/98
14,736 09/30/98
14,736 10/31/98
14,736 11/30/98
14,736 12/31/98
14,736 01/31/99
14,736 02/28/99
14,736 03/31/99
14,736 04/30/99
14,736 05/31/99
14,736 06/30/99
14,736 07/31/99
14,736 08/31/99
14,736 09/30/99
</TABLE>
<PAGE> 9
<TABLE>
Number of Shares Date of Earliest Vesting
<S> <C>
14,736 10/31/99
14,736 11/30/99
14,736 12/31/99
14,717 01/31/2000
</TABLE>
The 124,347 shares of Common Stock issued pursuant to the exercise of
stock options subject to the Company's Repurchase Right shall vest as follows:
<TABLE>
Number of Shares Date of Earliest Vesting
<S> <C>
4,288 02/28/98
4,288 03/31/98
4,288 04/30/98
4,288 05/31/98
4,288 06/30/98
4,288 07/31/98
4,288 08/31/98
4,288 09/30/98
4,288 10/31/98
4,288 11/30/98
4,288 12/31/98
4,288 01/31/99
4,288 02/28/99
4,288 03/31/99
4,288 04/30/99
4,288 05/31/99
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
4,288 06/30/99
4,288 07/31/99
4,288 08/31/99
4,288 09/30/99
4,288 10/31/99
4,288 11/30/99
4,288 12/31/99
4,288 01/31/2000
4,288 02/28/2000
4,288 03/31/2000
4,288 04/30/2000
4,288 05/31/2000
4,283 06/30/2000
</TABLE>
<PAGE> 11
EXHIBIT B
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
As an Employee of VIXEL CORPORATION (the "Company"), and as a condition
of my employment by the Company and in consideration of the compensation now and
hereafter paid to me, I agree to the following:
1. MAINTAINING CONFIDENTIAL INFORMATION
(a) COMPANY INFORMATION. I agree at all times during the term of my
employment and thereafter to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation, without the written authorization of the Board of Directors of the
Company ("Board"), any proprietary information of the Company. I will obtain the
Board's written approval before publishing or submitting for publication any
material (written, verbal or otherwise) that relates to any work at the Company
and/or incorporates any proprietary information. I hereby recognize that all
Proprietary Information will be the sole property of the Company and its
assigns.
(b) PROPRIETARY INFORMATION. The term "Proprietary Information" shall
mean any and all confidential and/or proprietary knowledge, data or information
of the Company. By way of illustration but not limitation, "Proprietary
Information" includes (a) trade secrets, inventions, mask works, ideas,
processes, formulas, source and object codes, data, programs, other works of
authorship, know-how, improvements, discoveries, developments, designs and
techniques (hereinafter collectively referred to as "Inventions"); and (b)
information regarding plans for research, development, new products, marketing
and selling, business plans, budgets and unpublished financial statements,
licenses, prices and costs, suppliers and customers; and (c) information
regarding the skills and compensation of other employees of the company.
Notwithstanding the foregoing, it is understood that, "Proprietary Information"
does not include, and at all such times I am free to use to whatever extent and
in whichever way I wish information (a) which is generally known to the public
or in the trade or industry, (b) is known to me at the time of its first
disclosure to me by the Company (c) becomes known to me lawfully from a third
party without any restriction on disclosure, and (d) my own, skill, knowledge,
know-how and experience.
(c) THIRD PARTY INFORMATION. I recognize that the Company has received
and in the future will receive Proprietary Information from third parties
subject to a duty on the Company's part to maintain the confidentiality of such
information and, in some cases, to use it only for certain limited purposes. I
agree that I owe the Company and such third parties, both during the term of my
employment and thereafter, a duty to hold all such Proprietary Information in
the strictest confidence and not to, except as is consistent with the Company's
agreement with the third party, disclose it to any person, firm or corporation
or use it for the benefit of anyone other than the Company or such third party,
unless expressly authorized to act otherwise by an officer of the Company.
(d) FORMER EMPLOYER INFORMATION. I agree that I will not, during my
employment with the Company, in breach of any agreement or unlawfully use or
disclose any confidential information or trade secrets of my former or
concurrent employers or companies, if any, and that I will not bring onto the
premises of the Company any unpublished documents or any property belonging to
my former or concurrent employers or companies unless previously and
specifically consented to in writing by the particular employer or company.
2. ASSIGNMENT OF INVENTIONS AND ORIGINAL WORKS
(a) INVENTIONS AND ORIGINAL WORKS RETAINED BY ME. I have attached hereto
as Exhibit A a complete disclosure of all inventions, original works of
authorship, developments, improvements, and trade secrets that I have, alone or
jointly with others, conceived, developed or reduced to practice or caused to be
conceived, developed or reduced to practice prior to the commencement of my
employment with the Company, that I consider to be my property or the property
of third parties and that I wish to have excluded from the scope of this
Agreement. If disclosure of an item on Exhibit A would cause me to violate any
prior confidentiality agreement, I understand that I am not to disclose such on
Exhibit A but in the applicable space on Exhibit A I am only to disclose a
cursory name for each such invention, a listing of all parties to whom it
belongs and the fact that full disclosure as to such inventions has not been
made for that reason. A
1.
<PAGE> 12
space is provided on Exhibit A for such purpose. If no disclosure is attached, I
represent that there are no such inventions.
(b) INVENTIONS AND ORIGINAL WORKS ASSIGNED TO THE COMPANY. I agree that
I will make prompt written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assign to the Company all my
right, title and interest in and to any ideas, inventions, original works of
authorship, developments, improvements or trade secrets which I may solely or
jointly conceive or reduce to practice, or cause to be conceived or reduced to
practice, as a consequence of and during the period of my employment with the
Company. I recognize that, in the event of a specifically applicable state law,
regulation, rule or public policy ("Specific Inventions Law"), this Agreement
will not be deemed to require assignment of any invention which qualifies fully
for protection under a Specific Inventions Law by virtue of the fact that any
such invention was, for example, developed entirely on my own time without using
the Company's equipment, supplies, facilities or trade secrets and neither
related to the Company's actual or anticipated business, research or
development, nor resulted from work performed by me for the Company. In the
absence of a Specific Inventions Law, the preceding sentence will not apply.
(c) WORKS MADE FOR HIRE. I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are "works made for
hire," as that term is defined in the United States Copyright Act (17 U.S.C.
Section 101). To the extent that any original works of authorship created by me
for the company and in furtherance of my employment by the Company would be
deemed not to be "works made for hire," unless specially ordered or
commissioned, I and the Company hereby mutually agree that such works are
specially ordered or commissioned. To the extent that such works are not deemed
to be "works made for hire," as that term is defined in the Copyright Act
because, for example, I am deemed to be an independent contractor and/or such
works do not fall within the category of works which are commissionable as
"works made for hire," I hereby assign to the Company, as author, all of my
right, title and interest in the Copyright to such works.
(d) INVENTIONS AND ORIGINAL WORKS ASSIGNED TO THE UNITED STATES. I
hereby assign to the United States government all my right, title and interest
in and to any and all inventions, original works of authorship, developments,
improvements or trade secrets whenever full title to same is required to be in
the United States by a contract between the Company and the United States or any
of its agencies.
(e) OBTAINING LETTERS PATENT, COPYRIGHT REGISTRATIONS AND OTHER
PROTECTIONS.
(i) I will assist the Company in every proper way to obtain and
enforce United States and foreign proprietary rights relating to any and all
inventions, original works of authorship, developments, improvements or trade
secrets of the Company in any and all countries. To that end I will execute,
verify and deliver (A) such documents and perform such other acts (including
appearing as a witness) as Company may reasonably request for use in applying
for, obtaining, perfecting, evidencing, sustaining and enforcing such
proprietary rights and the assignment thereof and (B) assignments of such
proprietary rights to the Company or its designee. Company shall reimburse me
for my reasonable expenses in conjunction with the foregoing.
(ii) My obligation to assist the Company with respect to
proprietary rights in any and all countries shall continue beyond the
termination of my employment, but the Company shall compensate me at a
reasonable rate after my termination for the time actually spent by me at the
Company's request on such assistance.
(iii) In the event the Company is unable for any reason, after
reasonable effort, to secure my signature on any document needed in connection
with the actions specified in the preceding paragraph, I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney-in-fact, to act for and on my behalf lawfully to execute
and file any such documents and to do all other lawfully permitted acts to
further the purposes of the preceding paragraph with the same legal force and
effect as if executed by me. Such appointment is coupled with an interest. I
hereby waive and quitclaim to the Company any and all claims of any nature
whatsoever which I now or may hereafter have for infringement of any proprietary
rights assigned to the Company.
<PAGE> 13
(f) OBLIGATION TO KEEP THE COMPANY INFORMED. In addition to my
obligations under paragraph 2(b) above, during the period of my employment and
for one (1) year after termination of my employment for any reason, unless
prohibited by a subsequent employer (if such invention or improvement was not
conceived or reduced to practice as a consequence of and during my employment
with the Company), I will promptly disclose to the Company in summary form and
in writing all patent applications filed by me or on my behalf. At the time of
each such disclosure, I will advise the Company in writing of any inventions
that I believe fully qualify for protection under a Specific Inventions Law, if
any. I will at that time provide to the Company in writing all evidence
necessary to substantiate that belief. The Company will keep in confidence and
will not disclose to third parties without my consent any proprietary
information disclosed in writing to the Company pursuant to this Agreement. I
will preserve the confidentiality of any such invention that does not qualify
fully for protection under a Specific Inventions Law, if any. I agree to keep
and maintain adequate and current records (in the form of notes, sketches,
drawings and in any other form that may be required by the Company) of all
proprietary information developed by me and all inventions made by me during the
period of my employment at the Company, which records shall be available to and
remain the sole property of the Company at all times.
3. NO CONFLICTS OR SOLICITATION
(a) In addition to the obligations set forth in Section 6 of the
Employment Agreement dated of even date herewith (the "Employment Agreement"), I
agree that during the period of my employment by the Company I will not, without
the Company's express written consent, engage or prepare to engage in any
activity in competition with the Company or concurrently accept employment,
provide services to, or establish a business relationship with a business or
individual engaged in or preparing to engage in competition with the Company.
For the period of my employment by the Company and for one (1) year after the
date of termination of my employment by the Company I will not (a) induce any
executive, director, consultant or independent contractor of the Company to
leave the service of the Company or (b) solicit the business of any client or
customer of the Company (other than on behalf of the Company). If any
restriction set forth in this Section is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period of
time or over too great a range of activities or in too broad a geographic area,
it shall be interpreted to extend only over the maximum period of time, range of
activities or geographic area as to which it may be enforceable.
4. NO CONFLICTING OBLIGATIONS
I represent that my performance of all the terms of this Agreement and as an
Employee of the Company does not and will not breach any agreement or obligation
of mine relating to any time prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any agreement either written or
oral in conflict with this Agreement or my employment.
5. RETURN OF COMPANY DOCUMENTS
When I leave the employ of the Company, I will deliver to the Company (and will
not keep in my possession, recreate or deliver to anyone else) any and all
devices, records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, together with all copies thereof (in whatever medium
recorded) belonging to the Company, its successors or assigns whether kept at
the Company, home or elsewhere. I further agree that any property situated on
the Company's premises and owned by the Company, including disks and other
storage media, filing cabinets or other work areas, is subject to inspection by
Company personnel at any time with or without notice. Prior to leaving, I will
cooperate with the Company in completing and signing the Company's termination
statement for technical and management personnel confirming the above and my
obligations under this Agreement.
6. NOTIFICATION OF NEW EMPLOYER
In the event that I leave the employ of the Company, I hereby consent to the
notification of my new employer of my rights and obligations under this
Agreement.
7. LEGAL AND EQUITABLE REMEDIES
Because my services are personal and unique and because I may have access to and
become acquainted with the proprietary information of the Company, the Company
shall have the right to enforce this Agreement and any of its provisions by
injunction,
<PAGE> 14
specific performance or other equitable relief, without bond and without
prejudice to any other rights and remedies that the Company may have for a
breach of this Agreement.
8. GENERAL PROVISIONS
(a) NOT AN EMPLOYMENT CONTRACT. I agree and understand that nothing in
this Agreement shall confer any right with respect to continuation of my
employment by the Company, nor shall it interfere in any way with my right or
the Company's right to terminate my employment at any time, with or without
cause.
(b) GOVERNING LAW; CONSENT TO PERSONAL JURISDICTION. This Agreement will
be governed by and construed according to the laws of the State of California,
excluding conflicts of laws principles. I hereby expressly consent to the
personal jurisdiction of the state and federal courts located in
____________________ Counties for any lawsuit filed there against me by the
Company arising from or relating to this Agreement.
(c) ENTIRE AGREEMENT. This Agreement, Exhibit 1 attached hereto and the
Employment Agreement hereby incorporated herein, set forth the final, complete
and exclusive agreement and understanding between the Company and me relating to
the subject matter hereof and supersedes all prior and contemporaneous
understandings and agreements relating to its subject matter. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, will be effective unless in writing and signed by both the Company
and me. Any subsequent change or changes in my duties, salary or compensation
will not affect the validity or scope of this Agreement.
(d) SEVERABILITY. If one or more of the provisions in this Agreement are
deemed unenforceable by law, then the remaining provisions will continue in full
force and effect.
(e) SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors and its assigns.
(f) SURVIVAL. The provisions of this Agreement shall survive the
termination of my employment and the assignment of this Agreement by the Company
to any successor in interest or other assignee.
(g) WAIVER. No waiver by the Company of any breach of this Agreement
shall be a waiver of any preceding or succeeding breach. No waiver by the
Company of any right under this Agreement shall be construed as a waiver of any
other right. The Company shall not be required to give notice to enforce strict
adherence to all terms of this Agreement.
(h) NOTICE. All notices required or permitted hereunder shall be given
to the appropriate party at the address specified below or at such other address
as the party shall specify in writing. Such notice shall be deemed given upon
personal delivery or, if sent by certified or registered mail, postage prepaid,
three (3) days after the date of mailing.
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE
DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S
PROPRIETARY INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT 1 TO THIS AGREEMENT.
Dated: 2/17/98
-----------------------
/s/ Stuart Berman
- ----------------------------------------
Signature
- ----------------------------------------
STUART BERMAN
- ----------------------------------------
Address
- ----------------------------------------
ACCEPTED AND AGREED TO:
Vixel Corporation
11911 Northcreek Parkway South, Suite 100
Bothell, WA 98011
By:_____________________________________
Title:__________________________________
<PAGE> 15
EXHIBIT 1
TO: VIXEL CORPORATION
FROM: _____________________________
RE: PRIOR INVENTIONS
DATE: _____________________________
1. Except as listed in Section 2 below the following is a complete
disclosure of all inventions or improvements relevant to the subject matter of
my employment by Vixel Corporation (the "Company") that have been made or
conceived or first reduced to practice by me alone or jointly with others prior
to my engagement by the Company:
[ ] No inventions or improvements.
[ ] See below.
[ ] Additional sheets attached.
3. Due to a prior confidentiality agreement, I cannot complete the
disclosure under Section 1 above with respect to inventions or improvements
generally listed below, the proprietary rights and duty of confidentiality with
respect to which I owe to the following parties:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
INVENTION OR IMPROVEMENT PARTY RELATIONSHIP
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.
- ------------------------------------------------------------------------------------------------------
2.
- ------------------------------------------------------------------------------------------------------
3.
- ------------------------------------------------------------------------------------------------------
</TABLE>
[ ] Additional sheets attached.
1.
<PAGE> 16
I. I propose to bring to my employment the following devices, materials
and documents of a former employer or other person to whom I have an obligation
of confidentiality that are not generally available to the public, which
materials and documents may be used in my employment pursuant to the express
written authorization of my former employer or such other person (a copy of
which is attached hereto):
[ ] No inventions or improvements.
[ ] See below.
[ ] Additional sheets attached.
Date:____________________ Very truly yours,
___________________________________
STUART BERMAN
2.
<PAGE> 17
EXHIBIT C
ARBITRATION PROCEDURE
1. The Parties agree that any dispute that arises in connection with this
Agreement or the termination of this Agreement shall be resolved by binding
arbitration in the manner described below.
2. A Party intending to seek resolution of any dispute under the Agreement by
arbitration shall provide a written demand for arbitration to the other Party,
which demand shall contain a brief statement of the issues to be resolved.
3. The arbitration shall be conducted by the American Arbitration Association
("AAA"). At the request of either Party, subject to paragraph ten (10) below
regarding judicial enforcement of the decree or judgment of an award rendered by
the arbitrator, arbitration proceedings will be conducted in the utmost secrecy
and, in such case, all documents, testimony and records shall be received, heard
and maintained by the arbitrator(s) in secrecy under seal, available for
inspection only by the Parties to the arbitration, their respective attorneys,
and their respective expert consultants or witnesses who shall agree, in advance
and in writing, to receive all such information confidentially and to maintain
such information in secrecy, and make no use of such information except for the
purposes of the arbitration, unless compelled by legal process.
4. The arbitrator(s) is required to disclose any circumstances that might
preclude the arbitrator from rendering an objective and impartial determination.
5. The Party demanding arbitration shall promptly request that AAA conduct a
scheduling conference within fifteen (15) days of the date of that Party's
written demand for arbitration or on the first available date thereafter on the
arbitrator's calendar. The arbitration hearing shall be held within thirty (30)
days after the scheduling conference or on the first available date thereafter
on the arbitrator's calendar. Nothing in this paragraph shall prevent a Party
from at any time seeking temporary equitable relief, from AAA or any court of
competent jurisdiction, to prevent irreparable harm pending the resolution of
the arbitration.
6. Discovery shall be conducted as follows: (a) prior to the arbitration any
Party may make a written demand for lists of the witnesses to be called and the
documents to be introduced at the hearing; (b) the lists must be served within
fifteen (15) days of the date of receipt of the demand, or one (1) day prior to
the arbitration, whichever is earlier; and (c) each Party may take no more than
two depositions (pursuant to the procedures of California law) with a maximum of
five hours of examination time per deposition, and no other form of
pre-arbitration discovery shall be permitted.
1.
<PAGE> 18
7. It is the intent of the Parties that the Federal Arbitration Act ("FAA")
shall apply to the enforcement of this provision unless it is held inapplicable
by a court with jurisdiction over the dispute, in which event California law
with regard to arbitration shall apply.
8. The arbitrator(s) shall apply California law, and shall be able to decree any
and all relief of an equitable nature, including but not limited to such relief
as a temporary restraining order, a preliminary injunction, a permanent
injunction, or repletion of Company property. The arbitrator(s) shall also be
able to award actual, general or consequential damages, but shall not award any
other form of damage (e.g., punitive damages).
9. Each Party shall pay its pro rata share of the arbitrator's fees and
expenses, in addition to other expenses of the arbitration approved by the
arbitrator, pending the resolution of the arbitration. The losing party shall
pay the other Party's reasonable attorneys' fees while each party shall be
responsible for its own witness fees and other expenses incurred for its own
benefit. The arbitrator(s) shall have authority to award the payment of such
witness fees and other expenses to the prevailing Party, as appropriate in the
discretion of the arbitrator.
10. The arbitrator(s) shall render a written award setting forth the reasons for
the arbitration decision. The decree or judgment of an award rendered by the
arbitrator may be entered and enforced in any court having jurisdiction over the
Parties. The award of the arbitrator(s) shall be final and binding upon the
Parties without appeal or review except as permitted by the FAA, or if the FAA
is not applicable, as permitted by California law.
11. The Parties agree that the arbitration procedures set forth in this Exhibit
C shall be superseded and replaced by any change the Company makes to its
arbitration procedures that are generally applicable to its employees, provided
that any such change is no more restrictive on the Employee than the procedures
set forth herein.
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between
VIXEL CORPORATION ("Company"), a Delaware Corporation, and GREG R. OLBRIGHT
("Employee") (collectively, "Parties"), effective as of November 30, 1998 (the
"Effective Date").
W I T N E S S E T H
WHEREAS, the Company desires to employ and to assure itself of the
services of Employee as President and Chief Executive Officer through March 31,
1999, and to provide for his continuing service thereafter as Chairman and as a
part-time employee; and
WHEREAS, Employee desires to be employed by the Company under the terms
and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company shall continue to employ
Employee to render exclusive and full-time services to the Company as a
President and Chief Executive Officer for the time period specified in Section
1.1. Employee will report directly to the Company's Board of Directors. Employee
shall have the responsibilities, duties and authorities that are customarily
associated with such position. The Company may modify Employee's duties,
responsibilities and objectives at the Board's discretion from time to time.
1.1 PRESIDENT AND CHIEF EXECUTIVE OFFICER. Employee's employment
as President and Chief Executive Officer shall continue until the earlier of (i)
March 31, 1999, (ii) the appointment of a new Chief Executive Officer by the
Board of Directors or (iii) Employee's removal by the Board of Directors.
1.2 CHAIRMAN OF THE BOARD. Commencing on May 1, 1999, or such
other date as the Company and Employee may mutually agree, Employee shall become
Chairman of the Board of Directors for a term of one (1) year. Such term may be
extended by mutual agreement. Employee's compensation for serving as Chairman is
set forth in Section 2.2(b) below.
1.3 PART-TIME EMPLOYEE. After Employee ceases to be President
and Chief Executive Officer pursuant to Section 1.1, and following completion of
the one-month's vacation contemplated by Section 2.6 below, the Company and
Employee will discuss Employee's continuing role with the Company. If Company
and Employee do not agree on a new role and on the compensation for that role,
Employee shall become a part-time employee with the salary and benefits set
forth in Section 2.1(c) below commencing on the date the Company or Employee
notifies the other party in writing that they cannot agree. Such part-time
employment shall continue through December 19, 2000, unless extended by mutual
agreement. As a part-time employee, Employee will make himself available to
advise the Company's Chief Executive Officer and Board of Directors as may be
reasonably requested, recognizing that Employee may have secured other full time
employment. Such services will be rendered from Employee's residence and will
not require more than 12 days service per year. The Company agrees that Employee
may secure other employment or consulting engagements so long as such employment
or consulting activities do not violate this Agreement or the Noncompetition and
Nonsolicitation Agreement attached as Exhibit C or the Proprietary Information
and Inventions Agreement attached as Exhibit F.
1.
<PAGE> 2
2. COMPENSATION. The Company agrees to pay Employee base salary and
bonus as described below.
2.1 SALARY.
(a) The Company will pay Employee at an annual base
salary rate of $250,000 for 1998 and through March 31, 1999. Such salary rate
shall apply even if Employee ceases to be employed by the Company or ceases to
serve as President and Chief Executive Officer prior to March 31, 1999 (unless
prior to such date Employee either resigns voluntarily or is terminated for
Cause prior to the appointment of a new CEO). Paychecks will be distributed
pursuant to ordinary business practice, and shall be subject to ordinary payroll
deductions and tax withholdings.
(b) Commencing on the date that Employee becomes
Chairman of the Board, the Company will pay Employee at an annual base salary
rate of $50,000 for his services as Chairman of the Board of Directors. This
payment shall be in addition to any other amounts due under this Agreement.
(c) During any period that Employee is serving as a
part-time employee, the Company will pay Employee at an annual base salary rate
of $25,000 per year. Such salary will not be payable during any time that
Employee is receiving his regular salary pursuant to Section 2.1(a) or paid
vacation.
2.2 ANNUAL BONUS. So long as Employee is serving as President
and Chief Executive Officer, Employee will be eligible for an annual bonus of up
to 50% of his base salary rate then in effect (the "Target Bonus"). The bonus
shall be determined by the Compensation Committee in their sole discretion.
2.3 SAVINGS PLAN. The Company will make quarterly payments
("Savings Deposits") into the Company's savings plan (the "Plan"). This amount
may be adjusted from time to time and/or the Plan may be terminated at the sole
election of the Company. A copy of the Plan is available upon Employee's
request.
2.4 BENEFITS. The Company also agrees to provide Employee with
benefits consistent with Company policy and practice for its employees,
including participation in the Company's group health, life, and disability
insurance plans for Employee and Employee's dependents. Details about these
benefits are provided in the Company's employee handbook and summary plan
descriptions.
2.5 ADDITIONAL COMPENSATION. The Board may, but has no
obligation to, also award Employee discretionary compensation, bonuses and
benefits ("Additional Compensation"). The amount of the Additional Compensation,
if any, and the criteria for determining the amount of the Additional
Compensation, if any, shall be at the sole discretion of the Board or
Compensation Committee.
2.6 VACATION. So long as Employee is a full-time employee,
Employee shall be entitled to paid vacation in accordance with the Company's
policy applicable to executive officers. Whether or not Employee continues as a
full time employee, Employee shall be entitled to one month's paid vacation
(based on his salary rate of $250,000 per annum), commencing shortly after the
hiring of a new President and Chief Executive Officer.
2.7 RELOCATION. The Company and Employee have agreed that
Employee may relocate his principal residence to Colorado. The Company shall pay
Employee a lump sum of $250,000 in connection with such relocation. Such amount
will be payable on or before December 14, 1998. Such payment will be made on a
non-accountable basis and Employee will be responsible for all taxes on such
payment. To the extent that direct payment of relocation expenses by the Company
would result in a tax advantage to the Employee, the Company will make such
payment directly and reduce the payment to
2.
<PAGE> 3
Employee by the amount so paid. The Company will have no further obligation with
respect to relocation costs, including any obligation with respect to any loss
of equity on his Bellevue, Washington residence.
2.8 ATTORNEYS' FEES. The Company will reimburse Employee for
attorneys' fees and expenses of up to $15,000 incurred in negotiating this
Agreement and the related Nonstatutory Option Agreement and Stock Repurchase
Agreement.
2.9 STOCK OPTION. The Company and Employee agree that on or
before December 8, 1998, the Company shall (i) repurchase 1,050,000 shares of
common stock from Employee pursuant to the Stock Repurchase Agreement in the
form attached as Exhibit D, and (ii) grant Employee a stock option for 1,050,000
shares pursuant to the form of NonStatutory Stock Option Agreement attached as
Exhibit E, at an exercise price equal to the fair market value of the Company's
common stock on the date of grant (but not to exceed $3.33 per share).
3. EMPLOYEE HANDBOOK. By signing this Agreement, Employee acknowledges
that he has received, read and agrees to be bound by, the Company's employee
handbook. Employee agrees to abide by all Company policies and procedures.
4. ADDITIONAL ACTIVITIES. Employee agrees that during the period of
Employee's employment by the Company, Employee will not, without the Board of
Director's written approval, engage in any employment or business activity other
than for the Company that would adversely affect Employee's ability to perform
Employee's obligations hereunder.
5. TERMINATION OF EMPLOYMENT. Employee and the Company each acknowledge
that either Party has the right to terminate Employee's employment with the
Company at any time for any reason whatsoever, with or without cause or advance
notice.
5.1 TERMINATION FOR CAUSE. The Company shall have the right to
terminate Employee's employment with the Company at any time for cause. "Cause"
for termination shall mean: (i) Employee has committed any material act of
embezzlement, or fraud; (ii) Employee engages in unfair competition with the
Company or willfully breaches his obligations under this Agreement; (iii)
Employee causes material damage to Company through intentional misconduct or
gross neglect of the duties customary to his office. No activities covered by
items (ii) and (iii) will be deemed to be "cause" unless the Company has
notified Employee of the prohibited activity in written detail and Employee has
failed to cease such activity within fifteen (15) days. In the event Employee's
employment is terminated at any time with cause, he will not be entitled to
severance pay, pay in lieu of notice or any other such compensation, but shall
be entitled to accrued compensation.
5.2 TERMINATION WITHOUT CAUSE. The Company shall have the right
to terminate Employee's employment with the Company at any time without cause.
If the Company and Employee do not agree on a new substantially full-time role
for Employee with the Company following the hiring of a new Chief Executive
Officer, and provided that Employee shall not have been earlier terminated for
Cause, or resigned voluntarily, the severance benefit described below will
become payable beginning on May 1, 1999. In addition to the foregoing, in the
event Employee's employment is terminated at any time without Cause, the Company
shall pay Employee severance in the amount of one (1) year's salary at the rate
of $250,000 per annum (payable in equal monthly installments). Such severance
will be paid in addition to Employee's paid vacation under Section 2.6. Such
severance payments will be reduced to the extent of compensation received by the
Employee from full-time employment during the twelve-month period following
termination of employment. Such severance payments also shall be reduced by
standard payroll deductions and withholdings. In addition, the Company shall (a)
make a 401(k) (or such other retirement program then in effect for senior
executives) matching contribution equal to the maximum allowable for one year
under the Company's 401(k) (or such other retirement program then in effect for
senior executives) matching program then in effect and (b) pay Employee's COBRA
payments for a period of twelve months (or until such earlier time as Employee
and his family are covered under a comparable
3.
<PAGE> 4
health plan). The benefits described above are collectively referred to herein
as the "Severance Benefits". In consideration for such Severance Benefits, and
for the continued vesting of his stock options, Employee and the Company shall
execute a General Release in the form attached as Exhibit B on or about May 1,
1999 (and in any event prior to receiving such benefits) and a Non-Competition
and Non-Solicitation Agreement in the form attached as Exhibit C, concurrently
with the signing of this Agreement.
5.3 VOLUNTARY TERMINATION. Employee may voluntarily terminate
his employment with the Company at any time. If Employee voluntarily terminates
his employment prior to the appointment of a new Chief Executive Officer, or
March 31, 1999, whichever comes first, Employee will be entitled to receive the
Severance Benefits pursuant to Section 5.2, but will not be entitled to any
further compensation. If following the appointment of a new Chief Executive
Officer, or March 31, 1999, whichever occurs first, Employee and the Company do
not agree on a continuing role for Employee with the Company, Employee shall
become a part-time employee pursuant to Section 1.3. Any voluntary termination
of Employment by Employee shall not affect Employee's obligations under Exhibit
C. However, if Employee voluntarily terminates his employment because the
Company has materially breached any of its obligations to Employee, and if the
Company has failed to cure such breach within thirty (30) days after written
notice of such breach is given to the Company, his employment will be deemed to
have been terminated by the Company without cause and Section 5.2 above will
govern such termination.
6. NOTICES. All notices, requests, consents and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if personally delivered or delivered by
registered or certified mail (return receipt requested), or private overnight
mail (delivery confirmed by such service), to the following addresses, or to
such other address as either Party shall designate by notice in writing to the
other in accordance herein: if to the Company: to the Chief Financial Officer at
his business address; if to Employee: at such address provided to the Company by
him.
7. ARBITRATION. To ensure rapid and economical resolution of any and all
disputes directly or indirectly arising out of or in any way connected with
Employee's employment with the Company or the termination of that employment,
with the sole exception of disputes which arise under Employee's Proprietary
Information Agreement, (collectively, the "Arbitrable Claims"), the Company and
Employee each agree that any and all such disputes, whether of law or fact of
any nature whatsoever, shall be resolved by final and binding arbitration under
the procedures set forth in Exhibit A to this Agreement and the then existing
American Arbitration Association ("AAA") arbitration procedures (except insofar
as they are inconsistent with the procedures set forth in Exhibit A). The
Arbitrable Claims shall include, but not be limited to: any and all such claims
related to salary, bonuses, commissions, stock, stock options, or any other
ownership interests in the Company, vacation pay, fringe benefits, expense
reimbursements, severance benefits, or any other form of compensation; claims
pursuant to any federal, state or local law or cause of action including, but
not limited to, the federal Civil Rights Act of 1964, as amended; the federal
Age Discrimination in Employment Act of 1967, as amended ("ADEA"); the federal
Americans with Disabilities Act of 1990; tort law; contract law; wrongful
discharge; discrimination; fraud; defamation; emotional distress; and breach of
the implied covenant of good faith and fair dealing. Employee and the Company
acknowledge and agree that any and all rights they may otherwise have to resolve
such Arbitrable Claims by jury trial, by a court, or in any forum other than the
AAA, are hereby expressly waived.
8. GENERAL.
8.1 ENTIRE AGREEMENT. This Agreement together with the Exhibits
hereto sets forth the complete, final and exclusive embodiment of the entire
agreement between Employee and the Company with respect to the subject matter
hereof. This Agreement supersedes in its entirety the Employment Agreement
between the Company and Employee dated March 3, 1998. This Agreement is entered
into without reliance upon any promise, warranty or representation, written or
oral, other than
4.
<PAGE> 5
those expressly contained herein, and it supersedes any other such promises,
warranties, representations or agreements. This Agreement may not be amended or
modified except in a written instrument signed by Employee and a duly authorized
officer or director of the Company. Nothing herein shall affect Employee's
obligations under his confidentiality and Proprietary Information and Inventions
Agreement attached as Exhibit F, which shall survive expiration or termination
of this Agreement.
8.2 SEVERABILITY. If a court of competent jurisdiction or
arbitral panel determines that any term or provision of this Agreement is
invalid or unenforceable, then the remaining terms and provisions shall be
unimpaired. Such court shall have the authority to modify or replace the invalid
or unenforceable term or provision with a valid and enforceable term or
provision which most accurately represents the Parties' intention with respect
to the invalid or unenforceable term or provision.
8.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors and administrators of
each Party, and inure to the benefit of each Party, its heirs, successors and
assigns. However, because of the unique and personal nature of Employee's duties
under this Agreement, Employee may not delegate the performance of his duties
under this Agreement.
8.4 APPLICABLE LAW. This Agreement shall be deemed to have been
entered into and shall be construed and enforced in accordance with the laws of
the State of Washington as applied to contracts made and to be performed
entirely within Washington.
8.5 FORUM. Any action to enforce or requiring interpretation of
this Agreement must be brought in a forum located within the State of Colorado.
8.6 HEADINGS. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
8.7 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have duly authorized and caused this
Agreement to be executed as follows:
VIXEL CORPORATION,
A DELAWARE CORPORATION
By: /s/ Gregory R. Olbright By: /s/ Timothy M. Spicer
------------------------------- ---------------------------------
Date: December 1, 1998 Title: Director
----------------------------- ------------------------------
Date: December 1, 1998
-------------------------------
5.
<PAGE> 6
EXHIBIT A
ARBITRATION PROCEDURE
1. The Parties agree that any dispute that arises in connection with
this Agreement or the termination of this Agreement shall be resolved by binding
arbitration in the manner described below.
2. A Party intending to seek resolution of any dispute under the
Agreement by arbitration shall provide a written demand for arbitration to the
other Party, which demand shall contain a brief statement of the issues to be
resolved.
3. The arbitration shall be conducted by the American Arbitration
Association ("AAA"). At the request of either Party, subject to paragraph 10
below regarding judicial enforcement of the decree or judgment of an award
rendered by the arbitrator, arbitration proceedings will be conducted in the
utmost secrecy and, in such case, all documents, testimony and records shall be
received, heard and maintained by the arbitrator(s) in secrecy under seal,
available for inspection only by the Parties to the arbitration, their
respective attorneys, and their respective expert consultants or witnesses who
shall agree, in advance and in writing, to receive all such information
confidentially and to maintain such information in secrecy, and make no use of
such information except for the purposes of the arbitration, unless compelled by
legal process.
4. The arbitrator(s) is required to disclose any circumstances that
might preclude the arbitrator from rendering an objective and impartial
determination.
5. The Party demanding arbitration shall promptly request that AAA
conduct a scheduling conference within fifteen (15) days of the date of that
Party's written demand for arbitration or on the first available date thereafter
on the arbitrator's calendar. The arbitration hearing shall be held within
thirty (30) days after the scheduling conference or on the first available date
thereafter on the arbitrator's calendar. Nothing in this paragraph shall prevent
a Party from at any time seeking temporary equitable relief, from AAA or any
court of competent jurisdiction, to prevent irreparable harm pending the
resolution of the arbitration.
6. Discovery shall be conducted as follows: (a) prior to the arbitration
any Party may make a written demand for lists of the witnesses to be called and
the documents to be introduced at the hearing; (b) the lists must be served
within fifteen days of the date of receipt of the demand, or one day prior to
the arbitration, whichever is earlier; and (c) each Party may take no more than
two depositions (pursuant to the procedures of Colorado law) with a maximum of
five hours of examination time per deposition, and no other form of
pre-arbitration discovery shall be permitted.
7. It is the intent of the Parties that the Federal Arbitration Act
("FAA") shall apply to the enforcement of this provision unless it is held
inapplicable by a court with jurisdiction over the dispute, in which event
Washington law with regard to arbitration shall apply.
8. The arbitrator(s) shall apply Washington law, and shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a preliminary injunction, a
permanent injunction, or replevin of Company property. The arbitrator(s) shall
also be able to award actual, general or consequential damages, but shall not
award any other form of damage (e.g., punitive damages).
9. Each Party shall pay one-half of the arbitrator's fees and expenses,
in addition to other expenses of the arbitration approved by the arbitrator,
pending the resolution of the arbitration. The prevailing Party shall pay the
other Party's attorneys' fees, while each Party will be responsible for its own
A-1
<PAGE> 7
witness fees and other expenses incurred for its own benefit. The arbitrator(s)
shall have authority to award the payment of such witness fees and other
expenses to the prevailing Party, as appropriate in the discretion of the
arbitrator.
10. The arbitrator(s) shall render a written award setting forth the
reasons for the arbitration decision. The decree or judgment of an award
rendered by the arbitrator may be entered and enforced in any court having
jurisdiction over the Parties. The award of the arbitrator(s) shall be final and
binding upon the Parties without appeal or review except as permitted by the
FAA, or if the FAA is not applicable, as permitted by Washington law.
11. The Parties agree that the arbitration procedures set forth in this
Exhibit A shall be superseded and replaced by any change the Company makes to
its arbitration procedures that are generally applicable to its employees,
provided that any such change is no more restrictive on the Employee than the
procedures set forth herein.
A-2
<PAGE> 8
EXHIBIT B
GENERAL RELEASE
Employee and the Company understand and agree completely to the terms
set forth in the foregoing agreement.
In granting the release herein, Employee and the Company each
acknowledge that he or it understands that he or it is waiving the benefit of
any provision of law in any jurisdiction to the effect that a general release
does not extend to claims which the person executing the release does not know
or suspect to exist in his favor at the time of executing the release, which if
known by such person must have materially affected his or her settlement with
the debtor. The Company and Employee hereby expressly waives and relinquishes
all rights and benefits under any such law or legal principle effect in any
jurisdiction with respect to the release of unknown and unsuspected claims
granted in this Agreement.
Except as otherwise set forth in this Agreement, Employee hereby
releases, acquits and forever discharges the Company, its parents and
subsidiaries, and its and their respective officers, directors, agents,
servants, employees, shareholders, successors, assigns and affiliates, and the
Company hereby releases, acquits and forever discharges Employee and his agents,
servants, heirs and assigns, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed (other than
any claim for indemnification Employee may have as a result of any third party
action against him based on his employment with the Company), arising out of or
in any way related to agreements, events, acts or conduct involving or relating
to his employment by the Company at any time prior to the date of this
Agreement, including but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with Employee's employment
with the Company or the termination of that employment, including but not
limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law or cause of action including, but not limited to,
the federal Civil Rights Act of 1964, as amended; the federal Age Discrimination
in Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; tort law; contract law; wrongful discharge; harassment;
discrimination; fraud; defamation; emotional distress; and breach of the implied
covenant of good faith and fair dealing; provided, however, that nothing in this
paragraph shall be construed in any way to release the Company from its
obligation to indemnify Employee pursuant to any indemnification agreement right
to statutory indemnification, rights under the Company's Certificate of
Incorporation or bylaws, nor shall it affect Employee's rights to receive future
compensation and benefits under the express terms of the Employment Agreement,
nor shall it affect Employee's rights or obligations under the agreements listed
on Exhibit B-1.
Employee acknowledges that Employee is knowingly and voluntarily waiving
and releasing any rights Employee may have under ADEA. Employee also
acknowledges that the consideration given for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which Employee
was already entitled. Employee further acknowledges that Employee has been
advised by this writing, as required by the ADEA, that: (A) his waiver and
release does not apply to any rights or claims that may arise on or after the
date Employee executes this Agreement; (B) Employee has the right to consult
with an attorney prior to executing this Agreement; (C) Employee has twenty-one
(21) days to consider this Agreement (although Employee may choose to
voluntarily execute this Agreement earlier); (D) Employee has seven (7) days
following the execution of this Agreement by the parties to revoke the
Agreement; and (E) this Agreement shall not be effective until the date upon
which the revocation period has expired, which shall be the eighth day after
this Agreement is executed by Employee, provided that the Company has also
executed this Agreement by that date (the "Effective Date").
B-1
<PAGE> 9
VIXEL CORPORATION
By: /s/ Timothy M. Spicer By: /s/ Gregory R. Olbright
--------------------------------- -------------------------------
Title: Director Date: December 1, 1998
------------------------------ -----------------------------
B-2
<PAGE> 10
EXHIBIT B-1
Non-Statutory Stock Option Agreement dated December 8, 1998
Early Exercise Stock Purchase Agreement effective March 11, 1998
Employment Agreement dated November 30, 1998 and all Exhibits thereto
Agreement dated November 30, 1998 (relating to Co-Sale Agreement and Amended and
Restated Investors Rights Agreement)
Stock Repurchase Agreement dated December 8, 1998
EXHIBIT C
NON-COMPETE AND NON-SOLICITATION AGREEMENT
This Non-Compete and Non-Solicitation Agreement is entered into as of
the 30th day of November, 1998, by and between Vixel Corporation, a Delaware
corporation (the "Company") and Gregory R. Olbright ("Employee").
RECITALS
A. Employee is a founder of the Company and is currently serving as its
President and Chief Executive Officer.
B. Concurrently with the execution and delivery of this agreement,
Employee and the Company are executing an Employment Agreement, Non-Statutory
Stock Option Agreement and Stock Repurchase Agreement under which Employee will
be entitled to receive substantial benefits.
C. The Employee's execution and delivery of this Agreement is a material
inducement for the Company to enter into the agreements referred to in Recital
B, and is a condition precedent to the Company's obligations thereunder.
1. DEFINITIONS:
1.1 "CONFLICTING ORGANIZATION" means any person or
entity who or which is engaged in the design, development, production,
marketing, integration, installation or selling of, a Conflicting Product.
1.2 "CONFLICTING PRODUCT" means any transceiver, hub or
switch for use in storage area networks.
1.3 "TERM OF AGREEMENT" means the period from the
execution of this Agreement through December 18, 2000.
2. EMPLOYEE AGREEMENTS.
2.1 NON-COMPETITION. Employee agrees that he will not at
any time during the Term of this Agreement, directly or indirectly, engage in
any activities on behalf of, or have an equity interest greater than one percent
(1%) in, any Conflicting Organization (whether as an employee, officer,
director, agent, securityholder, partner, creditor, consultant, licensor,
licensee or otherwise) that engages in, or is
B-3
<PAGE> 11
preparing to engage in, any activity involving the design, development,
manufacture, sale, integration, installation, distribution or marketing of a
Conflicting Product, as long as the Company shall carry on the business of
designing, developing, manufacturing, integrating, installing, selling or
marketing such Conflicting Product. This prohibition shall not apply to
ownership of less than one percent (1%) of the equity securities of any entity
whose securities are publicly traded. This Section 2.1 shall not prohibit
Employee from working for an organization, a business unit of which is a
Conflicting Organization, provided that Employee is not employed by, responsible
for, or in any way involved with such Conflicting Organization. Notwithstanding
the foregoing, if Employee proposes to accept employment with a systems
integrator, and if Employee provides all material information regarding the
proposed scope and nature of such employment to the Company's Board of Directors
and demonstrates to their reasonable satisfaction that such employment could not
reasonably be expected to adversely affect the business or prospects of the
Company, then the Company will not unreasonably withhold its consent to
Employee's acceptance of such employment, so long as such new employment remains
on terms materially consistent with the terms presented to the Board of
Directors through the Term of this Agreement.
2.2 NON-SOLICITATION. Employee agrees that he will not at any
time within the Term of this Agreement, immediately following the date of this
Agreement, recruit, solicit or induce, or attempt to induce, any employee or
employees of the Company to terminate their employment with, or otherwise cease
their relationship with the Company; provided, however, that such prohibition
shall not apply to placement of advertisements in newspapers or trade journals
or other employment advertising not directed specifically at any employee of the
Company. Employee further agrees that he will not at any time within the Term of
this Agreement induce or attempt to induce any customer or prospective customer
of the Company to reduce their level of business with or to stop buying from the
Company, or not to do business with the Company.
2.3 INJUNCTIVE RELIEF. The remedy at law for breach of the
non-compete covenant contained in Section 2.1 and the nonsolicitation covenant
in Section 2.2, being inadequate, Employee understands, acknowledges and agrees
that the Company shall be entitled, in addition to such other remedies they may
have, to temporary and permanent injunctive relief for any breach or threatened
breach of such non-compete covenant.
3. EARLY TERMINATION. This Agreement shall terminate upon a breach of
the Employment Agreement if the Company fails to cure such breach within thirty
(30) days after Employee has given written notice of such breach (10 days if
such breach involves the payment of money).
4. GOVERNING LAWS. It is the intention of the parties hereto that the
internal laws of the State of Washington shall govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
5. ENTIRE AGREEMENT. This Agreement sets forth the complete, final and
exclusive embodiment of the entire agreement between Employee and the Company
with respect to the subject matter hereof. This Agreement is entered into
without reliance upon any promise, warranty or representation, written or oral,
other than those expressly contained herein, and the Agreements listed on
Exhibit B-1 to that certain General Release between Employee and the Company
attached as Exhibit B to the Employment Agreement and it supersedes any other
such promises, warranties, representations or agreements. This Agreement may not
be amended or modified except in a written instrument signed by Employee and a
duly authorized officer or director of the Company.
6. SEVERABILITY. If a court of competent jurisdiction or arbitral panel
determines that any term or provision of this Agreement is invalid or
unenforceable, then the remaining terms and provisions shall be unimpaired. Such
court shall have the authority to modify or replace the invalid or unenforceable
term or provision with a valid and enforceable term or provision which most
accurately represents the parties' intention with respect to the invalid or
unenforceable term or provision.
2.
<PAGE> 12
7. SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs, personal
representatives, successors, assigns, executors and administrators of each
party, and inure to the benefit of each party, its heirs, successors and
assigns. However, because of the unique and personal nature of Employee's duties
under this Agreement, Employee may not delegate the performance of his duties
under this Agreement.
8. FORUM. Any action to enforce or requiring interpretation of this
Agreement must be brought in a forum located within the State of Colorado.
9. HEADINGS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
10. COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and Employee have entered into this
Agreement as of the date set forth above.
VIXEL CORPORATION
/s/ Gregory R. Olbright By: /s/ Timothy M. Spicer
- ---------------------------------- ---------------------------------
Gregory R. Olbright
3.
<PAGE> 13
EXHIBIT D
TO
EMPLOYMENT AGREEMENT
STOCK REPURCHASE AGREEMENT
THIS STOCK REPURCHASE AGREEMENT is entered into as of the 8th day of
December, 1998, by and between VIXEL CORPORATION, a Delaware corporation (the
"Company"), and GREGORY B. OLBRIGHT ("Olbright"), to memorialize a binding oral
agreement entered into on October 5, 1998.
RECITALS
A. On March 3, 1998, the Company granted Olbright a nonstatutory stock
option for 1,050,000 shares of Common Stock, which option permitted early
exercise prior to vesting.
B. On April 30, 1998, Olbright purchased 1,050,000 shares of the
Company's Common Stock (the "Shares") under an Early Exercise Stock Purchase
Agreement, and paid the exercise price with a promissory note for $3,496,500
(the "Note").
C. On October 5, 1998, the Company and Olbright entered into a binding
oral agreement that the Company would repurchase the shares in exchange for
cancellation of the Note and accrued interest.
D. The Company and Olbright now wish to memorialize their previous
binding oral agreement concerning the repurchase of the Shares and the
cancellation of the Note.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and Olbright agree as follows:
1. The Company hereby purchases from Olbright, and Olbright hereby sells
to the Company, all of the Shares in exchange for the Company's cancellation of
the Note and accrued interest.
2. Promptly after the execution and delivery of this Agreement:
(a)The Company will return to Olbright the Note, marked
"Cancelled."
(b)The Escrow Agent, pursuant to the Escrow Agreement dated
April 30, 1998, will return to the Company the certificate(s) representing the
Shares.
4.
<PAGE> 14
3. Upon consummation of the transactions contemplated by this Agreement,
the Early Exercise Stock Purchase Agreement dated April 30, 1998, and the
related Notice of Exercise, Note and Joint Escrow Instructions are terminated.
4. Olbright represents and warrants that, subject to the provisions of
the Early Exercise Stock Purchase Agreement and Escrow Agreement, he owns the
shares free and clear of any liens, claims and encumbrances; that he has not
transferred any beneficial interest in the Shares to any other person or entity;
and that he has full right and authority to enter into and perform this
Agreement.
This Agreement represents the entire agreement of the parties regarding the
repurchase of the Shares and the cancellation of the Note. The
repurchase of the Shares and the cancellation of the Note shall be
effective as of October 5, 1998, the date the parties reached their
binding oral agreement described above.
IN WITNESS WHEREOF, the parties have executed this Agreement.
VIXEL CORPORATION
By:_________________________________
Title:______________________________
____________________________________
Gregory R. Olbright
CONSENT OF SPOUSE:
____________________________________
Cindy Olbright
5.
<PAGE> 15
EXHIBIT E
TO
EMPLOYMENT AGREEMENT
NONSTATUTORY STOCK OPTION
Gregory R. Olbright, Optionee:
Vixel Corporation (the "Company"), pursuant to its 1995 Stock Option
Plan (the "Plan"), has this day granted to you, the optionee named above
(hereinafter referred to as "you" or the "Optionee"), an option to purchase
shares of the common stock of the Company ("Common Stock"). This option is not
intended to qualify as, and will not be treated as, an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
The grant hereunder is intended to comply with the provisions of Rule
144 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"). Defined terms not explicitly defined in
this agreement but defined in the Plan shall have the same definitions as in the
Plan, a copy of which is attached as Exhibit A.
The details of this option are as follows:
5. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is one million fifty thousand
(1,050,000) (the "Shares").
VESTING.
(a) Subject to the limitations contained herein, the shares of
Common Stock subject to this option shall vest pursuant to the Vesting Schedule
attached hereto as Exhibit B; provided that, if the Company or its stockholders
enter into an agreement providing for an Acquisition and the surviving or
acquiring company does not assume the option or substitute a substantially
equivalent option therefor, the vesting schedule of this option shall be
accelerated so that this option shall become exercisable immediately prior to
the consummation of the Acquisition with respect to a number of shares equal to
(i) the number of shares for which the option is exercisable pursuant to Exhibit
B as of the date of the consummation of such Acquisition (less the number of
shares as to which this option has been previously exercised), plus (ii) the
greater of (A) one-half of the number of unvested shares subject to this option
as of the date of consummation of the Acquisition or (B) the number of shares
that otherwise would have vested under Exhibit B in the 12 month period
following consummation of such Acquisition. In the event that the surviving or
acquiring corporation in an Acquisition assumes this option or substitutes a
substantially equivalent option, and if thereafter Optionee's employment is
terminated by the Company other than for Cause (as defined below) or by Optionee
for Good Reason (as defined below) at any time when any of the shares subject to
this option remain unvested following the consummation of the Acquisition, then
the vesting
6.
<PAGE> 16
schedule of this option will be accelerated so that the option shall become
exercisable upon such termination of employment with respect to a number of
shares equal to (i) the number of shares for which the option is exercisable
pursuant to Exhibit B as of the date of termination of Optionee's employment
(less the number of shares as to which this option has been previously
exercised), plus (ii) the greater of (A) one-half of the number of unvested
shares subject to this Option as of the date of termination of Optionee's
employment or (B) the number of shares that otherwise would have vested under
Exhibit B in the 12 month period following termination of Optionee's employment.
(b) The acceleration of vesting upon an Acquisition shall apply
only if the Acquisition is consummated while Optionee is serving as a full-time
employee of the Company, or if the Company's Board of Directors has approved a
letter of intent or term sheet for an Acquisition while Optionee is serving as a
full-time employee of the Company and thereafter consummates such Acquisition
within a period of not greater than one hundred eighty (180) days thereafter.
(c) Notwithstanding anything to the contrary in Section 2(a),
the Option shall terminate as to the 427,064 shares that otherwise would have
vested between December 18, 2000 and February 18, 2002, at such time as
Optionee's full-time employment ceases, unless the Company's Board of Directors
has approved a letter of intent or term sheet for an Acquisition while Optionee
is serving as a full-time employee of the Company and thereafter consummates
such Acquisition within a period of not greater than one hundred eighty (180)
days thereafter.
(d) For purposes of this Agreement, the term:
"Acquisition" shall mean: (1) a sale of all or substantially all of the
assets of the Company; (2) a merger or consolidation in which the Company is not
the surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
after the Listing Date (as defined below), an acquisition by any person, entity
or group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as hereafter amended or succeeded (the "Exchange Act"), excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an affiliate of the Company, of the beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of securities of the
Company or its successor representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors; provided
that, notwithstanding the foregoing, in the case of (2) and (3) above, such
transactions shall only be deemed an "Acquisition" if the stockholders of the
Company or its successor immediately prior to such merger, consolidation or
reverse merger: (A) hold less than 50% of the outstanding securities of the
surviving company following the merger or consolidation, or (B) in the event
that the securities of an affiliated entity are issued to the stockholders of
the Company in the transaction in exchange for their shares in the Company, hold
less than 50% of the outstanding securities of such affiliated entity.
7.
<PAGE> 17
"Cause" for termination shall mean: (i) Optionee has committed any
material act of embezzlement or fraud; (ii) if Optionee is convicted of any or
pleads nolo contendere to felony involving moral turpitude; (iii) Optionee
engages in competition with the Company, or its successor; or (iv) Optionee
causes material damage to Company through intentional misconduct or gross
neglect of the duties customary to his office. No activities covered by items
(ii) and (iii) will be deemed to be "cause" unless the Company has notified
Optionee of the prohibited activity in written detail and Optionee has failed to
cease such activity within 15 days. In the event Optionee's employment is
terminated at any time with Cause, he will not be entitled to any acceleration
of vesting hereunder.
"Good Reason" shall mean any of the following not agreed to by Optionee:
(i) a reduction in Optionee's compensation: (ii) a relocation of Optionee's
principal worksite to a location that is more than 35 miles further away from
Optionee's Colorado residence than the Optionee's pre-Acquisition principal
worksite; or (iii) a material reduction in Optionee's responsibilities with
respect to the Company's operations as in effect immediately prior to the
Acquisition (other than changes in responsibility customarily associated with
the Company's business becoming owned and operated by the acquiring company).
"Listing Date" shall mean the first date upon which any security of the
Company or its successor is listed on the American or New York Stock Exchange or
designated upon notice of issuance as a national market security on the Nasdaq
National Market interdealer quotation system.
EXERCISE PRICE AND METHOD OF PAYMENT.
(e) EXERCISE PRICE. The exercise price of this option shall be
two dollars and five cents ($2.05) per share.
(f) METHOD OF PAYMENT. Payment of the exercise price per share
is due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
Payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which results in the receipt of
cash (or check) by the Company prior to the issuance of Common Stock;
By delivery of already-owned shares of Common Stock,
held for the period required to avoid a charge to the Company's reported
earnings, and owned free and clear of any liens, claims, encumbrances or
security interests, and valued at its fair market value (as defined in the Plan)
on the date of exercise;
By delivery of Optionee's full recourse promissory note
in the form attached as Exhibit C (the "Note") in a principal amount equal to
the exercise price of the Shares being acquired upon exercise of the Option. The
Note will (i) bear interest at the minimum rate
8.
<PAGE> 18
required to avoid imputed interest under the Code, (ii) have a term of four
years from the date of exercise, (iii) be secured by the Shares acquired upon
exercise of the Option and (iv) be subject to mandatory prepayment in the event
that any of the Shares are sold; or
By a combination of the above methods.
6. INVESTMENT REPRESENTATIONS
Optionee represents and warrants that he is acquiring this Option and
the underlying Shares solely for Employee's account for investment and not with
a view to or for sale or distribution. Employee understands that neither the
Option nor the Shares have been registered under the Securities Act of 1933, as
amended (the "Securities Act"). Optionee recognizes that the Option and, upon
exercise, the Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Optionee is aware that neither the Option nor the Shares may be sold
pursuant to Rule 144 adopted under the Securities Act ("Rule 144") unless
certain conditions are met and until the undersigned has held the Shares for at
least one year.
Optionee further agrees following the Option's exercise not to make any
disposition of the Shares unless and until:
(a) The Shares are transferred pursuant to Rule 144, and the
Company shall have received from Optionee documentation acceptable to the
Company that a sale of the Shares has occurred in accordance with all of the
provisions of Rule 144; or
(b) The Company shall have received a letter secured by Optionee
from the Securities and Exchange Commission stating that no action will be
recommended to the Commission with respect to the proposed disposition; or
(c) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(d) (i) Optionee shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, (ii) Optionee shall have
furnished the Company with an opinion of counsel for the undersigned to the
effect that such disposition will not require registration of such Shares under
the Securities Act, and (iii) such opinion of counsel for Optionee shall have
been concurred in by the Company's counsel and the Company shall have advised
Optionee of such concurrence.
Optionee understands and agrees that all certificates evidencing the
Shares to be issued to Optionee may bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE
9.
<PAGE> 19
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
7. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
8. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Act or, if such
shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Act.
9. TERM. The term of this option commences on the date hereof and
expires on November 30, 2008 (the "Expiration Date," which date shall be no more
than ten (10) years from date this option is granted), unless this option
expires sooner as set forth below or in the Plan. In no event may this option be
exercised on or after the date on which it terminates. This option shall
terminate prior to the expiration of its term as follows: ninety (90) days after
the termination of your employment with the Company or an affiliate of the
Company (as defined in the Plan) for any reason or for no reason unless:
(a) such termination of employment is due to your disability, in
which event the option shall terminate on the earlier of the Expiration Date or
twelve (12) months following such termination of employment; or
(b) such termination of employment is due to your death, in
which event the option shall terminate on the earlier of the Expiration Date or
twelve (12) months after your death; or
(c) during any part of such ninety (90) day period the option is
not exercisable solely because of the condition set forth in paragraph 6 above,
in which event this option shall not terminate until the earlier of the
Expiration Date or the date as of which this option shall have been exercisable
for an aggregate period of ninety (90) days after the termination of your
employment; or
(d) exercise of the option within ninety (90) days after
termination of your employment with the Company or with an affiliate would
result in liability under section 16(b) of the Securities Exchange Act of 1934,
in which event this option will terminate on the earliest of (i) the Expiration
Date set forth above, (ii) the tenth (10th) day after the last date upon which
exercise would result in such liability or (iii) six (6) months and ten (10)
days after the termination of your employment with the Company or an affiliate.
However, this option may be exercised following termination of
employment only as to that number of shares as to which it was exercisable on
the date of termination of employment under the provisions of paragraph 2 of
this option.
10.
<PAGE> 20
For purposes of this Section 7, the term "employment" shall be deemed to
include your full-time employment, part-time employment or the continued
provision of bona fide consulting services to the Company. Accordingly, this
Option shall continue to vest in the event Optionee continues as a part-time
employee or bona fide consultant of the Company following termination of
full-time employment. Unless otherwise determined by the Company's Board of
Directors, for purposes of this Section 7, the term "bona fide consulting
services" shall only include services provided to the Company by Optionee for
such compensation as the Company's Board of Directors may approve and shall not
include services directly or indirectly related to Optionee's services as a
member of the Company's Board of Directors.
10. EXERCISE.
(a) Subject to the provisions of this option, you may elect at
any time during your employment with the Company or an affiliate thereof to
exercise the option as to any part or all of the shares subject to this option
at any time during the term hereof, including without limitation, a time prior
to the vesting dates described in paragraph 2 hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto as Exhibit D; and
(iii) you shall enter into an Early Exercise Stock Purchase
Agreement in the form attached hereto with a vesting schedule that will result
in the same vesting as if no early exercise had occurred; and
(iv) the option shall not be exercisable as to any of the shares
referred to in Section 2(c) until and unless such shares have vested.
(b) The election provided in this Section 8 to purchase shares
upon the exercise of this option prior to the vesting dates shall cease upon
termination of your employment with the Company or an affiliate thereof and may
not be exercised after the date thereof.
(c) This option may be exercised, to the extent specified above,
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to Section 11(e) of the Plan.
(d) By exercising this option you agree that:
11.
<PAGE> 21
(i) you will enter an arrangement providing for the cash payment
by you to the Company of any tax withholding obligation of the Company arising
by reason of (1) the exercise of this option; (2) the lapse of any substantial
risk of forfeiture to which the shares are subject at the time of exercise; or
(3) the disposition of shares acquired upon such exercise; or
(ii) with the Company's approval, you may request the Company to
withhold from your exercise of this option the greatest number of whole shares
that have an aggregate fair market value (as determined under the Plan) not
exceeding the amount of any tax withholding obligation of the Company arising by
reason of (1) the exercise of this option; (2) the lapse of any substantial risk
of forfeiture to which the shares are subject at the time of exercise; or (3)
the disposition of shares acquired upon such exercise, provided however, that
the amount of any remaining tax withholding obligation of the Company will be
paid by you to the Company in cash; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell, dispose of,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale,
any shares of Common Stock or other securities of the Company held by you, for a
period of time specified by the underwriter(s) (not to exceed one hundred eighty
(180) days) following the effective date of a registration statement of the
Company filed under the Act. You further agree to execute and deliver such other
agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. To enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to your Common Stock until the
end of such period.
11. TRANSFERABILITY. This option is not transferable, except (i) by will
or by the laws of descent and distribution, or (ii) by written instruction, in a
form accepted by the Company, as a gift or pursuant to a domestic relations
order, to your spouse, children, lineal ancestors or lineal descendants (or a
trust or other entity for the exclusive benefit of you and/or the foregoing
persons). This option is exercisable during your life only by you and by a
transferee satisfying the above conditions; provided, however, that such
transferee may exercise this option only if the proposed amendments to Form S-8
Registration Statement and related rules under the Securities Act of 1933, as
amended (the "Form S-8"), to allow for the use of the Form S-8 for the exercise
of stock options by family members of employee optionees, as promulgated by the
Securities and Exchange Commission in Release No. 33-07506, 34-39669, are
adopted in substantially the form promulgated in such release. Notwithstanding
the foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option. Any shares
acquired upon exercise of this option by a permitted transferee under this
Section 9 shall be subject to the terms of any applicable Early Exercise Stock
Purchase Agreement.
12.
<PAGE> 22
12. OPTION NOT AN EMPLOYMENT CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. References to
employment, employee or similar terms shall be deemed to include the performance
of services as a bona fide consultant, provided, however, that no rights as an
employee shall arise solely by reason of the use of such terms.
13. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after deposit
in the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
14. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto, and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the 8th day of December, 1998.
Very truly yours,
VIXEL CORPORATION
By:_________________________________
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Exhibit A-1995 Stock Option Plan
Exhibit B-Vesting Schedule
Exhibit C-Full Recourse Promissory Note
Exhibit D-Early Exercise Stock Purchase Agreement
Exhibit E-Notice of Exercise
13.
<PAGE> 23
The undersigned:
a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and
liabilities with respect to this option are set forth in the
option and the Plan; and
b) Acknowledges that as of the date of grant of this option, it
sets forth the entire understanding between the undersigned
Optionee and the Company and its Affiliates regarding the
acquisition of stock in the Company and supersedes all prior
oral and written agreements on that subject with the exception
of (i) the options previously granted and delivered to the
undersigned under stock option plans of the Company, and (ii)
the following agreements only:
NONE ______
(Initial)
OTHER Employment Agreement dated November 30, 1998 Stock Repurchase
Agreement dated November 30, 1998
______________________________
____________________________________
OPTIONEE
Address: ___________________________
___________________________
14.
<PAGE> 24
EXHIBIT E
TO
NONSTATUTORY OPTION AGREEMENT
NOTICE OF EXERCISE
Vixel Corporation Date of Exercise: ____________, ____
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
Type of option (check one): Incentive [ ] Nonstatutory [X]
Stock option dated: November 30, 1998
Number of shares as
to which option is
exercised:
Certificates to be
issued in name of: Gregory R. Olbright
Total exercise price:
Promissory note delivered
herewith:
Value of _______ shares of
Vixel Corporation
common stock delivered herewith: $ -
--------
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the 1995 Stock Option Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock of the Company listed above (the
"Shares"), which are being acquired by me for my own account upon exercise of
the Option as set forth above:
E-1
<PAGE> 25
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Act"), and are deemed to constitute
"restricted securities" under Rule 144 promulgated under the Act. I warrant and
represent to the Company that I have no present intention of distributing or
selling said Shares, except as permitted under the Act and any applicable state
securities laws.
I hereby affirm the representations set forth in Section 4 of the
Option.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further acknowledge that I have been given information concerning the
business and financial condition of the Company and that I am familiar with its
business and financial condition and prospects. I do not require any further
information from the Company. I have had adequate opportunity to obtain the
assistance of a knowledgeable representative to aid me in evaluating the risks
of this investment. I understand that an investment in the Shares is illiquid,
highly speculative, and involves a high degree of risk. I am willing to bear the
risk of loss associated with this investment and can afford a complete loss of
this investment.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not to sell,
dispose of, transfer, make any short sale of, grant any option for the purchase
of, or enter into any hedging or similar transaction with the same economic
effect as a sale, any Shares or other securities of the Company held by me, for
a period of time specified by the underwriter(s) (not to exceed one hundred
eighty (180) days) following the effective date of a registration statement of
the Company filed under the Act. I further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) which are consistent with the foregoing or which are necessary to
give further effect thereto. To enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to my Shares until the end of
such period.
Very truly yours,
------------------------------------
Gregory Olbright, Optionee
E-2
<PAGE> 26
C-1
EXHIBIT B
TO
NONSTATUTORY OPTION AGREEMENT
VESTING
<TABLE>
<CAPTION>
Date of Vesting Number of Shares
<S> <C>
11/30/98 237,506
12/18/98 20,834
1/18/99 20,834
2/18/99 20,834
3/18/99 20,834
4/18/99 20,834
5/18/99 20,834
6/18/99 20,834
7/18/99 20,834
8/18/99 20,834
9/18/99 20,834
10/18/99 20,834
11/18/99 20,834
12/18/99 20,834
1/18/00 20,834
2/18/00 20,834
3/18/00 7,292
4/18/00 7,292
5/18/00 7,292
6/18/00 7,292
7/18/00 7,292
8/18/00 7,292
9/18/00 7,292
</TABLE>
C-1
<PAGE> 27
<TABLE>
<CAPTION>
Date of Vesting Number of Shares
<S> <C>
10/18/00 7,292
11/18/00 7,292
12/18/00 7,292*
1/18/01 7,292*
2/18/01 7,292*
3/18/01 34,375*
4/18/01 34,375*
5/18/01 34,375*
6/18/01 34,375*
7/18/01 34,375*
8/18/01 34,375*
9/18/01 34,375*
10/18/01 34,375*
11/18/01 34,375*
12/18/01 34,375*
1/18/02 34,375*
2/18/02 34,355*
-----------
1,050,000
===========
</TABLE>
* Subject to termination under Section 2(c) of the Nonstatutory Option
Agreement dated December 8, 1998.
C-2
<PAGE> 1
EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") and related Offer Letter dated
December 24, 1998 (Offer) is entered into by and between VIXEL CORPORATION
("Company"), a Delaware Corporation, and STAN REESE ("Employee") (collectively,
"Parties"), effective as of the last date either party executes this Agreement).
WITNESSETH
WHEREAS, the Company desires to employ and to assure itself of the
continued services of Employee; and
WHEREAS, Employee desires to be employed by the Company under the terms
and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company hereby employs Employee
to render exclusive and full-time services to the Company as VICE PRESIDENT -
ENGINEERING. The Employee will report directly to PRESIDENT & CEO for the
Company, working from the Irvine offices, but travelling to Bothell as needed to
properly fulfill the position. It is the Company's intent to locate the Employee
in Irvine in order to afford the Irvine employees greater access to senior
executive members of the Company, and as such, the Company does not intend to
relocate Employee to Bothell. Employee shall have the responsibilities, duties
and authorities that are customarily associated with such position. The Company
may modify Employee's duties and objectives at its discretion from time to time,
keeping such duties in line with other senior executive team members.
2. COMPENSATION. The Company agrees to pay Employee compensation
(including base salary, and bonuses, if any) as agreed upon in the offer letter
between Employee and Company. The Company may change this compensation scheme
and amount from time to time, but will not decrease the base salary until after
3/31/00 unless agreed upon by both parties.
2.1 SALARY. Paychecks will be distributed pursuant to
ordinary business practice, and Shall be subject to ordinary payroll deductions
and tax withholdings.
2.2 SAVINGS PLAN. The Company may make quarterly payments
("Savings Deposits") into the Company's savings plan (the "Plan"). This amount
may be adjusted from time to time at the sole election of the Company. Employee
is eligible to enroll in the Plan six (6) months after Hire Date; enrollment is
at the beginning of each quarter. A copy of the Plan is available in the
Employee Handbook.
2.3 BENEFITS. The Company also agrees to provide Employee
with benefits consistent with Company policy and practice for its employees,
including participation in the Company's group health, life, and disability
insurance plans for Employee and Employee's dependents. Details about these
benefits are provided in the Company's Employee Handbook and summary plan
descriptions.
2.4 ADDITIONAL COMPENSATION. The Board may, but has no
obligation to, also award Employee discretionary compensation, bonuses and
benefits ("Additional Compensation"). The amount of the Additional Compensation,
if any, and the criteria for determining the amount of the Additional
Compensation, if any, shall be at the sole discretion of the Board. The Company
and Employee have agreed on a bonus plan as outlined in the Offer for the first
year of employment.
1.
<PAGE> 2
2.5 STOCK OPTIONS. Subject to the Board's approval, Employee
will receive options to purchase shares of the Company's Common Stock as
detailed in the offer letter pursuant to the terms and conditions (e.g.,
vesting, exercise and termination) set forth in the Company's Incentive Stock
Option ("ISO") Plan, a copy of which is available in the Employee Handbook.
3. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT OBLIGATIONS.
Employee agrees to execute, and to be bound by, a Proprietary Information and
Inventions Agreement ("Proprietary Information Agreement") in the form attached
hereto as Exhibit A, the terms of which are incorporated herein by reference.
4. EMPLOYEE HANDBOOK. By signing this Agreement, Employee
acknowledges that he has received, read and agrees to be bound by, the Company's
Employee Handbook. Employee agrees to abide by all Company policies and
procedures.
5. ADDITIONAL ACTIVITIES. Employee agrees that during the period of
his employment by the Company, he will not, without the Company's express
written consent, engage in any employment or business activity other than for
the Company that would adversely affect Employee's ability to perform Employee's
obligations hereunder.
6. TERMINATION OF EMPLOYMENT. Employee and the Company each
acknowledge that either Party has the right to terminate Employee's employment
with the Company at any time for any reason whatsoever, with or without cause or
advance notice. Notwithstanding the foregoing, if at any time from the starting
date of employment until March 31, 2000, the Company terminates employment of
Employee for any reason other than cause as defined below, Employee will be
entitled to receive as severance compensation an amount equal to one year's
salary ($150,000, payable in equal monthly installments), plus any accrued bonus
earned as of the time of termination. Such severance payments will be reduced to
the extent of compensation received by the Employee from full-time employment
during the twelve-month period following termination of employment. Standard
payroll deductions and withholdings also shall reduce such severance payments.
For purposes of this agreement, "cause" shall mean: (i) Employee has
committed any material act of embezzlement or fraud; (ii) Employee engages in
unfair competition with the Company or willfully breaches his obligations under
this Agreement; or (iii) Employee causes material damage to Company through
intentional misconduct or gross neglect of the duties customary to his office.
No activities covered by items (ii) and (iii) will be deemed to be "cause"
unless the Company has notified Employee of the prohibited activity in written
detail and Employee has failed to cease such activity within fifteen (15) days.
In the event Employee's employment is terminated at any time with cause, he will
not be entitled to severance pay, pay in lieu of notice or any other such
compensation, but shall be entitled to accrued compensation.
7. NOTICES. All notices, requests, consents and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered or delivered
by registered or certified mail (return receipt requested), or private overnight
mail (delivery confirmed by such service), to the following addresses, or to
such other address as either Party shall designate by notice in writing to the
other in accordance herein: if to the Company: Vixel Corporation, 11911 North
Creek Parkway, Bothell, WA 98011 Attention: CEO; if to Employee: at such address
provided to the Company by him.
8. ARBITRATION. To ensure rapid and economical resolution of any
and all disputes directly or indirectly arising out of or in any way connected
with Employee's employment with the Company or the termination of that
employment, with the sole exception of disputes which arise under Employee's
Proprietary Information Agreement, (collectively, the "Arbitrable Claims"), the
Company and Employee each agree that any and all such disputes, whether of law
or fact of any nature whatsoever, shall be resolved by final and binding
arbitration under the procedures set forth in Exhibit B to this Agreement and
the then existing American Arbitration Association ("AAA") arbitration
procedures (except insofar as they are inconsistent with the procedures set
forth in Exhibit B). The Arbitrable Claims shall include, but not be
2.
<PAGE> 3
limited to: any and all such claims related to salary, bonuses, commissions,
stock, stock options, or any other ownership interests in the Company, vacation
pay, fringe benefits, expense reimbursements, severance benefits, or any other
form of compensation; claims pursuant to any federal, state or local law or
cause of action including, but not limited to, the federal Civil Rights Act of
1964, as amended; the federal Age Discrimination in Employment Act of 1967, as
amended ("ADEA"); the federal Americans with Disabilities Act of 1990; the
Washington Law Against Discrimination; tort law; contract law; wrongful
discharge; discrimination; fraud; defamation; emotional distress; and breach of
the implied covenant of good faith and fair dealing. Employee and the Company
acknowledge and agree that any and all rights they may otherwise have to resolve
such Arbitrable Claims by jury trial, by a court, or in any forum other than the
AAA, are hereby expressly waived.
9. GENERAL.
9.1 ENTIRE AGREEMENT. This Agreement and Offer Letter sets
forth the complete, final and exclusive embodiment of the entire agreement
between Employee and the Company with respect to the subject matter hereof. This
Agreement is entered into without reliance upon any promise, warranty or
representation, written or oral, other than those expressly contained herein,
and it supersedes any other such promises, warranties, representations or
agreements. This Agreement may not be amended or modified except in a written
instrument signed by Employee and a duly authorized officer or director of the
Company.
9.2 SEVERABILITY. If a court of competent jurisdiction
determines that any term or provision of this Agreement is invalid or
unenforceable, then the remaining terms and provisions shall be unimpaired, Such
court shall have the authority to modify or replace the invalid or unenforceable
term or provision with a valid and enforceable term or provision which most
accurately represents the Parties' intention with respect to the invalid or
unenforceable term or provision.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind the
heirs, personal representatives, successors, assigns, executors and
administrators of each Party, and inure to the benefit of each Party, its heirs,
successors and assigns. However, because of the unique and personal nature of
Employee's duties under this Agreement, Employee may not delegate the
performance of his duties under this Agreement.
9.4 APPLICABLE LAW. This Agreement shall be deemed to have
been entered into and shall be construed and enforced in accordance with the
laws of the State of Washington as applied to contracts made and to be performed
entirely within Washington.
9.5 HEADINGS. The section headings contained herein are for
reference purposes only and shall not In any way affect the meaning or
interpretation of this Agreement.
9.6 COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, all of which together
shall constitute one and the same instrument.
3.
<PAGE> 4
IN WITNESS WHEREOF. The Parties have duly authorized and caused this
Agreement to be executed as follows.
VIXEL CORPORATION,
A DELAWARE CORPORATION
BY: /s/ STANLEY H. REESE By. Gregory R. Olbright
----------------------------- ------------------------------------
NAME Stanley H. Reese TITLE: CEO and President
----------------------------- ---------------------------------
DATE: 29 Dec 1998 DATE: 12/31/98
----------------------------- ---------------------------------
4.
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into by and between
VIXEL CORPORATION ("Company"), a Delaware corporation, and JAMES M. MCCLUNEY
("Employee") (collectively, "Parties"), effective as of April 26, 1999 (the
"Effective Date").
W I T N E S S E T H
WHEREAS, the Company desires to employ Employee; and
WHEREAS, Employee desires to be employed by the Company under the terms
and conditions herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. EMPLOYMENT BY THE COMPANY. The Company hereby employs Employee to render
exclusive and full-time services to the Company as a President and Chief
Executive Officer, and will report directly to the Company's Board of Directors.
So long as Employee is employed as the Company's Chief Executive Officer, he
will be entitled to be elected as a Director of the Company. Employee shall have
the responsibilities, duties and authorities that are customarily associated
with such position. The Company may modify Employee's duties and objectives at
their discretion from time to time. Employee's employment shall commence no
later than April 26, 1999. (The date Employee commences providing service as a
President and Chief Executive Officer is referred to herein as the "Start
Date").
2. COMPENSATION. The Company agrees to pay Employee base salary and bonus as
described below.
2.1 SALARY. The Company will pay Employee at an annual base salary rate
of $300,000 for his first year of employment. Thereafter, the Compensation
Committee of the Company's Board of Directors will review Employee's base salary
rate on an annual basis and make adjustments to such compensation as the Board
or Compensation Committee, in its sole discretion, deems appropriate. Paychecks
will be distributed pursuant to ordinary business practice, and shall be subject
to normal payroll deductions and tax withholdings.
2.2 INCENTIVE BONUS. The Company will pay Employee an annual incentive
bonus ranging from 0% to 100% of his base salary rate then in effect (the
"Incentive Bonus"), with an on target payout of 50%, based upon performance
criteria to be determined by the Board Compensation Committee. By mutual
agreement between the Employee and the Board, some portion of this amount may be
paid in equity or deferred. If the deferral option is chosen, any subsequent
termination of Employment without Cause shall not affect Employee's entitlement
to such Incentive Bonus, which shall become fully due and payable upon such
termination without Cause. The Incentive Bonus is earned by Employee and vested
if (a) the performance objectives established by the Company's Compensation
Committee for a particular year have been satisfied
<PAGE> 2
during that year and (b) Employee is employed by the Company as its President
and Chief Executive Officer for the year and during the first quarter of the
following calendar year. The establishment and interpretation of each year's
performance objective and the satisfaction thereof shall be determined by the
Compensation Committee in their sole discretion. If any Incentive Bonus is
earned and vested, it will be paid during the first quarter of the following
calendar year. Nothing in this paragraph shall alter the Employee's or the
Company's Party's right to terminate Employee's employment with the Company at
any time for any reason whatsoever, with or without cause or advance notice.
Employee's first evaluation period for his Incentive Bonus shall be from April
26, 1999 to December 31, 1999, and his bonus will be based on the percentage
determined by the Compensation Committee multiplied by his salary paid or
accrued during such period.
2.3 STOCK OPTIONS. Subject to approval by the Company's Board of
Directors, the Company will grant to Employee a certain stock option pursuant to
terms established by the Company's Board of Directors.
2.4 RELOCATION EXPENSES. The Company will reimburse the employee for the
following expenses if incurred by Employee in relocating to Washington to begin
services as an employee of the Company: (a) the following costs incurred by
Employee that are associated with the sale of his current residential dwelling
and the purchase of a residential dwelling for occupancy by Employee and his
immediate family in the - Washington area: (i) reasonable and customary
commissions paid to a licensed real estate agent, (ii) reasonable and customary
mortgage origination fees (points), (iii) reasonable and customary title
insurance, and (iv) reasonable and necessary closing fees, and (b) reasonable
and customary expenses incurred by Employee in transporting his household goods
to the, Washington area. Such expenses will be reimbursed by the Company upon
presentation by Employee of documentation establishing that the expenses were
incurred by Employee, reflecting the reason the expenses were incurred, and
reflecting the date incurred and date paid. This obligation to reimburse
Employee is valid for one year from the start date. The Company agrees to gross
up the amount of any reimbursement due under this paragraph, based on the
federal and applicable state income tax rates in effect for Employee, to
compensate Employee for any amount taxable to Employee as income. The parties
agree that these expenses are expected not to exceed $150,000.000.
2.5 TEMPORARY HOUSING. For a period beginning on the Start Date and
concluding no later than 6 months thereafter, the Company will pay directly or
reimburse Employee for the reasonable and customary rental costs incurred in
renting temporary housing in the Bothell, Washington area. The reimbursement
shall not exceed $3,000.00 per month of housing provided. The Company agrees
to gross up the amount of any reimbursement due under this paragraph, based on
the federal and applicable state income tax rates in effect for Employee, to
compensate Employee for any amount taxable to Employee as income.
2.6 CAR ALLOWANCE. For a period beginning on the Start Date and
concluding no later than 6 months thereafter, the Company will pay directly or
reimburse Employee for normal and customary car rental expenses up to a maximum
of $1,500.00 per month. The expenses covered include only those charged by the
rental agency for use of the car, and do not include
2.
<PAGE> 3
fuel, maintenance, insurance, or any other expenses. The Company agrees to gross
up the amount of any reimbursement due under this paragraph, based on the
federal and applicable state income tax rates in effect for Employee, to
compensate Employee for any amount taxable to Employee as income. Employee
agrees to indemnify the Company for any losses suffered by the Company
attributable to Employee's use of the rental car, including without limitation
accidents involving the rental car, personal injury or property damage
associated with use of the rental car, theft of the rental car, or deliberate
misconduct involving the rental car. Employee agrees to procure all appropriate
insurance to operate the rental car. In no event will the Company's obligation
to Employee under this paragraph exceed $2,000.00 per month.
2.7 SAVINGS PLAN. Employee will be eligible to participate in the
Company's 401(k) Savings Plan. A copy of the Plan is available upon Employee's
request. The Plan may be amended or terminated at the sole election of the
Company.
2.8 BENEFITS. The Company also agrees to provide Employee with benefits
consistent with Company policy and practice for its employees, including paid
vacation in accordance with the Company's policy applicable to other officers,
and participation in the Company's group health, life, and disability insurance
plans for Employee and Employee's dependents. Details about these benefits are
provided in the Company's employee handbook and summary plan descriptions.
3. EMPLOYEE HANDBOOK. By signing this Agreement, Employee acknowledges that he
has received, read and agrees to be bound by, the Company's employee handbook.
Employee agrees to abide by all Company policies and procedures. Employee
acknowledges that nothing in the handbook, or in the Company policies or
procedures constitute a contract of employment. The handbook in no manner alters
the terms set forth herein.
4. ADDITIONAL ACTIVITIES. Employee agrees that during the period of Employee's
employment by the Company, Employee will not, without the Board of Director's
written approval, engage in any employment or business activity other than for
the Company that would adversely affect Employee's ability to perform Employee's
obligations hereunder. As the sole exception and for the period beginning on the
Start Date and concluding no later than 90 days thereafter, Employee may
continue efforts to complete pending projects with Employee's former employer so
long as the activities do not conflict with any obligation Employee owes to the
Company.
5. PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT; NONCOMPETITION AND
NONSOLICITATION AGREEMENT. Employee agrees and acknowledges that he has executed
and is bound by the terms of the Company's Proprietary Information and
Inventions Agreement. Concurrently with the execution of this Employment
Agreement, Employee will sign the Noncompetition and Nonsolicitation Agreement
in the form attached as Exhibit B.
6. TERMINATION OF EMPLOYMENT. Employee and the Company each acknowledge that
either Party has the right to terminate Employee's employment with the Company
at any time for any reason whatsoever, with or without cause or advance notice.
3.
<PAGE> 4
6.1 TERMINATION FOR CAUSE. The Company shall have the right to terminate
Employee's employment with the Company at any time for cause. "Cause" for
termination shall mean: (i) Employee has committed any material act of
embezzlement, fraud or misconduct; (ii) Employee is convicted of any or pleads
nolo contendere to felony involving moral turpitude; (iii) Employee engages in
competition with the Company or breaches his obligations under this Agreement;
or (iv) Employee causes material damage to Company through intentional
misconduct or gross neglect of the duties customary to his office. No activities
covered by items (iii) and (iv) will be deemed to be "cause" unless the company
has notified Employee of the prohibited activity in writing and Employee has
failed to cease such activity within 15 days. In the event Employee's employment
is terminated at any time with cause, he will not be entitled to severance pay,
severance payments (as defined below), Incentive Bonus, pay in lieu of notice or
any other such compensation. Nothing herein will affect Employee's rights with
respect to any options vested as of the time of termination.
6.2 TERMINATION WITHOUT CAUSE. The Company shall have the right to
terminate Employee's employment with the Company at any time without cause. In
the event Employee's employment is terminated by the Company without cause, then
the Company will provide the severance benefits described in the subparts below
("Severance Benefits"). Employee will also be entitled to receive any bonus
payments that he elected to defer. In consideration for such Severance Benefits,
Employee shall execute a General Release in the form of Exhibit A that releases
the Company from liability for any and all claims, known or unknown that the
Employee may have at the time of the termination.
(a) The Company shall pay Employee severance in the amount of one
year's salary at the rate in effect at time of termination less all required
deductions and withholdings ("Severance Payments"), payable in the normal
payroll cycle. In addition, the vesting of Employee's stock options will
continue for one year following the termination without cause provided that
Employee is in compliance with and continues to act in compliance with all the
obligations imposed on him pursuant to the Proprietary Information and
Inventions Agreement referred to in paragraph 5 above.
(b) Should Employee timely elect to continue coverage pursuant to
COBRA, the Company agrees to reimburse Employee for the COBRA premiums he pays
in order to maintain health insurance coverage for a period of one year after
termination of employment that is substantially equivalent to that he received
immediately prior to the termination. Employee is responsible to provide to the
Company documentation establishing that he paid the COBRA premium and reflecting
the extent of the coverage. The Company's obligation to provide COBRA
reimbursement under this paragraph shall cease on the earlier of (i) one year
after the termination of employment or (ii) if Employee obtains employment, then
the date any waiting period for insurance coverage through the new employer
expires.
6.3 VOLUNTARY TERMINATION. Employee may voluntarily terminate his
employment with the Company at any time, after which no further compensation
will be paid to Employee. In the event Employee voluntarily terminates his
employment, he will be entitled to receive any
4.
<PAGE> 5
bonus payments that he has elected to defer, but he will not be entitled to
severance pay, Severance Payments, Incentive Bonus, pay in lieu of notice or any
other such compensation.
7. NOTICES. All notices, requests, consents and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or delivered by registered or certified
mail (return receipt requested), or private overnight mail (delivery confirmed
by such service), to the following addresses, or to such other address as either
Party shall designate by notice in writing to the other in accordance herein: if
to the Company: to the Chairman of the Board at his or her personal or business
address; if to Employee: at such address provided to the Company by him.
8. ARBITRATION. To ensure rapid and economical resolution of any and all
disputes directly or indirectly arising out of or in any way connected with
Employee's employment with the Company or the termination of that employment,
with the sole exception of disputes which arise under Employee's Proprietary
Information and Inventions Agreement, (collectively, the "Arbitrable Claims"),
the Company and Employee each agree that any and all such disputes, whether of
law or fact of any nature whatsoever, shall be resolved by final and binding
arbitration under the procedures set forth in Exhibit C to this Agreement and
the then existing American Arbitration Association ("AAA") arbitration
procedures (except insofar as they are inconsistent with the procedures set
forth in Exhibit C). The Arbitrable Claims shall include, but not be limited to:
any and all such claims related to salary, bonuses, commissions, stock, stock
options, or any other ownership interests in the Company, vacation pay, fringe
benefits, expense reimbursements, severance benefits, or any other form of
compensation; claims pursuant to any federal, state or local law or cause of
action including, but not limited to, the federal Civil Rights Act of 1964, as
amended; the federal Age Discrimination in Employment Act of 1967, as amended
("ADEA"); the federal Americans with Disabilities Act of 1990; state and federal
common law; tort law; contract law; wrongful discharge; discrimination; fraud;
defamation; emotional distress; and breach of the implied covenant of good faith
and fair dealing. Employee and the Company acknowledge and agree that any and
all rights they may otherwise have to resolve such Arbitrable Claims by jury
trial, by a court, or in any forum other than the AAA, are hereby expressly
waived.
9. GENERAL.
9.1 ENTIRE AGREEMENT. This Agreement and the Company's Proprietary
Information and Inventions Agreement set forth the complete, final and exclusive
embodiment of the entire agreement between Employee and the Company with respect
to the subject matter therein. This Agreement is entered into without reliance
upon any promise, warranty or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties, representations or agreements. This Agreement may not be amended or
modified except in a written instrument signed by Employee and a duly authorized
officer or director of the Company.
9.2 SEVERABILITY. If a court of competent jurisdiction determines that
any term or provision of this Agreement is invalid or unenforceable, then the
remaining terms and provisions
5.
<PAGE> 6
shall be unimpaired. Such court shall have the authority to modify or replace
the invalid or unenforceable term or provision with a valid and enforceable term
or provision which most accurately represents the Parties' intention with
respect to the invalid or unenforceable term or provision.
9.3 SUCCESSORS AND ASSIGNS. This Agreement shall bind the heirs,
personal representatives, successors, assigns, executors and administrators of
each Party, and inure to the benefit of each Party, its heirs, successors and
assigns. Because of the unique and personal nature of Employee's duties under
this Agreement, Employee may not delegate the performance of his duties under
this Agreement.
9.4 APPLICABLE LAW. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of Washington as applied to contracts made and to be performed entirely
within Washington.
9.5 FORUM. Any controversy arising out of or relating to this Agreement
or the breach thereof, or any claim or action to enforce this Agreement or
portion thereof, or any controversy or claim requiring interpretation of this
Agreement must be brought in a forum located within the State of Washington. No
such action may be brought in any forum outside the State of Washington. Any
action brought in contravention of this paragraph by one party is subject to
dismissal at any time and at any stage of the proceedings by the other, and no
action taken by the other in answering, defending, counterclaiming, appealing or
otherwise shall be construed as a waiver of this right to immediate dismissal. A
party bringing an action in contravention of this paragraph shall be liable to
the other party for the costs, expenses and attorney's fees incurred in
successfully dismissing the action or successfully transferring the action to a
forum located within the State of Washington.
9.6 HEADINGS. The section headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
9.7 COUNTERPARTS. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the Parties have duly authorized and caused this
Agreement to be executed as follows:
VIXEL CORPORATION, a Delaware corporation
By: /s/ Kurtis L. Adams
Employee: /s/ JAMES M. MCCLUNEY ---------------------------
------------------------
James M. McCluney
Title: CFO
Date: 6/21/99 effective 4/26/99 -------------------------
--------------------------- Date: 6/21/99, effective 4/26/99
--------------------------
6.
<PAGE> 7
EXHIBIT C
ARBITRATION PROCEDURE
1. The Parties agree that any dispute that arises in connection with
this Agreement or the termination of this Agreement shall be resolved by binding
arbitration in the manner described below.
2. A Party intending to seek resolution of any dispute under the
Agreement by arbitration shall provide a written demand for arbitration to the
other Party, which demand shall contain a brief statement of the issues to be
resolved.
3. The arbitration shall be conducted by the American Arbitration
Association ("AAA"). At the request of either Party, subject to paragraph 10
below regarding judicial enforcement of the decree or judgment of an award
rendered by the arbitrator, arbitration proceedings will be conducted in the
utmost secrecy and, in such case, all documents, testimony and records shall be
received, heard and maintained by the arbitrator(s) in secrecy under seal,
available for inspection only by the Parties to the arbitration, their
respective attorneys, and their respective expert consultants or witnesses who
shall agree, in advance and in writing, to receive all such information
confidentially and to maintain such information in secrecy, and make no use of
such information except for the purposes of the arbitration, unless compelled by
legal process.
4. The arbitrator(s) is required to disclose any circumstances that
might preclude the arbitrator from rendering an objective and impartial
determination.
5. The Party demanding arbitration shall promptly request that AAA
conduct a scheduling conference within fifteen (15) days of the date of that
Party's written demand for arbitration or on the first available date thereafter
on the arbitrator's calendar. The arbitration hearing shall be held within
thirty (30) days after the scheduling conference or on the first available date
thereafter on the arbitrator's calendar. Nothing in this paragraph shall prevent
a Party from at any time seeking temporary equitable relief, from AAA or any
court of competent jurisdiction, to prevent irreparable harm pending the
resolution of the arbitration.
6. Discovery shall be conducted as follows: (a) prior to the arbitration
any Party may make a written demand for lists of the witnesses to be called and
the documents to be introduced at the hearing; (b) the lists must be served
within fifteen days of the date of receipt of the demand, or one day prior to
the arbitration, whichever is earlier; and (c) each Party may take no more than
two depositions (pursuant to the procedures of Washington law) with a maximum of
five hours of examination time per deposition, and no other form of
pre-arbitration discovery shall be permitted.
7. It is the intent of the Parties that the Federal Arbitration Act
("FAA") shall apply to the enforcement of this provision unless it is held
inapplicable by a court with jurisdiction over the dispute, in which event
Washington law with regard to arbitration shall apply.
<PAGE> 8
8. The arbitrator(s) shall apply Washington law, and shall be able to
decree any and all relief of an equitable nature, including but not limited to
such relief as a temporary restraining order, a preliminary injunction, a
permanent injunction, or replevin of Company property. The arbitrator(s) shall
also be able to award actual, general or consequential damages, but shall not
award any other form of damage (e.g., punitive damages).
9. The arbitrator(s) shall render a written award setting forth the
reasons for the arbitration decision. The decree or judgment of an award
rendered by the arbitrator may be entered and enforced in any court having
jurisdiction over the Parties. The award of the arbitrator(s) shall be final and
binding upon the Parties without appeal or review except as permitted by the
FAA, or if the FAA is not applicable, as permitted by Washington law.
10. The Parties agree that the arbitration procedures set forth in this
Exhibit C shall be superseded and replaced by any change the Company makes to
its arbitration procedures that are generally applicable to its employees,
provided that any such change is no more restrictive on the Employee than the
procedures set forth herein.
<PAGE> 1
EXHIBIT 10.13
EARLY EXERCISE STOCK PURCHASE AGREEMENT
FOR APRIL 26, 1999 OPTION
(INCLUDING RIGHT OF FIRST REFUSAL)
THIS AGREEMENT is made by and between Vixel Corporation, a Delaware
corporation (the "Corporation"), and James M. McCluney ("Purchaser").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and
the Corporation hereby agrees to sell to Purchaser, an aggregate of one million
five hundred thousand (1,500,000) shares of the common stock (the "Stock") of
the Corporation, for an exercise price of $2.05 per share. The closing hereunder
shall occur at the offices of the Corporation on the date of this Agreement or
at such other time and place as the parties may mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in the form
of Exhibit B, duly endorsed (with date and number of shares left blank), joint
escrow instructions (the "Joint Escrow Instructions") in the form of Exhibit C,
duly executed by Purchaser, and the total exercise price (including endorsed
certificates representing the appropriate number of shares of the Corporation's
common stock if a portion of the total exercise price is to be paid by common
stock). At the closing or as soon thereafter as practicable, the Corporation
shall deliver to the Escrow Agent (as defined in paragraph 10 below) share
certificates for all of the Stock that is to be subject to the Purchase Option
(as defined in paragraph 2 below), and shall deliver share certificates to
Purchaser for all of the Stock, if any, that is not to be subject to the
Purchase Option. Upon the request of Purchaser during the term of the escrow,
certificates for shares that are no longer subject to the Purchase Option shall
be delivered to Purchaser.
2. The Stock to be purchased by Purchaser pursuant to this
Agreement shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser shall cease to be an
employee of the Corporation for any reason (including his death), or no reason,
with or without cause, the Purchase Option may be exercised. The Corporation
shall have the right at any time within ninety (90) days after such cessation of
employment to purchase from Purchaser or his personal representative, as the
case may be, at the price per share paid by Purchaser pursuant to this Agreement
("Option Price"), up to but not exceeding the number of shares of the Stock set
forth on Exhibit A hereto which is incorporated herein by this reference. For
purposes of this Section 2, Purchaser will be considered to be "employed" by the
Company if Purchaser is providing bona fide consulting services to the Company.
Accordingly, notwithstanding the foregoing, the Purchase Option may not be
exercised and the shares of Stock subject to this Agreement will continue to
vest during any period that Purchaser is a bona fide consultant of the Company.
Unless otherwise determined by the Company's Board of Directors, for purposes of
this Section 2, the term "bona fide consulting services" shall only include
services provided to the Company by Optionee for such compensation as the
Company's Board of Directors may approve and shall not include services directly
or indirectly related to Purchaser's services as a member of the Company's Board
of Directors.
1.
<PAGE> 2
(b) In addition, and without limiting the foregoing Purchase
Option, if at any time during the term of the Purchase Option, there occurs an
Acquisition (as defined in the Nonstatutory Option Agreement dated April 26,
1999) (the "Option Agreement"), or if following an Acquisition Purchaser's
employment is terminated by the Company other than for Cause, or is terminated
by Purchaser for Good Reason (as such terms are defined in such agreement), then
the Purchase Option shall be terminated as to the number of shares subject to
accelerated vesting pursuant to Section 2 of such agreement.
(c) The Corporation shall be entitled to pay for any shares
purchased pursuant to its Purchase Option, at the Corporation's option, in cash,
by offset against any indebtedness owing to the Corporation by Purchaser,
including, without limitation, any note given in payment for the Stock, or a
combination of both.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 15 below. Upon providing
of such notice and payment or tender of the purchase price, the Corporation
shall become the legal and beneficial owner of the Stock being purchased and all
rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option
there is any stock dividend or liquidating dividend or distribution of cash
and/or property, stock split or other change in the character or amount of any
of the outstanding securities of the Corporation, then, in such event, any and
all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Stock will be immediately
subject to the Purchase Option and be included in the word "Stock" for all
purposes of the Purchase Option with the same force and effect as the shares of
Stock then subject to the Purchase Option. While the total Option Price shall
remain the same after each such event, the Option Price per share of Stock upon
exercise of the Purchase Option shall be appropriately adjusted.
5. [INTENTIONALLY DELETED.]
6. CORPORATION'S RIGHT OF FIRST REFUSAL.
(a) Subject to the limitations of subparagraph 6(b), in the
event that, prior to the date of the first registration of an equity security of
the Corporation under Section 12 of the Securities Exchange Act of 1934,
Purchaser desires to sell, encumber or otherwise transfer all or any portion of
the Stock received upon the exercise of Purchaser's Option, or any interest
therein, Purchaser will be required to first give written notice of the intent
to transfer to the Secretary of the Corporation. The notice will name the
proposed transferee and state the number of shares of Stock to be transferred,
the proposed consideration, and all other terms and conditions of the proposed
transfer. The Corporation and/or its assignee(s) will have the right (the "Right
of First Refusal") at any time within thirty (30) days after receipt of such
notice to purchase any portion of the Stock specified in the notice at the price
and upon the terms set forth in such notice (the "Notice Price"). In the case of
a gift, property settlement or other transfer in which the proposed transferee
is not paying the full price for the shares, the price will be deemed to be the
fair market value of the Stock at such time as determined in good faith by the
Board of
2.
<PAGE> 3
Directors. In the event the Corporation and/or its assignee(s) elects to
purchase all or any portion of the Stock, it will provide Purchaser with written
notice of its election and cash payment at the Notice Price within thirty (30)
days after receipt of the transfer notice. If, however, the terms of payment set
forth in the transfer notice were other than cash against delivery, the
Corporation and/or its assignee(s) will pay for the Stock on the same terms and
conditions as set forth in the transfer notice. In the event the Corporation
and/or its assignee(s) do not elect to acquire all of the shares specified in
the transfer notice, Purchaser may, within the sixty (60)-day period following
the expiration of the Corporation's Right of First Refusal, transfer any portion
of the Stock specified in the notice which was not acquired by the Corporation
and/or its assignee(s) on the terms specified in the original notice. All shares
so sold by Purchaser will continue to be subject to the same restrictions as
before the transfer.
(b) The following transactions shall be exempt from the
provisions of subparagraph 6(a): (i) Purchaser's transfer of any or all shares
held either during such Purchaser's lifetime or on death by will or intestacy to
such Purchaser's immediate family or to any custodian or trustee for the account
of such Purchaser or such Purchaser's immediate family and (ii) Purchaser's bona
fide pledge or mortgage of any shares with a commercial lending institution,
provided that any subsequent transfer of said shares to said institution shall
be conducted in the manner set forth in this Agreement. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the Purchaser making such transfer;
In any case, the transferee, assignee, or other recipient shall receive
and hold such Stock subject to the provisions of this Agreement, and there shall
be no further transfer of such Stock except in accord with this Agreement.
7. All certificates representing any shares of Stock of the
Corporation subject to the provisions of this Agreement shall have endorsed
thereon legends in substantially the following form:
(i) "The shares represented by this certificate are
subject to an option and a right of first refusal set forth in an agreement
between the corporation and the registered holder, or his predecessor in
interest, a copy of which is on file at the principal office of this
corporation. Any transfer or attempted transfer of any shares subject to such
option is void without the prior express written consent of the issuer of these
shares."
(ii) "These securities have not been registered under
the Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
8. Purchaser acknowledges that he is aware that the Stock to be
issued to him by the Corporation pursuant to this Agreement has not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock is to be effected,
and in this connection acknowledges that the Corporation is relying on the
following representations. In this connection, Purchaser warrants and represents
to the Corporation that he is acquiring the Stock for investment and not with a
view to or for sale in connection with any distribution of the Stock or with any
present intention of distributing or selling the Stock and he does not presently
have reason to anticipate any change in circumstances or any particular
3.
<PAGE> 4
occasion or event which would cause him to sell the Stock. Purchaser recognizes
that the Stock must be held indefinitely unless it is subsequently registered
under the Act or an exemption from such registration is available and, further,
recognizes that the Corporation is under no obligation to register the Stock or
to comply with any exemption from such registration.
9. Purchaser is aware that the Stock may not be sold pursuant to
Rule 144 adopted under the Act unless certain conditions are met and until
Purchaser has held the Stock for at least one (1) year. Among the conditions for
use of Rule 144 is the availability of specified current public information
about the Corporation. Purchaser recognizes that the Corporation presently has
no plans to make such information available to the public. Whether or not the
Purchase Option is exercised or has lapsed, Purchaser further agrees not to make
any disposition of any of the Stock in any event unless and until: (A) There is
then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or (B) (I) Purchaser shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and (II)
Purchaser shall have given the Corporation an opinion of counsel, which opinion
and counsel shall be satisfactory to the Corporation, to the effect that such
disposition will not require registration of the Stock under the Act.
10. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Corporation deliver on the Purchaser's behalf) to and deposit with the
Secretary of the Corporation ("Escrow Agent"), as Escrow Agent in this
transaction, three (3) stock assignments duly endorsed (with date and number of
shares left blank) in the form attached hereto as Exhibit B, together with a
certificate or certificates evidencing all of the Stock subject to the Purchase
Option; said documents are to be held by the Escrow Agent and delivered by said
Escrow Agent pursuant to the Joint Escrow Instructions of the Corporation and
Purchaser set forth in Exhibit C attached hereto and incorporated herein by this
reference, which instructions shall also be delivered to the Escrow Agent at the
closing hereunder (or as soon thereafter as practicable).
11. Except for transfers permitted pursuant to Section 9 of the
Option Agreement, purchaser shall not sell or transfer any of the Stock subject
to the Purchase Option or any interest therein so long as such Stock is subject
to the Purchase Option.
12. The Corporation shall not be required (i) to transfer on its
books any shares of Stock of the Corporation which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
13. Subject to the provisions of paragraphs 11 and 12 above,
Purchaser (but not any unapproved transferee) shall, during the term of this
Agreement, exercise all rights and privileges of a stockholder of the
Corporation with respect to the Stock.
4.
<PAGE> 5
14. The parties agree to execute such further instruments and to
take such further action as reasonably may be necessary to carry out the intent
of this Agreement.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to the other party hereto at his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
16. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Corporation and, subject to the restrictions on
transfer herein set forth, inure to the benefit of and be binding upon
Purchaser, his heirs, executors, administrators, successors, and assigns.
Without limiting the generality of the foregoing, the Purchase Option of the
Corporation hereunder shall be assignable by the Corporation at any time or from
time to time, in whole or in part.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 30th day of April, 1999.
VIXEL CORPORATION
By: /s/ Kurtis L. Adams
-------------------------------
Title: CFO
-------------------------------
11911 Northcreek Parkway South
Suite 100
Bothell, WA 98011
PURCHASER
/s/ James M. McCluney
------------------------------------------
James M. McCluney
5.
<PAGE> 6
EXHIBIT A
TO
NONSTATUTORY OPTION AGREEMENT
VESTING
<TABLE>
<CAPTION>
Date of Vesting Number of Shares
<S> <C>
4/26/00 375,000
5/26/00 31,250
6/26/00 31,250
7/26/00 31,250
8/26/00 31,250
9/26/00 31,250
10/26/00 31,250
11/26/00 31,250
12/26/00 31,250
1/26/01 31,250
2/26/01 31,250
3/26/01 31,250
4/26/01 31,250
5/26/01 31,250
6/26/01 31,250
7/26/01 31,250
8/26/01 31,250
9/26/01 31,250
10/26/01 31,250
11/26/01 31,250
12/26/01 31,250
</TABLE>
6.
<PAGE> 7
<TABLE>
<S> <C>
1/26/02 31,250
2/26/02 31,250
3/26/02 31,250
4/26/02 31,250
5/26/02 31,250
6/26/02 31,250
7/26/02 31,250
8/26/02 31,250
9/26/02 31,250
10/26/02 31,250
11/26/02 31,250
12/26/02 31,250
1/26/03 31,250
2/26/03 31,250
3/26/03 31,250
4/26/03 31,250
=========
1,500,000
=========
</TABLE>
7.
<PAGE> 8
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Stock
Purchase Agreement (the "Agreement") dated as of April 30, 199, James M.
McCluney hereby sells, assigns and transfers unto Vixel Corporation, a Delaware
corporation (the "Corporation") One million five hundred thousand (1,500,000)
shares of Common Stock of the Corporation standing in the undersigned's name on
the books of the Corporation represented by Certificate No. _____ herewith, and
does hereby irrevocably constitute and appoint the Secretary of the Corporation
attorney to transfer the said stock on the books of the Corporation with full
power of substitution in the premises. This Assignment may be used only in
accordance with and subject to the terms and conditions of the Agreement, in
connection with the repurchase of shares of Common Stock issued to the
undersigned pursuant to the Agreement, and only to the extent that such shares
remain subject to the Company's Purchase Option under the Agreement.
Dated: April 30, 1998 /s/ James M. McCluney
-----------------------------------------
[Signature]
James M. McCluney
8.
<PAGE> 9
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Vixel Corporation
Attention: Secretary
Dear Sir:
As Escrow Agent for both Vixel Corporation, a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company ("Purchaser"),
you are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Early Exercise Stock Purchase Agreement
(the "Agreement"), dated April 26, 1999, to which a copy of these Joint Escrow
Instructions is attached as Exhibit B, in accordance with the following
instructions:
1. In the event the Company or an assignee shall elect to exercise
the Purchase Option set forth in the Agreement, the Company or its assignee will
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) of the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or closing of the
exercise of the Purchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged of
all further obligations hereunder; provided, however, that
9.
<PAGE> 10
if at the time of termination of this escrow you are advised by the Company that
the property subject to this escrow is the subject of a pledge or other security
agreement, you shall deliver all such property to the pledgeholder or other
person designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act you
may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
any statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel (including,
without limitation, the firm of Cooley Godward LLP) and other experts as you may
deem necessary properly to advise you in connection with your obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be Secretary of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
may appoint any officer or assistant officer of the Company as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
10.
<PAGE> 11
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you may (but are not obligated to) retain in your possession without
liability to anyone all or any part of said securities until such dispute shall
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but you shall
be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties hereunto
entitled at the following addresses specified below, or at such other addresses
as a party may designate by ten days' written notice to each of the other
parties hereto:
16. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This agreement will be governed by, and construed in accordance
with, the internal laws (excluding the law of conflicts) of the State of
Delaware.
11.
<PAGE> 12
18. This instrument shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
Very truly yours,
VIXEL CORPORATION
By: /s/ KURTIS L. ADAMS
------------------------------------
Name: Kurtis L. Adams
Title: CFO
PURCHASER:
/s/ JAMES M. MCCLUNEY
---------------------------------------
James M. McCluney
ESCROW AGENT:
Secretary
Address:
2595 Canyon Blvd., Ste. 250
Boulder, CO 80302
12.
<PAGE> 1
EXHIBIT 10.14
EARLY EXERCISE STOCK PURCHASE AGREEMENT
FOR MARCH 3, 1998 OPTION
(INCLUDING RIGHT OF FIRST REFUSAL)
THIS AGREEMENT is made by and between Vixel Corporation, a Delaware
corporation (the "Corporation"), and Gregory R. Olbright ("Purchaser").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and
the Corporation hereby agrees to sell to Purchaser, an aggregate of shares of
the common stock (the "Stock") of the Corporation, for an exercise price of
$3.33 per share. The closing hereunder shall occur at the offices of the
Corporation on the date of this Agreement or at such other time and place as the
parties may mutually agree upon in writing. At the closing, Purchaser shall
deliver three (3) stock assignments in the form of Exhibit B, duly endorsed
(with date and number of shares left blank), joint escrow instructions (the
"Joint Escrow Instructions") in the form of Exhibit C, duly executed by
Purchaser, and the total exercise price (including endorsed certificates
representing the appropriate number of shares of the Corporation's common stock
if a portion of the total exercise price is to be paid by common stock). At the
closing or as soon thereafter as practicable, the Corporation shall deliver to
the Escrow Agent (as defined in paragraph 10 below) share certificates for all
of the Stock that is to be subject to the Purchase Option (as defined in
paragraph 2 below), and shall deliver share certificates to Purchaser for all of
the Stock, if any, that is not to be subject to the Purchase Option. Upon the
request of Purchaser during the term of the escrow, certificates for shares that
are no longer subject to the Purchase Option shall be delivered to Purchaser.
2. The Stock to be purchased by Purchaser pursuant to this
Agreement shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser shall cease to be an
employee of the Corporation for any reason (including his death), or no reason,
with or without cause, the Purchase Option may be exercised. The Corporation
shall have the right at any time within ninety (90) days after such cessation of
employment to purchase from Purchaser or his personal representative, as the
case may be, at the price per share paid by Purchaser pursuant to this Agreement
("Option Price"), up to but not exceeding the number of shares of the Stock set
forth on Exhibit A hereto which is incorporated herein by this reference. For
purposes of this Section 2, Purchaser will be considered to be "employed" by the
Company if Purchaser is providing bona fide consulting services to the Company.
Accordingly, notwithstanding the foregoing, the Purchase Option may not be
exercised and the shares of Stock subject to this Agreement will continue to
vest during any period that Purchaser is a bona fide consultant of the Company.
Unless otherwise determined by the Company's Board of Directors, for purposes of
this Section 2, the term "bona fide consulting services" shall only include
services provided to the Company by Optionee for such compensation as the
Company's Board of Directors may approve and shall not include services directly
or indirectly related to Purchaser's services as a member of the Company's Board
of Directors.
<PAGE> 2
(b) In addition, and without limiting the foregoing Purchase
Option, if at any time during the term of the Purchase Option, there occurs an
Acquisition (as defined in the Nonstatutory Option Agreement dated March 3,
1998) (the "Option Agreement"), or if following an Acquisiton Purchaser's
employment is terminated by the Company other than for Cause, or is terminated
by Purchaser for Good Reason (as such terms are defined in such agreement), then
the Purchase Option shall be terminated as to the number of shares subject to
accelerated vesting pursuant to Section 2 of such agreement.
(c) The Corporation shall be entitled to pay for any shares
purchased pursuant to its Purchase Option, at the Corporation's option, in cash,
by offset against any indebtedness owing to the Corporation by Purchaser,
including, without limitation, any note given in payment for the Stock, or a
combination of both.
3. The Purchase Option may be exercised by giving written notice of
exercise delivered or mailed as provided in paragraph 15 below. Upon providing
of such notice and payment or tender of the purchase price, the Corporation
shall become the legal and beneficial owner of the Stock being purchased and all
rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option
there is any stock dividend or liquidating dividend or distribution of cash
and/or property, stock split or other change in the character or amount of any
of the outstanding securities of the Corporation, then, in such event, any and
all new, substituted or additional securities or other property to which
Purchaser is entitled by reason of his ownership of Stock will be immediately
subject to the Purchase Option and be included in the word "Stock" for all
purposes of the Purchase Option with the same force and effect as the shares of
Stock then subject to the Purchase Option. While the total Option Price shall
remain the same after each such event, the Option Price per share of Stock upon
exercise of the Purchase Option shall be appropriately adjusted.
5. [INTENTIONALLY DELETED.]
6. CORPORATION'S RIGHT OF FIRST REFUSAL.
(a) Subject to the limitations of subparagraph 6(b), in the
event that, prior to the date of the first registration of an equity security of
the Corporation under Section 12 of the Securities Exchange Act of 1934,
Purchaser desires to sell, encumber or otherwise transfer all or any portion of
the Stock received upon the exercise of Purchaser's Option, or any interest
therein, Purchaser will be required to first give written notice of the intent
to transfer to the Secretary of the Corporation. The notice will name the
proposed transferee and state the number of shares of Stock to be transferred,
the proposed consideration, and all other terms and conditions of the proposed
transfer. The Corporation and/or its assignee(s) will have the right (the "Right
of First Refusal") at any time within thirty (30) days after receipt of such
notice to purchase any portion of the Stock specified in the notice at the price
and upon the terms set forth in such notice (the "Notice Price"). In the case of
a gift, property settlement or other transfer in which the proposed transferee
is not paying the full price for the shares, the price will be deemed to be the
fair market value of the Stock at such time as determined in good faith by the
Board of
<PAGE> 3
Directors. In the event the Corporation and/or its assignee(s) elects to
purchase all or any portion of the Stock, it will provide Purchaser with written
notice of its election and cash payment at the Notice Price within thirty (30)
days after receipt of the transfer notice. If, however, the terms of payment set
forth in the transfer notice were other than cash against delivery, the
Corporation and/or its assignee(s) will pay for the Stock on the same terms and
conditions as set forth in the transfer notice. In the event the Corporation
and/or its assignee(s) do not elect to acquire all of the shares specified in
the transfer notice, Purchaser may, within the sixty (60)-day period following
the expiration of the Corporation's Right of First Refusal, transfer any portion
of the Stock specified in the notice which was not acquired by the Corporation
and/or its assignee(s) on the terms specified in the original notice. All shares
so sold by Purchaser will continue to be subject to the same restrictions as
before the transfer.
(b) The following transactions shall be exempt from the
provisions of subparagraph 6(a): (i) Purchaser's transfer of any or all shares
held either during such Purchaser's lifetime or on death by will or intestacy to
such Purchaser's immediate family or to any custodian or trustee for the account
of such Purchaser or such Purchaser's immediate family and (ii) Purchaser's bona
fide pledge or mortgage of any shares with a commercial lending institution,
provided that any subsequent transfer of said shares to said institution shall
be conducted in the manner set forth in this Agreement. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the Purchaser making such transfer;
In any case, the transferee, assignee, or other recipient shall receive
and hold such Stock subject to the provisions of this Agreement, and there shall
be no further transfer of such Stock except in accord with this Agreement.
7. All certificates representing any shares of Stock of the
Corporation subject to the provisions of this Agreement shall have endorsed
thereon legends in substantially the following form:
(i) "The shares represented by this certificate are
subject to an option and a right of first refusal set forth in an agreement
between the corporation and the registered holder, or his predecessor in
interest, a copy of which is on file at the principal office of this
corporation. Any transfer or attempted transfer of any shares subject to such
option is void without the prior express written consent of the issuer of these
shares."
(ii) "These securities have not been registered under
the Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as to the
securities under said Act or an opinion of counsel satisfactory to the
corporation that such registration is not required."
8. Purchaser acknowledges that he is aware that the Stock to be
issued to him by the Corporation pursuant to this Agreement has not been
registered under the Securities Act of 1933, as amended (the "Act"), on the
basis that no distribution or public offering of the Stock is to be effected,
and in this connection acknowledges that the Corporation is relying on the
following representations. In this connection, Purchaser warrants and represents
to the Corporation that he is acquiring the Stock for investment and not with a
view to or for sale in connection with any distribution of the Stock or with any
present intention of distributing or selling the Stock and he
<PAGE> 4
does not presently have reason to anticipate any change in circumstances or any
particular occasion or event which would cause him to sell the Stock. Purchaser
recognizes that the Stock must be held indefinitely unless it is subsequently
registered under the Act or an exemption from such registration is available
and, further, recognizes that the Corporation is under no obligation to register
the Stock or to comply with any exemption from such registration.
9. Purchaser is aware that the Stock may not be sold pursuant to
Rule 144 adopted under the Act unless certain conditions are met and until
Purchaser has held the Stock for at least one (1) year. Among the conditions for
use of Rule 144 is the availability of specified current public information
about the Corporation. Purchaser recognizes that the Corporation presently has
no plans to make such information available to the public. Whether or not the
Purchase Option is exercised or has lapsed, Purchaser further agrees not to make
any disposition of any of the Stock in any event unless and until: (A) There is
then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or (B) (I) Purchaser shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a detailed
statement of the circumstances surrounding the proposed disposition, and (II)
Purchaser shall have given the Corporation an opinion of counsel, which opinion
and counsel shall be satisfactory to the Corporation, to the effect that such
disposition will not require registration of the Stock under the Act.
10. As security for his faithful performance of the terms of this
Agreement and to insure the availability for delivery of Purchaser's Stock upon
exercise of the Purchase Option herein provided for, Purchaser agrees, at the
closing hereunder (or as soon thereafter as practicable), to deliver (or have
the Corporation deliver on the Purchaser's behalf) to and deposit with the
Secretary of the Corporation ("Escrow Agent"), as Escrow Agent in this
transaction, three (3) stock assignments duly endorsed (with date and number of
shares left blank) in the form attached hereto as Exhibit B, together with a
certificate or certificates evidencing all of the Stock subject to the Purchase
Option; said documents are to be held by the Escrow Agent and delivered by said
Escrow Agent pursuant to the Joint Escrow Instructions of the Corporation and
Purchaser set forth in Exhibit C attached hereto and incorporated herein by this
reference, which instructions shall also be delivered to the Escrow Agent at the
closing hereunder (or as soon thereafter as practicable).
11. Except for transfers permitted pursuant to Section 9 of the
Option Agreement, purchaser shall not sell or transfer any of the Stock subject
to the Purchase Option or any interest therein so long as such Stock is subject
to the Purchase Option.
12. The Corporation shall not be required (i) to transfer on its
books any shares of Stock of the Corporation which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement or
(ii) to treat as owner of such shares or to accord the right to vote as such
owner or to pay dividends to any transferee to whom such shares shall have been
so transferred.
13. Subject to the provisions of paragraphs 11 and 12 above,
Purchaser (but not any unapproved transferee) shall, during the term of this
Agreement, exercise all rights and privileges of a stockholder of the
Corporation with respect to the Stock.
<PAGE> 5
14. The parties agree to execute such further instruments and to
take such further action as reasonably may be necessary to carry out the intent
of this Agreement.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to the other party hereto at his
address hereinafter shown below his signature or at such other address as such
party may designate by ten (10) days' advance written notice to the other party
hereto.
16. This Agreement shall bind and inure to the benefit of the
successors and assigns of the Corporation and, subject to the restrictions on
transfer herein set forth, inure to the benefit of and be binding upon
Purchaser, his heirs, executors, administrators, successors, and assigns.
Without limiting the generality of the foregoing, the Purchase Option of the
Corporation hereunder shall be assignable by the Corporation at any time or from
time to time, in whole or in part.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the __ day of April, 1998.
VIXEL CORPORATION
By: /s/ DAVID DULL
---------------------------------------
Title: Chairman, Compensation Committee
--------------------------------
11911 Northcreek Parkway South
Suite 100
Bothell, WA 98011
PURCHASER
/s/ GREGORY R. OLBRIGHT
-------------------------------------------
Gregory R. Olbright
<PAGE> 6
EXHIBIT A
<TABLE>
<CAPTION>
DATE OF PURCHASE OPTION NUMBER OF SHARES SUBJECT TO PURCHASE OPTION
<S> <C>
Before 3/18/98 1,000,000
On or after 3/18/98 and before 4/18/98 979,166
On or after 4/18/98 and before 5/18/98 958,332
On or after 5/18/98 and before 6/18/98 937,498
On or after 6/18/98 and before 7/18/98 916,664
On or after 7/18/98 and before 8/18/98 895,830
On or after 8/18/98 and before 9/18/98 874,996
On or after 9/18/98 and before 10/18/98 854,162
On or after 10/18/98 and before 11/18/98 833,328
On or after 11/18/98 and before 12/18/98 812,494
On or after 12/18/98 and before 1/18/99 791,660
On or after 1/18/99 and before 2/18/99 770,826
On or after 2/18/99 and before 3/18/99 749,992
On or after 3/18/99 and before 4/18/99 729,158
On or after 4/18/99 and before 5/18/99 708,324
On or after 5/18/99 and before 6/18/99 687,490
On or after 6/18/99 and before 7/18/99 666,656
On or after 7/18/99 and before 8/18/99 645,822
On or after 8/18/99 and before 9/18/99 624,988
On or after 9/18/99 and before 10/18/99 604,154
On or after 10/18/99 and before 11/18/99 583,320
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
DATE OF PURCHASE OPTION NUMBER OF SHARES SUBJECT TO PURCHASE OPTION
<S> <C>
On or after 11/18/99 and before 12/18/99 562,486
On or after 12/18/99 and before 1/18/00 541,652
On or after 1/18/00 and before 2/18/00 520,818
On or after 2/18/00 and before 3/18/00 499,984
On or after 3/18/00 and before 4/18/00 492,692
On or after 4/18/00 and before 5/18/00 485,400
On or after 5/18/00 and before 6/18/00 478,108
On or after 6/18/00 and before 7/18/00 470816
On or after 7/18/00 and before 8/18/00 463,524
On or after 8/18/00 and before 9/18/00 456,232
On or after 9/18/00 and before 10/18/00 448,940
On or after 10/18/00 and before 11/18/00 441,648
On or after 11/18/00 and before 12/18/00 434,356
On or after 12/18/00 and before 1/18/01 427,064
On or after 1/18/01 and before 2/18/01 419,772
On or after 2/18/01 and before 3/18/01 412,480
On or after 3/18/01 and before 4/18/01 378,105
On or after 4/18/01 and before 5/18/01 343,730
On or after 5/18/01 and before 6/18/01 309,355
On or after 6/18/01 and before 7/18/01 274,980
On or after 7/18/01 and before 8/18/01 240,605
On or after 8/18/01 and before 9/18/01 206,230
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
DATE OF PURCHASE OPTION NUMBER OF SHARES SUBJECT TO PURCHASE OPTION
<S> <C>
On or after 9/18/01 and before 10/18/01 171,855
On or after 10/18/01 and before 11/18/01 137,480
On or after 11/18/01 and before 12/18/01 103,105
On or after 12/18/01 and before 1/18/02 68,730
On or after 1/18/02 and before 2/18/02 34,355
On or after 2/18/02 0
</TABLE>
<PAGE> 9
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Stock
Purchase Agreement (the "Agreement") dated as of April ____________, 1998,
Gregory R. Olbright hereby sells, assigns and transfers unto Vixel Corporation,
a Delaware corporation (the "Corporation") One million fifty thousand
(1,050,000) shares of Common Stock of the Corporation standing in the
undersigned's name on the books of the Corporation represented by Certificate
No. _____ herewith, and does hereby irrevocably constitute and appoint the
Secretary of the Corporation attorney to transfer the said stock on the books of
the Corporation with full power of substitution in the premises. This Assignment
may be used only in accordance with and subject to the terms and conditions of
the Agreement, in connection with the repurchase of shares of Common Stock
issued to the undersigned pursuant to the Agreement, and only to the extent that
such shares remain subject to the Company's Purchase Option under the Agreement.
Dated: April __, 1998 /s/ GREGORY R. OLBRIGHT
---------------------------------------
Gregory R. Olbright
<PAGE> 10
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Vixel Corporation
Attention: Secretary
Dear Sir:
As Escrow Agent for both Vixel Corporation, a Delaware corporation (the
"Company"), and the undersigned purchaser of stock of the Company ("Purchaser"),
you are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Early Exercise Stock Purchase Agreement
(the "Agreement"), dated March 3, 1998, to which a copy of these Joint Escrow
Instructions is attached as Exhibit B, in accordance with the following
instructions:
1. In the event the Company or an assignee shall elect to exercise
the Purchase Option set forth in the Agreement, the Company or its assignee will
give to Purchaser and you a written notice specifying the number of shares of
stock to be purchased, the purchase price, and the time for a closing hereunder
at the principal office of the Company. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company against the
simultaneous delivery to you of the purchase price (which may include suitable
acknowledgment of cancellation of indebtedness) of the number of shares of stock
being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser hereby irrevocably constitutes and appoints you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities and other property all documents of assignment and/or
transfer and all stock certificates necessary or appropriate to make all
securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or closing of the
exercise of the Purchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same
<PAGE> 11
to Purchaser and shall be discharged of all further obligations hereunder;
provided, however, that if at the time of termination of this escrow you are
advised by the Company that the property subject to this escrow is the subject
of a pledge or other security agreement, you shall deliver all such property to
the pledgeholder or other person designated by the Company.
6. Except as otherwise provided in these Joint Escrow Instructions,
your duties hereunder may be altered, amended, modified or revoked only by a
writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties or their assignees. You shall not be personally liable for any act you
may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith, and any act done or omitted by you
pursuant to the advice of your own attorneys shall be conclusive evidence of
such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree of any
court, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
any statute of limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel (including,
without limitation, the firm of Cooley Godward LLP) and other experts as you may
deem necessary properly to advise you in connection with your obligations
hereunder, may rely upon the advice of such counsel, and may pay such counsel
reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be Secretary of the Company or if you shall resign by
written notice to each party. In the event of any such termination, the Company
may appoint any officer or assistant officer of the Company as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
<PAGE> 12
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities, you may (but are not obligated to) retain in your possession without
liability to anyone all or any part of said securities until such dispute shall
have been settled either by mutual written agreement of the parties concerned or
by a final order, decree or judgment of a court of competent jurisdiction after
the time for appeal has expired and no appeal has been perfected, but you shall
be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in any United States Post Office Box, by registered or certified mail
with postage and fees prepaid, addressed to each of the other parties hereunto
entitled at the following addresses specified below, or at such other addresses
as a party may designate by ten days' written notice to each of the other
parties hereto:
16. By signing these Joint Escrow Instructions you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This agreement will be governed by, and construed in accordance
with, the internal laws (excluding the law of conflicts) of the State of
Delaware.
<PAGE> 13
18. This instrument shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns. It
is understood and agreed that references to "you" or "your" herein refer to the
original Escrow Agent and to any and all successor Escrow Agents. It is
understood and agreed that the Company may at any time or from time to time
assign its rights under the Agreement and these Joint Escrow Instructions in
whole or in part.
Very truly yours,
VIXEL CORPORATION
By: /s/ DAVID DULL
--------------------------------------
Name: David Dull
Title: Chairman, Compensation
Committee
PURCHASER:
/s/ GREGORY R. OLBRIGHT
-----------------------------------------
ESCROW AGENT:
Secretary
Address:
2595 Canyon Blvd., Ste. 250
Boulder, CO 80302
<PAGE> 1
EXHIBIT 10.16
FULL RECOURSE PROMISSORY NOTE
For value received, receipt of which the undersigned hereby
acknowledges, the undersigned, Stuart Berman ("Maker"), hereby promises to pay
to Vixel Corporation ("Vixel"), the principal sum of Sixty-Two Thousand Dollars
($62,000.00), plus interest, computed on the unpaid balance at the rate of five
and three quarters percent (5.75%) per annum or the maximum rate permitted by
applicable usury law, whichever is less, from the date hereof until the entire
indebtedness evidenced by this Note is paid in full.
This Note shall be secured by a pledge of and security interest in
Nine-Hundred, Seventy-Nine Thousand, Six-Hundred and Ninety-Two (979,692) shares
of common stock (the "Shares")of Vixel currently owned by the undersigned,
together with any and all additional shares of common stock of Vixel that may be
acquired by the undersigned after the date of this Note pursuant to the exercise
of any Vixel stock options now or hereafter held by the undersigned.
The entire amount of unpaid principal of this Note, plus all accrued
interest, shall be due and payable on the earlier of (i) six (6) months after
termination or cessation of Maker's employment with or services to Vixel, (ii)
April 15, 2000, or (iii) the sale, pledge or other transfer by Maker of any of
the Shares.
This Note may, at the option of Maker, be prepaid in whole or in part at
any time without premium or penalty. All payments shall be applied first to
accrued and unpaid interest and then to principal.
If default is made in the payment of this Note, then, at the option of
the holder and without notice, the entire unpaid principal sum and accrued
interest shall become immediately due and payable, and, again at the option of
the holder and without notice, the entire unpaid principal sum and accrued and
unpaid interest shall bear interest from the date of such default until fully
paid at the rate of eighteen percent (18%) per annum or the maximum rate
permitted by applicable usury law, whichever is less.
Amounts, if any, owed to Maker by Vixel may be offset against accrued
interest and principal hereunder. In addition, at the election of either Maker
or Vixel, unpaid accrued salary or other bonuses owed to Maker by Vixel may be
offset against accrued interest and principal hereunder; provided, however, that
Vixel may only make such election if, when and to the extent that amounts are
due and payable hereunder.
All payments and offsets shall be credited first against accrued
interest to the date of the payment and thereafter to reduce the outstanding
principal amount hereof. All payments shall be made in lawful money of the
United States to the holder at 11911 North Creek Parkway South, Bothell,
Washington 98011, or at such other place as the holder may designate.
If this Note is placed in the hands of an attorney for collection after
any default, whether or not an action in court is commenced, the undersigned
promises to pay all costs and expenses of collection (including, but not limited
to, reasonable attorneys' fees) incurred by the holder.
PAGE 1
<PAGE> 2
The obligation of this Note shall be joint and several. The undersigned
and all endorsers and all persons liable or who become liable on this Note: (a)
waive presentment, demand, protest and notice of presentment, demand protest,
dishonor and nonpayment; (b) agree to remain bound for payment of this Note not
withstanding any extension of time, substitution or release of security or any
other indulgence by the holder of this Note; (c) waive notice of any such
extension, substitution, release or other indulgence; and (d) consent to the
jurisdiction and venue of the Superior Court of the State of Washington for King
County in any action involving this Note or any default hereunder. The
nonexercise by the holder of any of its rights or remedies hereunder in any
instance shall not constitute a waiver thereof in that or any other instance.
This Note shall be interpreted, construed and enforced in all respects
in accordance with the laws of the State of Washington.
Dated: April 16, 1999
--------------------------------
/s/ Stuart Berman
----------------------------------------
Stuart Berman
PAGE 2
<PAGE> 1
EXHIBIT 10.17
, 1999
Bothell, Washington
FULL RECOURSE PROMISSORY NOTE
FOR VALUE RECEIVED, receipt of which the undersigned hereby
acknowledges, the undersigned, _________________ ("MAKER"), hereby promises to
pay to VIXEL CORPORATION (the "COMPANY"), the principal sum of _____________
__________________________________ dollars ($_________), plus interest at the
rate of five and three quarters percent (5.75%) per annum from the date hereof
until the full amount of principal and interest is paid in full in lawful money
of the United States of America. Interest shall be payable annually.
The entire amount of unpaid principal of this Note, plus all accrued
interest, shall be due and payable on the earlier of (i) six (6) months after
termination or cessation of Maker's employment with or services to the Company,
or (ii) ________, 2003.
This Note is delivered in connection with Maker's purchase of ___
_____________________________ (_________) shares of Common Stock of the Company
(the "SHARES") pursuant to that certain Early Exercise Stock Purchase Agreement
by and between Maker and the Company of even date herewith (the "PURCHASE
AGREEMENT"). This Note is full recourse.
All installments of principal and accrued interest shall be accelerated
and come due six (6) months after the date of termination of Maker's employment
with the Company. In addition, upon the sale, pledge or other transfer by Maker
of any of the Shares purchased by Maker pursuant to the Purchase Agreement, all
accrued interest and a portion of the principal amount hereof shall thereupon
become immediately due and payable, such that the remaining principal amount not
then due shall be equal to the product of $2.05 times the number of Shares
remaining owned by Maker following that sale, pledge or other transfer.
Amounts, if any, owed to Maker by the Company may be offset against
accrued interest and principal hereunder. In addition, at the election of either
Maker or the Company, unpaid accrued salary or other bonuses owed to Maker by
the Company may be offset against accrued interest and principal hereunder;
provided, however, that the Company may only make such election if, when and to
the extent that (a) Maker demands payment of the accrued salary or (b) amounts
are due and payable hereunder.
All payments and offsets shall be credited first against accrued
interest to the date of the payment and thereafter to reduce the outstanding
principal amount hereof.
1.
<PAGE> 2
Maker reserves the right to prepay the sums due hereunder in whole or in
part without premium or penalty. Maker hereby waives demand, protest,
presentment and notice of non-payment, and shall pay reasonable costs and
expenses, including attorneys' fees, incurred by Company in connection with the
collection or enforcement of the indebtedness represented hereby.
-----------------------------
2.
<PAGE> 1
EXHIBIT 10.18
May 28, 1999
Bothell, Washington
$100,000
FULL RECOURSE PROMISSORY NOTE
FOR VALUE RECEIVED, receipt of which the undersigned hereby
acknowledges, the undersigned, ______________ ("MAKER"), hereby promises to pay
to VIXEL CORPORATION (the "COMPANY"), the principal sum of one hundred thousand
dollars ($100,000), plus interest at the rate of five and three quarters percent
(5.75%) per annum from the date hereof until the full amount of principal and
interest is paid in full in lawful money of the United States of America.
Interest shall be payable annually.
The entire amount of unpaid principal of this Note, plus all accrued
interest, shall be due and payable on the earlier of (i) six (6) months after
termination or cessation of Maker's services to the Company, or (ii) May 28,
2003.
This Note is delivered in connection with Maker's purchase of
twenty-five thousand (25,000) shares of Common Stock of the Company (the
"SHARES") pursuant to that certain Stock Purchase Agreement by and between Maker
and the Company of even date herewith (the "PURCHASE AGREEMENT"). This Note is
full recourse.
All installments of principal and accrued interest shall be accelerated
and come due six (6) months after the date of termination of Maker's service to
the Company. In addition, upon the sale, pledge or other transfer by Maker of
any of the Shares purchased by Maker pursuant to the Purchase Agreement, all
accrued interest and a portion of the principal amount hereof shall thereupon
become immediately due and payable, such that the remaining principal amount not
then due shall be equal to the product of $4.00 times the number of Shares
remaining owned by Maker following that sale, pledge or other transfer.
Amounts, if any, owed to Maker by the Company may be offset against
accrued interest and principal hereunder.
All payments and offsets shall be credited first against accrued
interest to the date of the payment and thereafter to reduce the outstanding
principal amount hereof.
1.
<PAGE> 2
Maker reserves the right to prepay the sums due hereunder in whole or
in part without premium or penalty. Maker hereby waives demand, protest,
presentment and notice of non-payment, and shall pay reasonable costs and
expenses, including attorneys' fees, incurred by Company in connection with the
collection or enforcement of the indebtedness represented hereby.
-----------------------
2.
<PAGE> 1
EXHIBIT 10.20
LEASE AGREEMENT
BY AND BETWEEN
AETNA LIFE INSURANCE COMPANY,
A CONNECTICUT CORPORATION
AS LANDLORD
AND
ARCXEL TECHNOLOGIES, INC.,
A CALIFORNIA CORPORATION
AS TENANT
DATED NOVEMBER 1, 1997
<PAGE> 2
LEASE AGREEMENT
BASIC LEASE INFORMATION
Lease Date: November 1, 1997
Landlord: AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
Landlord's Address: c/o Allegis Realty Investors LLC
455 Market Street, Suite 1540
San Francisco, CA 94105
All notices sent to Landlord under this Lease
shall be sent to the above address, with copies
to:
Lincoln Property Company Management
Services, Inc.
Attn: Vice President, Leasing & operations
30 Executive Park, Suite 100
Irvine, CA 92614
Tenant: Arcxel Technologies, Inc.
a California corporation
Tenant's Contact Person: Jay O'Donald, CEO
Tenant's Address and 2691 Richter #106
Telephone Number: Irvine, CA 92606
(714) 475-4350
Premises Square Footage: Approximately Thirteen Thousand Three Hundred
Ninety-Six (13,396) rentable square feet
Premises Address: 15245 Alton Parkway, Suite 100
Irvine, California
Project: Alton Plaza,
together with the land on which the Project is
situated and all
(1)
<PAGE> 3
Common Areas
Building (if not the same as
the Project): Intentionally Omitted
Tenant's Proportionate Share
of Project: 6.27%
Tenant's Proportionate Share
of Building: Intentionally Omitted
Length of Term: Sixty (60) months
Estimated Commencement Date: December 1, 1997
Estimated Expiration Date: November 30, 2002
<TABLE>
<CAPTION>
Monthly Base Rent: Monthly Base
Months Sq. Ft. Rate Monthly Base Rent
<S> <C> <C> <C> <C>
1-12 13.396 x $1.05 = $14,066.00
13-24 13,396 x $1.092 x $14,628.00
25-36 13,396 x $1.136 x $15,218.00
37.48 13,396 x $ 1.18 x $15,807.00
49-60 13,396 x $ 1.23 x $16,477.00
</TABLE>
Escalations: Intentionally Omitted
Prepaid Rent: Fourteen Thousand Sixty-Six and 00/100 Dollars
($14,066.00)
Prepaid Additional Rent: Intentionally Omitted
Month to which Prepaid Base
Rent and Additional Rent
will be Applied: First (1st) month of the Term
(2)
<PAGE> 4
Security Deposit: Eighty-Four Thousand Three Hundred Ninety-Six and
00/100 Dollars ($84,396.00)
Permitted Use: General office use, research and development,
light manufacturing, assembly and warehouse
storage for a fiber channel company..............
Unreserved Parking Spaces: Forty-six (46) nonexclusive and undesignated
parking spaces
Listing Broker(s): Gregg Haly/David Bolt, CB Commercial
24422 Avenida de la Carlota, Suite 100
Laguna Hills, CA 92653
Procuring Broker(s): Carol Trapani/Omar Davod
CB Commercial
3501 Jamboree Road, Suite 100
Newport Beach, CA 92660-2940
Tenant Improvements
Allowance: Intentionally Omitted
Tenant Improvements Loan: Intentionally Omitted
Architect: Intentionally Omitted ...........................
(3)
<PAGE> 5
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into by and between Landlord and
Tenant on the Lease Date. The defined terms used in this Lease which are defined
in the Basic Lease Information attached to this Lease Agreement ("Basic Lease
Information") shall have the meaning and definition given them in the Basic
Lease Information. The Basic Lease Information, the exhibits, the addendum or
addenda described in the Basic Lease Information, and this Lease Agreement are
and shall be construed as a single instrument and are referred to herein as the
"Lease".
1. DEMISE
In consideration for the rents and all other charges and payments payable
by Tenant, and for the agreements, terms and conditions to be performed by
Tenant in this Lease, LANDLORD DOES HEREBY LEASE TO TENANT, AND TENANT DOES
HEREBY HIRE AND TAKE FROM LANDLORD, the Premises described below (the
"Premises"), upon the agreements, terms and conditions of this Lease for the
Term hereinafter stated.
2. PREMISES
The Premises demised by this Lease is located in that certain building (the
"Building") specified in the Basic Lease Information, which Building is located
in that certain real estate development (the "Project") specified in the Basic
Lease Information. The Premises has the address and contains the square footage
specified in the Basic Lease Information. The location and dimensions of the
Premises are depicted on Exhibit A, which is attached hereto and incorporated
herein by this reference. Tenant shall have the non-exclusive right (in common
with the other tenants, Landlord and any other person granted use by Landlord)
to use the Common Areas (as hereinafter defined), except that, with respect to
parking, Tenant shall have only a license to use the number of non-exclusive and
undesignated parking spaces set forth in the Basic Lease Information in the
Project's parking areas (the "Parking Areas"); provided, however, that Landlord
shall not be required to enforce Tenant's right to use such parking spaces; and,
provided further, that the number of parking spaces allocated to Tenant
hereunder shall be reduced on a proportionate basis in the event any of the
parking spaces in the Parking Areas are taken or otherwise eliminated as a
result of any Condemnation (as hereinafter defined) or casualty event affecting
such Parking Areas. No easement for light or air is incorporated in the
Premises. For purposes of this Lease, the term "Common Areas" shall mean all
areas and facilities outside the Premises and within the exterior boundary line
of the Project that are provided and designated by Landlord for the
non-exclusive use of Landlord, Tenant and other tenants of the Project and their
respective employees, guests and invitees.
<PAGE> 6
Tenant understands and agrees that the Premises shall be leased by Tenant
in its as-is condition without any improvements or alterations by Landlord
unless Landlord has expressly agreed to make such improvements or alterations in
a tenant improvement work agreement attached hereto, if at all, as Exhibit B. If
Landlord has agreed to make any such improvements or alterations, then the
Premises demised by this Lease shall include any Tenant Improvements (as that
term is defined in the aforesaid tenant improvement work agreement) to be
constructed by Landlord within the interior of the Premises. Landlord shall
construct any Tenant Improvements on the terms and conditions set forth in
Exhibit B, if attached hereto. Landlord and Tenant agree to and shall be bound
by the terms and conditions of Exhibit B, if any.
Landlord has the right, in its sole discretion, from time to time, to: (a)
make changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors and
walkways; (b) close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available; (c) add
additional buildings and improvements to the Common Areas or remove existing
buildings or improvements therefrom; (d) use the Common Areas while engaged in
making additional improvements, repairs or alterations to the Project or any
portion thereof; and (e) do and perform any other acts or make any other changes
in, to or with respect to the Common Areas and the Project as Landlord may, in
its sole discretion, deem to be appropriate.
3. TERM
The term of this Lease (the "Term") shall be for the period of months
specified in the Basic Lease Information, commencing on the earliest to occur of
the following dates (the "Commencement Date"):
(a) The date the Tenant Improvements are approved by the appropriate
governmental agency as being in accordance with its building code and the
building permit issued for such improvements, as evidenced by the issuance of a
final building inspection approval; or
(b) The date Landlord's architect and general contractor have both
certified in writing to Tenant that the Tenant Improvements have been
substantially completed in accordance with the plans and specifications
therefor; or
(c) The date Tenant commences occupancy of the Premises.
In the event the actual Commencement Date, as determined pursuant to the
foregoing, is a date other than the Estimated Commencement Date, then Landlord
and Tenant shall promptly execute a Commencement and Expiration Date Memorandum
in the form attached hereto as Exhibit C, wherein the parties shall specify the
2
<PAGE> 7
Commencement Date, the date on which the Term expires (the "Expiration Date")
and the date on which Tenant is to commence paying Rent.
4. RENT
(a) BASE RENT. Tenant shall pay to Landlord, in advance on the first day of
each month, without further notice or demand and without offset or deduction,
the monthly installments of rent specified in the Basic Lease Information (the
"Base Rent").
Upon execution of this Lease, Tenant shall pay to Landlord the Prepaid Rent
and first monthly installment of estimated Additional Rent (as hereinafter
defined) specified in the Basic Lease Information to be applied toward Base Rent
and Additional Rent for the month of the Term specified in the Basic Lease
Information.
(b) ADDITIONAL RENT. This Lease is intended to be a triple-net Lease with
respect to Landlord; and subject to Paragraph 13(b) below, the Base Rent owing
hereunder is (1) to be paid by Tenant absolutely net of all costs and expenses
relating to Landlord's ownership and operation of the Project and the Building,
and (2) not to be reduced, offset or diminished, directly or indirectly, by any
cost, charge or expense payable hereunder by Tenant or by others in connection
with the Premises, the Building and/or the Project or any part thereof. The
provisions of this Paragraph 4(b) for the payment of Tenant's Proportionate
Share(s) of Expenses (as hereinafter defined) are intended to pass on to Tenant
its share of all such costs and expenses. In addition to the Base Rent, Tenant
shall pay to Landlord, in accordance with this Paragraph 4, Tenant's
Proportionate Share(s) of all costs and expenses paid or incurred by Landlord in
connection with the ownership, operation, maintenance, management and repair of
the Premises, the Building and/or the Project or any part thereof (collectively,
the "Expenses"), including, without limitation, all the following items (the
"Additional Rent"):
(1) Taxes and Assessments. All real estate taxes and assessments,
which shall include any form of tax, assessment, fee, license fee, business
license fee, levy, penalty (if a result of Tenant's delinquency), or tax (other
than net income, estate, succession, inheritance, transfer or franchise taxes),
imposed by any authority having the direct or indirect power to tax, or by any
city, county, state or federal government or any improvement or other district
or division thereof, whether such tax is (i) determined by the area of the
Premises, the Building and/or the Project or any part thereof, or the Rent and
other sums payable hereunder by Tenant or by other tenants, including, but not
limited to, any gross income or excise tax levied by any of the foregoing
authorities with respect to receipt of Rent and/or other sums due under this
Lease; (ii) upon any legal or equitable interest of Landlord in the Premises,
the Building and/or the Project or any part thereof; (iii) upon this transaction
or any document to which Tenant is a party creating or transferring any interest
in the Premises, the Building and/or the Project; (iv) levied or assessed in
lieu of, in substitution for, or in addition to, existing or additional taxes
against the Premises, the Building and/or the Project, whether or not now
customary or
3
<PAGE> 8
within the contemplation of the parties; or (v) surcharged against the parking
area. Tenant and Landlord acknowledge that Proposition 13 was adopted by the
voters of the State of California in the June, 1978 election and that
assessments, taxes, fees, levies and charges may be imposed by governmental
agencies for such purposes as fire protection, street, sidewalk, road, utility
construction and maintenance, refuse removal and for other governmental services
which may formerly have been provided without charge to property owners or
occupants. It is the intention of the parties that all new and increased
assessments, taxes, fees, levies and charges due to any cause whatsoever are to
be included within the definition of real property taxes for purposes of this
Lease. "Taxes and assessments" shall also include legal and consultants' fees,
costs and disbursements incurred in connection with proceedings to contest,
determine or reduce taxes, Landlord specifically reserving the right, but not
the obligation, to contest by appropriate legal proceedings the amount or
validity of any taxes.
(2) Insurance. All insurance premiums for the Building and/or the
Project or any part thereof, including premiums for "all risk" fire and extended
coverage insurance, commercial general liability insurance, rent loss or
abatement insurance, earthquake insurance, flood or surface water coverage, and
other insurance as Landlord deems necessary in its sole discretion, and any
deductibles paid under policies of any such insurance.
(3) Utilities. The cost of all Utilities (as hereinafter defined)
serving the Premises, the Building and the Project that are not separately
metered to Tenant, any assessments or charges for Utilities or similar purposes
included within any tax bill for the Building or the Project, including without
limitation, entitlement fees, allocation unit fees, and/or any similar fees or
charges and any penalties (if a result of Tenant's delinquency) related thereto,
and any amounts, taxes, charges, surcharges, assessments or impositions levied,
assessed or imposed upon the Premises, the Building or the Project or any part
thereof, or upon Tenant's use and occupancy thereof, as a result of any
rationing of Utility services or restriction on Utility use affecting the
Premises, the Building and/or the Project, as contemplated in Paragraph 5 below
(collectively, "Utility Expenses").
(4) Common Area Expenses. All costs to operate, maintain, repair,
replace, supervise, insure and administer the Common Areas, including supplies,
materials, labor and equipment used in or related to the operation and
maintenance of the Common Areas, including parking areas (including, without
limitation, all costs of resurfacing and restriping parking areas), signs and
directories on the Building and/or the Project, landscaping (including
maintenance contracts and fees payable to landscaping consultants), amenities,
sprinkler systems, sidewalks, walkways, driveways, curbs, lighting systems and
security services, if any, provided by Landlord for the Common Areas, and any
charges, assessments, costs or fees levied by any association or entity of which
the Project or any part thereof is a member or to which the Project or any part
thereof is subject.
4
<PAGE> 9
(5) Parking Charges. Any parking charges or other costs levied,
assessed or imposed by, or at the direction of, or resulting from statutes or
regulations, or interpretations thereof, promulgated by any governmental
authority or insurer in connection with the use or occupancy of the Building or
the Project.
(6) Maintenance and Repair Costs. Except for costs which are the
responsibility of Landlord pursuant to Paragraph 13(b) below, all costs to
maintain, repair, and replace the Premises, the Building and/or the Project or
any part thereof, including without limitation, (i) all costs paid under
maintenance, management and service agreements such as contracts for janitorial,
security and refuse removal, (ii) all costs to maintain, repair and replace the
roof coverings of the Building or the Project or any part thereof, (iii) all
costs to maintain, repair and replace the heating, ventilating, air
conditioning, plumbing, sewer, drainage, electrical, fire protection, life
safety and security systems and other mechanical and electrical systems and
equipment serving the Premises, the Building and/or the Project or any part
thereof (collectively, the "Systems").
(7) Life Safety Costs. All costs to install, maintain, repair and
replace all life safety systems, including, without limitation, all fire alarm
systems, serving the Premises, the Building and/or the Project or any part
thereof (including all maintenance contracts and fees payable to life safety
consultants) whether such systems are or shall be required by Landlord's
insurance carriers, Laws (as hereinafter defined) or otherwise.
(8) Management and Administration. All costs for management and
administration of the Premises, the Building and/or the Project or any part
thereof, including, without limitation, a property management fee, accounting,
auditing, billing, postage, salaries and benefits for clerical and supervisory
employees, whether located on the Project or off-site, payroll taxes and legal
and accounting costs and fees for licenses and permits related to the ownership
and operation of the Project.
Notwithstanding anything in this Section 4(b) to the contrary, with
respect to all sums payable by Tenant as Additional Rent under this Section 4(b)
for the repair or replacement of any item or the construction of any new item in
connection with the physical operation of the Premises, the Building or the
Project (i.e., HVAC, roof membrane or coverings and parking area) which is a
capital item the repair or replacement of which properly would be capitalized
under generally accepted accounting principles, Tenant shall be required to pay
only the pro rata share of the cost of the item falling due within the Term
(including any Renewal Term) based upon the amortization of the same over the
useful life of such item, as reasonably determined by Landlord.
(c) PAYMENT OF ADDITIONAL RENT.
(1) Upon commencement of this Lease, Landlord shall submit to Tenant
an estimate of monthly Additional Rent for the period between the Commencement
Date
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and the following December 31 and Tenant shall pay such estimated Additional
Rent on a monthly basis, in advance, on the first day of each month. Tenant
shall continue to make said monthly payments until notified by Landlord of a
change therein. By April 1 of each calendar year, Landlord shall endeavor to
provide to Tenant a statement showing the actual Additional Rent due to Landlord
for the prior calendar year, to be prorated during the first year from the
Commencement Date. If the total of the monthly payments of Additional Rent that
Tenant has made for the prior calendar year is less than the actual Additional
Rent chargeable to Tenant for such prior calendar year, then Tenant shall pay
the difference in a lump sum within ten (10) days after receipt of such
statement from Landlord. Any overpayment by Tenant of Additional Rent for the
prior calendar year shall be credited towards the Additional Rent next due.
(2) Landlord's then-current annual operating and capital budgets for
the Building and the Project or the pertinent part thereof shall be used for
purposes of calculating Tenant's monthly payment of estimated Additional Rent
for the current year, subject to adjustment as provided above. Landlord shall
make the final determination of Additional Rent for the year in which this Lease
terminates as soon as possible after termination of such year. Even though the
Term has expired and Tenant has vacated the Premises, Tenant shall remain liable
for payment of any amount due to Landlord in excess of the estimated Additional
Rent previously paid by Tenant, and, conversely, Landlord shall promptly return
to Tenant any overpayment. Failure of Landlord to submit statements as called
for herein shall not be deemed a waiver of Tenant's obligation to pay Additional
Rent as herein provided.
(3) With respect to Expenses which Landlord allocates to the Building,
Tenant's "Proportionate Share" shall be the percentage set forth in the Basic
Lease Information as Tenant's Proportionate Share of the Building, as adjusted
by Landlord from time to time for a remeasurement of or changes in the physical
size of the Premises or the Building, whether such changes in size are due to an
addition to or a sale or conveyance of a portion of the Building or otherwise.
With respect to Expenses which Landlord allocates to the Project as a whole or
to only a portion of the Project, Tenant's "Proportionate Share" shall be, with
respect to Expenses which Landlord allocates to the Project as a whole, the
percentage set forth in the Basic Lease Information as Tenant's Proportionate
Share of the Project and, with respect to Expenses which Landlord allocates to
only a portion of the Project, a percentage calculated by Landlord from time to
time in its sole discretion and furnished to Tenant in writing, in either case
as adjusted by Landlord from time to time for a remeasurement of or changes in
the physical size of the Premises or the Project, whether such changes in size
are due to an addition to or a sale or conveyance of a portion of the Project or
otherwise. Notwithstanding the foregoing, Landlord may equitably adjust Tenant's
Proportionate Share(s) for all or part of any item of expense or cost
reimbursable by Tenant that relates to a repair, replacement, or service that
benefits only the Premises or only a portion of the Building and/or the Project
or that varies with the occupancy of the Building and/or the Project.
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Without limiting the generality of the foregoing, Tenant understands and agrees
that Landlord shall have the right to adjust Tenant's Proportionate Share(s) of
any Utility Expenses based upon Tenant's use of the Utilities or similar
services as reasonably estimated and determined by Landlord based upon factors
such as size of the Premises and intensity of use of such Utilities by Tenant
such that Tenant shall pay the portion of such charges reasonably consistent
with Tenant's use of such Utilities and similar services. If Tenant disputes any
such estimate or determination of Utility Expenses, then Tenant shall either pay
the estimated amount or cause the Premises to be separately metered at Tenant's
sole expense.
(d) GENERAL PAYMENT TERMS. The Base Rent, Additional Rent and all other
sums payable by Tenant to Landlord hereunder, including, without limitation,
payments of principal and interest on the Tenant Improvements Loan (as defined
in Exhibit B hereto), if any, any late charges assessed pursuant to Paragraph 6
below and any interest assessed pursuant to Paragraph 45 below, are referred to
as the "Rent". All Rent shall be paid without deduction, offset or abatement in
lawful money of the United States of America. Checks are to be made payable to
Aetna Life Insurance Company and shall be mailed to: Lincoln Property Company
Management Services, Inc., 30 Executive Park, Suite 100, Irvine, CA 92614 or to
such other person or place as Landlord may, from time to time, designate to
Tenant in writing. The Rent for any fractional part of a calendar month at the
commencement or termination of the Lease term shall be a prorated amount of the
Rent for a full calendar month based upon a thirty (30) day month.
5. UTILITY EXPENSES
(a) Tenant shall pay the cost of all water, sewer use, sewer discharge fees
and permit costs and sewer connection fees, gas, heat, electricity, refuse
pick-up, janitorial service, telephone and all materials and services or other
utilities (collectively, "Utilities") billed or metered separately to the
Premises and/or Tenant, together with all taxes, assessments, charges and
penalties added to or included within such cost. Tenant acknowledges that the
Premises, the Building and/or the Project may become subject to the rationing of
Utility services or restrictions on Utility use as required by a public utility
company, governmental agency or other similar entity having jurisdiction
thereof. Tenant acknowledges and agrees that its tenancy and occupancy hereunder
shall be subject to such rationing or restrictions as may be imposed upon
Landlord, Tenant, the Premises, the Building and/or the Project, and Tenant
shall in no event be excused or relieved from any covenant or obligation to be
kept or performed by Tenant by reason of any such rationing or restrictions.
Tenant agrees to comply with energy conservation programs implemented by
Landlord by reason of rationing, restrictions or Laws.
(b) Landlord shall not be liable for any loss, injury or damage to property
caused by or resulting from any variation, interruption, or failure of Utilities
due to any cause whatsoever, or from failure to make any repairs or perform any
maintenance. No temporary interruption or failure of such services incident to
the making of repairs,
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alterations, improvements, or due to accident, strike, or conditions or other
events shall be deemed an eviction of Tenant or relieve Tenant from any of its
obligations hereunder. In no event shall Landlord be liable to Tenant for any
damage to the Premises or for any loss, damage or injury to any property therein
or thereon occasioned by bursting, rupture, leakage or overflow of any plumbing
or other pipes (including, without limitation, water, steam, and/or refrigerant
lines), sprinklers, tanks, drains, drinking fountains or washstands, or other
similar cause in, above, upon or about the Premises, the Building, or the
Project.
6. LATE CHARGE
Notwithstanding any other provision of this Lease, Tenant hereby
acknowledges that late payment to Landlord of Rent, or other amounts due
hereunder will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. If any Rent or
other sums due from Tenant are not received by Landlord or by Landlord's
designated agent within three (3) days after their due date, then Tenant shall
pay to Landlord a late charge equal to ten percent (10%) of such overdue amount,
plus any costs and reasonable attorneys' fees incurred by Landlord by reason of
Tenant's failure to pay Rent and/or other charges when due hereunder. Landlord
and Tenant hereby agree that such late charges represent a fair and reasonable
estimate of the cost that Landlord will incur by reason of Tenant's late payment
and shall not be construed as a penalty. Landlord's acceptance of such late
charges shall not constitute a waiver of Tenant's default with respect to such
overdue amount or estop Landlord from exercising any of the other rights and
remedies granted under this Lease.
Initials: Landlord /s/ CDS Tenant /s/ Jay
------ ------
7. SECURITY DEPOSIT
Concurrently with Tenant's execution of the Lease, Tenant shall deposit
with Landlord the Security Deposit specified in the Basic Lease Information as
security for the full and faithful performance of each and every term, covenant
and condition of this Lease. Landlord may use, apply or retain the whole or any
part of the Security Deposit as may be reasonably necessary (a) to remedy
Tenant's default in the payment of any Rent, (b) to repair damage to the
Premises caused by Tenant, (c) to clean the Premises upon termination of this
Lease, (d) to reimburse Landlord for the payment of any amount which Landlord
may reasonably spend or be required to spend by reason of Tenant's default, or
(e) to compensate Landlord for any other loss or damage which Landlord may
suffer by reason of Tenant's default. Provided that no Default (as hereinafter
defined) is continuing and no event or circumstance, which with the passage of
time or the giving of notice would constitute a Default, is continuing,, within
thirty (30) days following the expiration of the Term, the Security Deposit or
any balance thereof shall be returned to Tenant or, at the option of Landlord,
to the last assignee of Tenant's interest in this Lease.
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Landlord shall not be required to keep the Security Deposit separate from its
general funds and Tenant shall not be entitled to any interest on such deposit.
If Landlord so uses or applies all or any portion of said deposit, within five
(5) days after written demand therefor Tenant shall deposit cash with Landlord
in an amount sufficient to restore the Security Deposit to the full extent of
the above amount, and Tenant's failure to do so shall be a default under this
Lease. In the event Landlord transfers its interest in this Lease, Landlord
shall transfer the then remaining amount of the Security Deposit to Landlord's
successor in interest, and thereafter Landlord shall have no further liability
to Tenant with respect to such Security Deposit.
8. POSSESSION
(a) TENANT'S RIGHT OF POSSESSION. Subject to Paragraph 8(b), Tenant shall
be entitled to possession of the Premises upon commencement of the Term.
(b) DELAY IN DELIVERING POSSESSION. If for any reason whatsoever, Landlord
cannot deliver possession of the Premises to Tenant on or before the Estimated
Commencement Date, this Lease shall not be void or voidable, nor shall Landlord,
or Landlord's agents, advisors, employees, partners, shareholders, directors,
invitees or independent contractors (collectively, "Landlord's Agents"), be
liable to Tenant for any loss or damage resulting therefrom. Tenant shall not be
liable for Rent until Landlord delivers possession of the Premises to Tenant.
The Expiration Date shall be extended by the same number of days that Tenant's
possession of the Premises was delayed beyond the Estimated Commencement Date.
9. USE OF PREMISES
(a) PERMITTED USE. The use of the Premises by Tenant and Tenant's agents,
advisors, employees, partners, shareholders, directors, invitees and independent
contractors (collectively, "Tenant's Agents") shall be solely for the Permitted
Use specified in the Basic Lease Information and for no other use. Tenant shall
not permit any objectionable or unpleasant odor, smoke, dust, gas, noise or
vibration to emanate from or near the Premises. The Premises shall not be used
to create any nuisance or trespass, for any illegal purpose, for any purpose not
permitted by Laws, for any purpose that would invalidate the insurance or
increase the premiums for insurance on the Premises, the Building or the Project
or for any purpose or in any manner that would interfere with other tenants' use
or occupancy of the Project. Tenant agrees to pay to Landlord, as Additional
Rent, any increases in premiums on policies resulting from Tenant's Permitted
Use or any other use or action by Tenant or Tenant's Agents which increases
Landlord's premiums or requires additional coverage by Landlord to insure the
Premises. Tenant agrees not to overload the floor(s) of the Building.
(b) COMPLIANCE WITH GOVERNMENTAL REGULATIONS AND PRIVATE RESTRICTIONS.
Subject to Paragraph 52(a) below, Tenant and Tenant's Agents shall, at Tenant's
expense,
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faithfully observe and comply with (1) all municipal, state and federal laws,
statutes, codes, rules, regulations, ordinances, requirements, and orders
(collectively, "Laws"), now in force or which may hereafter be in force
pertaining to the Premises or Tenant's use of the Premises, the Building or the
Project, whether substantial in cost or otherwise, provided, however, that
except as provided in Paragraph 9(c) below, Tenant shall not be required to make
or, except as provided in Paragraph 4 above, pay for, structural changes to the
Premises or the Building imposed by Laws or Private Restrictions (as hereinafter
defined) not related to Tenant's specific use of the Premises unless the
requirement for such changes is imposed as a result of any improvements or
additions made or proposed to be made at Tenant's request; (2) all recorded
covenants, conditions and restrictions affecting the Project ("Private
Restrictions") now in force or which may hereafter be in force; and (3) any and
all rules and regulations set forth in Exhibit D and any other rules and
regulations now or hereafter promulgated by Landlord related to parking or the
operation of the Premises, the Building and/or the Project (collectively, the
"Rules and Regulations"). The judgment of any court of competent jurisdiction,
or the admission of Tenant in any action or proceeding against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such Laws or
Private Restrictions, shall be conclusive of that fact as between Landlord and
Tenant.
(c) COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT. Landlord and Tenant
hereby agree and acknowledge that the Premises, the Building and/or the Project
may be subject to, among other Laws, the requirements of the Americans with
Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including,
but not limited to Title III thereof, and all regulations and guidelines related
thereto, together with any and all laws, rules, regulations, ordinances, codes
and statutes now or hereafter enacted by local or state agencies having
jurisdiction thereof, including all requirements of Title 24 of the State of
California, as the same may be in effect on the date of this Lease and may be
hereafter modified, amended or supplemented (collectively, the "ADA"). Any
Tenant Improvements to be constructed hereunder shall be in compliance with the
requirements of the ADA, and all costs incurred for purposes of compliance
therewith shall be a part of and included in the costs of the Tenant
Improvements. Tenant shall be solely responsible for conducting its own
independent investigation of this matter and for ensuring that the design of all
Tenant Improvements strictly complies with all requirements of the ADA. Subject
to reimbursement pursuant to Paragraph 4 above, if any barrier removal work or
other work is required to the Building, the Common Areas or the Project under
the ADA, then such work shall be the responsibility of Landlord; provided, if
such work is required under the ADA as a result of Tenant's use of the Premises
or any work or Alteration (as hereinafter defined) made to the Premises by or on
behalf of Tenant, then such work shall be performed by Landlord at the sole cost
and expense of Tenant. Except as otherwise expressly provided in this provision,
Tenant shall be responsible at its sole cost and expense for fully and
faithfully complying with all applicable requirements of the ADA, including
without limitation, not discriminating against any disabled persons in the
operation of Tenant's business in or about the Premises, and offering or
otherwise
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providing auxiliary aids and services as, and when, required by the ADA. Within
ten (10) days after receipt, Tenant shall advise Landlord in writing, and
provide Landlord with copies of (as applicable), any notices alleging violation
of the ADA relating to any portion of the Premises, the Building or the Project;
any claims made or threatened orally or in writing regarding noncompliance with
the ADA and relating to any portion of the Premises, the Building, or the
Project; or any governmental or regulatory actions or investigations instituted
or threatened regarding noncompliance with the ADA and relating to any portion
of the Premises, the Building or the Project. Tenant shall and hereby agrees to
protect, defend (with counsel acceptable to Landlord) and hold Landlord and
Landlord's Agents harmless and indemnify Landlord and Landlord's Agents from and
against all liabilities, damages, claims, losses, penalties, judgments, charges
and expenses (including reasonable attorneys' fees, costs of court and expenses
necessary in the prosecution or defense of any litigation including the
enforcement of this provision) arising from or in any way related to, directly
or indirectly, Tenant's or Tenant's Agents' violation or alleged violation of
the ADA. Tenant agrees that the obligations of Tenant set forth in this
Paragraph 9 to protect, defend, hold harmless and indemnify Landlord and
Landlord's Agents shall survive the expiration or earlier termination of this
Lease
10. ACCEPTANCE OF PREMISES
By entry hereunder, Tenant accepts the Premises as suitable for Tenant's
intended use and as being in good and sanitary operating order, condition and
repair, AS IS, and without representation or warranty by Landlord as to the
condition, use or occupancy which may be made thereof. Any exceptions to the
foregoing must be by written agreement executed by Landlord and Tenant.
11. SURRENDER
Tenant agrees that on the last day of the Term, or on the sooner termination
of this Lease, Tenant shall surrender the Premises to Landlord (a) in good
condition and repair (damage by acts of God, fire, and normal wear and tear
excepted), but with all interior walls painted or cleaned so they appear
painted, any carpets cleaned, all floors cleaned and waxed, all non-working
light bulbs and ballasts replaced and all roll-up doors and plumbing fixtures in
good condition and working order, and (b) otherwise in accordance with Paragraph
32(h). Normal wear and tear shall not include any damage or deterioration to the
floors of the Premises arising from the use of forklifts in, on or about the
Premises (including, without limitation, any marks or stains on any portion of
the floors), and any damage or deterioration that would have been prevented by
proper maintenance by Tenant, or Tenant otherwise performing all of its
obligations under this Lease. On or before the expiration or sooner termination
of this Lease, (i) Tenant shall remove all of Tenant's Property (as hereinafter
defined) and Tenant's signage from the Premises, the Building and the Project
and repair any damage caused by such removal, and (ii) Landlord may, by notice
to Tenant given not later than ninety (90) days prior to
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the Expiration Date (except in the event of a termination of this Lease prior to
the scheduled Expiration Date, in which event no advance notice shall be
required), require Tenant at Tenant's expense to remove any or all Alterations
and/or the initial Tenant Improvements constructed and installed pursuant to
Exhibit B hereto, and to repair any damage caused by such removal. Any of
Tenant's Property not so removed by Tenant as required herein shall be deemed
abandoned and may be stored, removed, and disposed of by Landlord at Tenant's
expense, and Tenant waives all claims against Landlord for any damages resulting
from Landlord's retention and disposition of such property; provided, however,
that Tenant shall remain liable to Landlord for all costs reasonably incurred in
storing and disposing of such abandoned property of Tenant. All Tenant
Improvements and Alterations except those which Landlord requires Tenant to
remove shall remain in the Premises as the property of Landlord. If the Premises
are not surrendered at the end of the Term or sooner termination of this Lease,
and in accordance with the provisions of this Paragraph 11 and Paragraph 32(h)
below, without limitation upon Landlord's other remedies, Tenant shall continue
to be responsible for the payment of Rent (as the same may be increased pursuant
to Paragraph 35 below) until the Premises are so surrendered in accordance with
said Paragraphs; provided, however that if the Premises are surrendered at the
end of the Term or sooner termination of this Lease but not in accordance with
said Paragraphs, without limitation upon Landlord's other remedies or Tenant's
liability for failure to surrender the Premises in accordance with said
Paragraphs, Tenant shall continue to be responsible for the payment of Rent (as
the same may be increased pursuant to Paragraph 35 below) until the earlier of
(i) the first anniversary of the surrender of the Premises and (ii) until the
Premises are so surrendered in accordance with said Paragraphs. Tenant shall
indemnify, defend and hold Landlord harmless from and against any and all loss
or liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any loss or liability resulting from any claim
against Landlord made by any succeeding tenant or prospective tenant founded on
or resulting from such delay and losses to Landlord due to lost opportunities to
lease any portion of the Premises to any such succeeding tenant or prospective
tenant, together with, in each case, reasonable attorneys' fees and costs.
12 ALTERATIONS AND ADDITIONS
(a) Tenant shall not make, or permit to be made, any alteration, addition
or improvement (hereinafter referred to individually as an "Alteration" and
collectively as the "Alterations") or series of Alterations collectively
exceeding a cost of Five Thousand Dollars ($5,000) to the Premises or any part
thereof without the prior written consent of Landlord, which consent shall not
be unreasonably withheld and which consent shall either be given or withheld
within three (3) business days after Landlord's receipt of Tenant's written
request and such other information concerning the request as Landlord may
reasonably request (the "Alteration Request") if such Alterations or series of
Alterations do not collectively exceed a cost of Ten Thousand Dollars ($10,000)
or within fifteen (15) business days after Landlord's receipt of the Alteration
Request if such
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Alterations or series of Alteration collectively exceed a cost of Ten Thousand
Dollars ($10,000); provided, however, that Landlord shall have the right in its
sole and absolute discretion to consent or to withhold its consent to any
Alteration which affects the structural portions of the Premises, the Building
or the Project or the Systems serving the Premises, the Building and/or the
Project or any portion thereof.
(b) Any Alteration to the Premises shall be at Tenant's sole cost and
expense, in compliance with all applicable Laws and all requirements requested
by Landlord, including, without limitation, the requirements of any insurer
providing coverage for the Premises or the Project or any part thereof, and in
accordance with plans and specifications approved in writing by Landlord, and
shall be constructed and installed by a contractor approved in writing by
Landlord. As a further condition to giving consent, Landlord may require Tenant
to provide Landlord, at Tenant's sole cost and expense, a payment and
performance bond in form acceptable to Landlord, in a principal amount not less
than one and one-half times the estimated costs of such Alterations, to ensure
Landlord against any liability for mechanic's and materialmen's liens and to
ensure completion of work. Before Alterations may begin, valid building permits
or other permits or licenses required must be furnished to Landlord, and, once
the Alterations begin, Tenant will diligently and continuously pursue their
completion. Landlord may monitor construction of the Alterations and Tenant
shall reimburse Landlord for its costs (including, without limitation, the costs
of any construction manager retained by Landlord) in reviewing plans and
documents and in monitoring construction. Tenant shall maintain during the
course of construction, at its sole cost and expense, builders' risk insurance
for the amount of the completed value of the Alterations on an all-risk
non-reporting form covering all improvements under construction, including
building materials, and other insurance in amounts and against such risks as
Landlord shall reasonably require in connection with the Alterations. In
addition to and without limitation on the generality of the foregoing, Tenant
shall ensure that its contractor(s) procure and maintain in full force and
effect during the course of construction a "broad form" commercial general
liability and property damage policy of insurance naming Landlord, Tenant and
Landlord's lenders as additional insureds. The minimum limit of coverage of the
aforesaid policy shall be in the amount of not less than Three Million Dollars
($3,000,000.00) for injury or death of one person in any one accident or
occurrence and in the amount of not less than Three Million Dollars
($3,000,000.00) for injury or death of more than one person in any one accident
or occurrence, and shall contain a severability of interest clause or a cross
liability endorsement. Such insurance shall further insure Landlord and Tenant
against liability for property damage of at least One Million Dollars
($1,000,000.00). Notwithstanding the foregoing, if the cost of the Alteration in
question is less than Five Thousand Dollars ($5,000), Tenant shall ensure that
its contractor maintains such insurance; provided, however, that such insurance
need not (i) include coverages which exceed the greater of (y) those amounts
which are required by law and (z) those amounts which are reasonably appropriate
with respect to
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the nominal cost and the nature of such Alterations or (ii) name Landlord,
Landlord's lenders or Tenant as additional insureds.
(c) All Alterations, including, but not limited to, heating, lighting,
electrical, air conditioning, fixed partitioning, drapery, wall covering and
paneling, built-in cabinet work and carpeting installations made by Tenant,
together with all property that has become an integral part of the Premises or
the Building, shall at once be and become the property of Landlord, and shall
not be deemed trade fixtures or Tenant's Property. If requested by Landlord,
such Alterations shall be demolished and the Premises and the Building shall be
returned to its condition prior to such Alterations, all at Tenant's sole cost
and expense.
(d) All telephone systems and/or other related computer or
telecommunications equipment or lines must be installed within the Premises and,
at the request of Landlord made at any time prior to the expiration of the Term,
removed upon the expiration or sooner termination of this Lease and the Premises
restored to the same condition as before such installation. In no event shall
such systems or equipment be installed on the exterior of the Building or in any
of the Common Areas nor shall the installation of such systems or equipment
penetrate the exterior of the Building.
(e) Notwithstanding anything herein to the contrary, before installing any
equipment or lights which generate an undue amount of heat in the Premises, or
if Tenant plans to use any high-power usage equipment in the Premises, Tenant
shall obtain the written permission of Landlord. Landlord may refuse to grant
such permission unless Tenant agrees to pay the costs to Landlord for
installation of supplementary air conditioning capacity or electrical systems
necessitated by such equipment.
(f) Tenant agrees not to proceed to make any Alterations, notwithstanding
consent from Landlord to do so, until Tenant notifies Landlord in writing of the
date Tenant desires to commence construction or installation of such Alterations
and Landlord has approved such date in writing, in order that Landlord may post
appropriate notices to avoid any liability to contractors or material suppliers
for payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work.
13 MAINTENANCE AND REPAIRS OF PREMISES
(a) MAINTENANCE BY TENANT. Throughout the Term, Tenant shall, at its sole
expense, (1) keep and maintain in good order and condition the Premises, and
repair and replace every part thereof, including glass, windows, window frames,
window casements, skylights, interior and exterior doors, door frames and door
closers; interior lighting (including, without limitation, light bulbs and
ballasts), the plumbing and electrical systems exclusively serving the Premises,
all communications systems serving the Premises, Tenant's signage, interior
demising walls and partitions, equipment, interior
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painting and interior walls and floors, and the roll-up doors, ramps and dock
equipment, including, without limitation, dock bumpers, dock plates, dock seals,
dock levelers and dock lights located in or on the Premises (excepting only
those portions of the Building or the Project to be maintained by Landlord, as
provided in Paragraph 13(b) below), (2) furnish all expendables, including light
bulbs, paper goods and soaps, used in the Premises, and (3) keep and maintain in
good order and condition, repair and replace all of Tenant's security systems in
or about or serving the Premises. Tenant shall not do nor shall Tenant allow
Tenant's Agents to do anything to cause any damage, deterioration or
unsightliness to the Premises, the Building or the Project.
(b) MAINTENANCE BY LANDLORD. Subject to the provisions of Paragraphs 13(a),
22 and 23, and further subject to Tenant's obligation under Paragraph 4 to
reimburse Landlord, in the form of Additional Rent, for Tenant's Proportionate
Share(s) of the cost and expense of the following items, Landlord agrees to
repair and maintain the following items: the roof coverings (provided that
Tenant installs no additional air conditioning or other equipment on the roof
that damages the roof coverings, in which event Tenant shall pay all costs
resulting from the presence of such additional equipment); the Systems serving
the Premises and the Building, excluding the plumbing and electrical systems
exclusively serving the Premises; and the Parking Areas, pavement, landscaping,
sprinkler systems, sidewalks, driveways, curbs, and lighting systems in the
Common Areas. Subject to the provisions of Paragraphs 13(a), 22 and 23,
Landlord, at its own cost and expense, agrees to repair and maintain the
following items: the structural portions of the roof (specifically excluding the
roof coverings), the foundation, the footings, the floor slab, and the load
bearing walls and exterior walls of the Building (excluding any glass and any
routine maintenance, including, without limitation, any painting, sealing,
patching and waterproofing of such walls). Notwithstanding anything in this
Paragraph 13 to the contrary, Landlord shall have the right to either repair or
to require Tenant to repair any damage to any portion of the Premises, the
Building and/or the Project caused by or created due to any act, omission,
negligence or willful misconduct of Tenant or Tenant's Agents and to restore the
Premises, the Building and/or the Project, as applicable, to the condition
existing prior to the occurrence of such damage; provided, however, that in the
event Landlord elects to perform such repair and restoration work, Tenant shall
reimburse Landlord upon demand for all costs and expenses incurred by Landlord
in connection therewith. Landlord's obligation hereunder to repair and maintain,
other than with respect to periodic, routine maintenance (e.g., lawn mowing), is
subject to the condition precedent that Landlord shall have received actual
notice of the need for such repairs and maintenance and a reasonable time to
perform such repair and maintenance. Tenant shall promptly report in writing to
Landlord any defective condition known to it which Landlord is required to
repair.
(c) TENANT'S WAIVER OF RIGHTS. Tenant hereby expressly waives all rights to
make repairs at the expense of Landlord or to terminate this Lease, as provided
for in California
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Civil Code Sections 1941 and 1942, and 1932(1), respectively, and any similar or
successor statute or law in effect or any amendment thereof during the Term.
14 LANDLORD'S INSURANCE
Landlord shall purchase and keep in force fire, extended coverage and "all
risk" insurance covering the Building and the Project. Tenant shall, at its sole
cost and expense, comply with any and all reasonable requirements pertaining to
the Premises, the Building and the Project of any insurer necessary for the
maintenance of reasonable fire and commercial general liability insurance,
covering the Building and the Project. Landlord, at Tenant's cost, may maintain
"Loss of Rents" insurance, insuring that the Rent will be paid in a timely
manner to Landlord for a period of at least twelve (12) months if the Premises,
the Building or the Project or any portion thereof are destroyed or rendered
unusable or inaccessible by any cause insured against under this Lease. If
Landlord receives reimbursement of the premiums for such "Loss of Rents"
insurance as Additional Rent, the foregoing shall not permit Landlord to seek a
second reimbursement of such premiums for "Loss of Rents" insurance from Tenant.
15 TENANT'S INSURANCE
(a) COMMERCIAL GENERAL LIABILITY INSURANCE. Tenant shall, at Tenant's
expense, secure and keep in force a "broad form" commercial general liability
insurance and property damage policy covering the Premises, insuring Tenant, and
naming Landlord and its lenders as additional insureds, against any liability
arising out of the ownership, use, occupancy or maintenance of the Premises. The
minimum limit of coverage of such policy shall be in the amount of not less than
Two Million Dollars ($2,000,000.00) for injury or death of one person in any one
accident or occurrence and in the amount of not less than Two Million Dollars
($2,000,000.00) for injury or death of more than one person in any one accident
or occurrence, shall include an extended liability endorsement providing
contractual liability coverage (which shall include coverage for Tenant's
indemnification obligations in this Lease), and shall contain a severability of
interest clause or a cross liability endorsement. Such insurance shall further
insure Landlord and Tenant against liability for property damage of at least Two
Million Dollars ($2,000,000.00). Landlord may from time to time require
reasonable increases in any such limits if Landlord believes that additional
coverage is necessary or desirable. The limit of any insurance shall not limit
the liability of Tenant hereunder. No policy maintained by Tenant under this
Paragraph 15(a) shall contain a deductible greater than five thousand dollars
($5,000.00). No policy shall be cancelable or subject to reduction of coverage
without thirty (30) days prior written notice to Landlord, and loss payable
clauses shall be subject to Landlord's approval. Such policies of insurance
shall be issued as primary policies and not contributing with or in excess of
coverage that Landlord may carry, by an insurance company authorized to do
business in the State of
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California for the issuance of such type of insurance coverage and rated A:XIII
or better in Best's Key Rating Guide.
(b) PERSONAL PROPERTY INSURANCE. Tenant shall maintain in full force and
effect on all of its personal property, furniture, furnishings, trade or
business fixtures and equipment (collectively, "Tenant's Property") on the
Premises, a policy or policies of fire and extended coverage insurance with
standard coverage endorsement to the extent of the full replacement cost
thereof. No such policy shall contain a deductible greater than five thousand
dollars ($5,000.00). During the term of this Lease the proceeds from any such
policy or policies of insurance shall be used for the repair or replacement of
the fixtures and equipment so insured. Landlord shall have no interest in the
insurance upon Tenant's equipment and fixtures and will sign all documents
reasonably necessary in connection with the settlement of any claim or loss by
Tenant. Landlord will not carry insurance on Tenant's possessions.
(c) WORKER'S COMPENSATION INSURANCE; EMPLOYER'S LIABILITY INSURANCE. Tenant
shall, at Tenant's expense, maintain in full force and effect worker's
compensation insurance with not less than the minimum limits required by law,
and employer's liability insurance with a minimum limit of coverage of One
Million Dollars ($1,000,000).
(d) EVIDENCE OF COVERAGE. Tenant shall deliver to Landlord certificates of
insurance and true and complete copies of any and all endorsements required
herein for all insurance required to be maintained by Tenant hereunder at the
time of execution of this Lease by Tenant. Tenant shall, at least fifteen (15)
days prior to expiration of each policy, furnish Landlord with certificates of
renewal or "binders" thereof. Each certificate shall expressly provide that such
policies shall not be cancellable or otherwise subject to modification except
after fifteen (15) days prior written notice to Landlord and the other parties
named as additional insureds as required in this Lease (except for cancellation
for nonpayment of premium, in which event cancellation shall not take effect
until at least ten (10) days notice has been given to Landlord).
16 INDEMNIFICATION
(a) OF LANDLORD. Tenant shall indemnify and hold harmless Landlord and
Landlord's Agents against and from any and all claims, liabilities, judgments,
costs, demands, causes of action and expenses (including, without limitation,
reasonable attorneys' fees) arising from (1) the use of the Premises, the
Building or the Project by Tenant or Tenant's Agents, or from any activity done,
permitted or suffered by Tenant or Tenant's Agents in or about the Premises, the
Building or the Project, and (2) any act, neglect, fault, willful misconduct or
omission of Tenant or Tenant's Agents, or from any breach or default in the
terms of this Lease by Tenant or Tenant's Agents, and (3) any action or
proceeding brought on account of any matter in items (1) or (2). If any action
or proceeding is brought against Landlord by reason of any such claim, upon
notice from Landlord, Tenant shall defend the same at Tenant's expense by
counsel reasonably
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satisfactory to Landlord. As a material part of the consideration to Landlord,
Tenant hereby releases Landlord and Landlord's Agents from responsibility for,
waives its entire claim of recovery for and assumes all risk of (i) damage to
property or injury to persons in or about the Premises, the Building or the
Project from any cause whatsoever (except that which is caused by the gross
negligence or willful misconduct of Landlord or Landlord's Agents or by the
failure of Landlord to observe any of the terms and conditions of this Lease, if
such failure has persisted for an unreasonable period of time after written
notice of such failure), or (ii) loss resulting from business interruption or
loss of income at the Premises. The obligations of Tenant under this Paragraph
16 shall survive any termination of this Lease.
(b) OF TENANT. Landlord shall indemnify and hold harmless Tenant and
Tenant's Agents against and from any and all claims, liabilities, judgments,
costs, demands, causes of action and expenses (including, without limitation,
reasonable attorneys' fees) arising from any gross negligence or willful
misconduct of Landlord or Landlord's Agents and any action or proceeding brought
on account of such gross negligence or wilful misconduct. If any action or
proceeding is brought against Tenant by reason of any such claim, upon notice
from Tenant, Landlord shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Tenant. The obligations of Landlord under this
Paragraph 16 shall survive any termination of this Lease.
(b) NO IMPAIRMENT OF INSURANCE. The foregoing indemnity shall not relieve
any insurance carrier of its obligations under any policies required to be
carried by either party pursuant to this Lease, to the extent that such policies
cover the peril or occurrence that results in the claim that is subject to the
foregoing indemnity.
17 SUBROGATION
Landlord and Tenant hereby mutually waive any claim against the other and
its Agents for any loss or damage to any of their property located on or about
the Premises, the Building or the Project that is caused by or results from
perils covered by property insurance carried by the respective parties, to the
extent of the proceeds of such insurance actually received with respect to such
loss or damage, whether or not due to the negligence of the other party or its
Agents. Because the foregoing waivers will preclude the assignment of any claim
by way of subrogation to an insurance company or any other person, each party
now agrees to immediately give to its insurer written notice of the terms of
these mutual waivers and shall have their insurance policies endorsed to prevent
the invalidation of the insurance coverage because of these waivers. Nothing in
this Paragraph 17 shall relieve a party of liability to the other for failure to
carry insurance required by this Lease.
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18 SIGNS
Tenant shall not place or permit to be placed in, upon, or about the
Premises, the Building or the Project any exterior lights, decorations,
balloons, flags, pennants, banners, advertisements or notices, or erect or
install any signs, windows or door lettering, placards, decorations, or
advertising media of any type which can be viewed from the exterior the Premises
without obtaining Landlord's prior written consent or without complying with
Landlord's signage criteria specified on Exhibit E hereto, as the same may be
modified by Landlord from time to time, and with all applicable Laws, and will
not conduct, or permit to be conducted, any sale by auction on the Premises or
otherwise on the Project. Tenant shall remove any sign, advertisement or notice
placed on the Premises, the Building or the Project by Tenant upon the
expiration of the Term or sooner termination of this Lease, and Tenant shall
repair any damage or injury to the Premises, the Building or the Project caused
thereby, all at Tenant's expense. If any signs are not removed, or necessary
repairs not made, Landlord shall have the right to remove the signs and repair
any damage or injury to the Premises, the Building or the Project at Tenant's
sole cost and expense.
19 FREE FROM LIENS
Tenant shall keep the Premises, the Building and the Project free from any
liens arising out of any work performed, material furnished or obligations
incurred by or for Tenant. In the event that Tenant shall not, within twenty
(20) days following the imposition of any such lien, cause the lien to be
released of record by payment or posting of a proper bond, Landlord shall have
in addition to all other remedies provided herein and by law the right but not
the obligation to cause same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all expenses incurred by it in connection therewith
(including, without limitation, reasonable attorneys' fees) shall be payable to
Landlord by Tenant upon demand. Landlord shall have the right at all times to
post and keep posted on the Premises any notices permitted or required by law or
that Landlord shall deem proper for the protection of Landlord, the Premises,
the Building and the Project, from mechanics' and materialmen's liens. Tenant
shall give to Landlord at least five (5) business days' prior written notice of
commencement of any repair or construction on the Premises.
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20 ENTRY BY LANDLORD
Tenant shall permit Landlord and Landlord's Agents to enter into and upon
the Premises at all reasonable times, upon reasonable notice (except in the case
of an emergency, for which no notice shall be required), and subject to Tenant's
reasonable security arrangements, for the purpose of inspecting the same or
showing the Premises to prospective purchasers, lenders or tenants or to alter,
improve, maintain and repair the Premises or the Building as required or
permitted of Landlord under the terms hereof, or for any other business purpose,
without any rebate of Rent and without any liability to Tenant for any loss of
occupation or quiet enjoyment of the Premises thereby occasioned (except for
actual damages resulting from the gross negligence or willful misconduct of
Landlord); and Tenant shall permit Landlord to post notices of
non-responsibility and ordinary "for sale" or "for lease" signs. No such entry
shall be construed to be a forcible or unlawful entry into, or a detainer of,
the Premises, or an eviction of Tenant from the Premises. Landlord may
temporarily close entrances, doors, corridors, elevators or other facilities
without liability to Tenant by reason of such closure in the case of an
emergency and when Landlord otherwise deems such closure necessary.
21 DESTRUCTION AND DAMAGE
(a) If the Premises are damaged by fire or other perils covered by extended
coverage insurance, Landlord shall, at Landlord's option:
(1) In the event of total destruction (which shall mean destruction or
damage in excess of twenty-five percent (25%) of the full insurable value
thereof) of the Premises, elect either to commence promptly to repair and
restore the Premises and prosecute the same diligently to completion, in which
event this Lease shall remain in full force and effect; or not to repair or
restore the Premises, in which event this Lease shall terminate. Landlord shall
give Tenant written notice of its intention within sixty (60) days after the
date (the "Casualty Discovery Date") Landlord obtains actual knowledge of such
destruction. If Landlord elects not to restore the Premises, this Lease shall be
deemed to have terminated as of the date of such total destruction.
(2) In the event of a partial destruction (which shall mean
destruction or damage to an extent not exceeding twenty-five percent (25%) of
the full insurable value thereof) of the Premises for which Landlord will
receive insurance proceeds sufficient to cover the cost to repair and restore
such partial destruction and, if the damage thereto is such that the Premises
may be substantially repaired or restored to its condition existing immediately
prior to such damage or destruction within one hundred eighty (180) days from
the Casualty Discovery Date, Landlord shall commence and proceed diligently with
the work of repair and restoration, in which event the Lease shall continue in
full force and effect. If such repair and restoration requires longer than one
hundred eighty (180) days or if the insurance proceeds therefor (plus any
amounts Tenant may elect or is obligated to contribute) are not sufficient to
cover the cost of such repair and restoration,
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Landlord may elect either to so repair and restore, in which event the Lease
shall continue in full force and effect, or not to repair or restore, in which
event the Lease shall terminate. In either case, Landlord shall give written
notice to Tenant of its intention within sixty (60) days after the Casualty
Discovery Date. If Landlord elects not to restore the Premises, this Lease shall
be deemed to have terminated as of the date of such partial destruction.
(3) Notwithstanding anything to the contrary contained in this
Paragraph, in the event of material damage to the Premises occurring during the
last twelve (12) months of the Term, Landlord or, if such damage is not caused,
in whole or in part, by the actions or inactions of Tenant or Tenant's Agents
and if Landlord receives rental abatement insurance proceeds for the balance of
the Term (provided, however, that such rental abatement insurance proceeds
condition shall not apply if Landlord fails to procure available rental
abatement insurance), Tenant may elect to terminate this Lease by written notice
of such election given to the other within thirty (30) days after the Casualty
Discovery Date.
(b) If the Premises are damaged by any peril not covered by extended
coverage insurance, and the cost to repair such damage exceeds any amount Tenant
may agree to contribute, Landlord may elect either to commence promptly to
repair and restore the Premises and prosecute the same diligently to completion,
in which event this Lease shall remain in full force and effect; or not to
repair or restore the Premises, in which event this Lease shall terminate.
Landlord shall give Tenant written notice of its intention within sixty (60)
days after the Casualty Discovery Date. If Landlord elects not to restore the
Premises, this Lease shall be deemed to have terminated as of the date on which
Tenant surrenders possession of the Premises to Landlord, except that if the
damage to the Premises materially impairs Tenant's ability to continue its
business operations in the Premises, then this Lease shall be deemed to have
terminated as of the date such damage occurred.
(c) Notwithstanding anything to the contrary in this Paragraph 22, Landlord
shall have the option to terminate this Lease, exercisable by notice to Tenant
within sixty (60) days after the Casualty Discovery Date, in each of the
following instances:
(1) If more than twenty-five percent (25%) of the full insurable value
of the Building or the Project is damaged or destroyed, regardless of whether or
not the Premises are destroyed.
(2) If the Building or the Project or any portion thereof is damaged
or destroyed and the repair and restoration of such damage requires longer than
one hundred eighty (180) days from the Casualty Discovery Date.
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(3) If the Building or the Project or any portion thereof is damaged
or destroyed and the insurance proceeds therefor are not sufficient to cover the
costs of repair and restoration.
(4) If the Building or the Project or any portion thereof is
materially damaged or destroyed during the last twelve (12) months of the Term.
(d) In the event of material damage or destruction and during the repair
and restoration as herein provided of such material damage or destruction, the
monthly installments of Base Rent shall be abated proportionately in the ratio
which Tenant's use of the Premises is impaired during the period of such repair
or restoration, but only to the extent of rental abatement insurance proceeds
received by Landlord; provided, however, if Landlord fails to procure available
rental abatement insurance, the foregoing limitation on rental abatement shall
not apply; and further provided, however, that Tenant shall not be entitled to
such abatement to the extent that such damage or destruction resulted from the
acts or inaction of Tenant or Tenant's Agents. Except as expressly provided in
the immediately preceding sentence with respect to abatement of Base Rent,
Tenant shall have no claim against Landlord for, and hereby releases Landlord
and Landlord's Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any damage to or destruction of the Premises, the Building or the
Project or the repair or restoration thereof, including, without limitation, any
cost, loss or expense resulting from any loss of use of the whole or any part of
the Premises, the Building or the Project and/or any inconvenience or annoyance
occasioned by such damage, repair or restoration.
(e) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall repair or restore only the initial tenant improvements,
if any, constructed by Landlord in the Premises pursuant to the terms of this
Lease, substantially to their condition existing immediately prior to the
occurrence of the damage or destruction; and Tenant shall promptly repair and
restore, at Tenant's expense, Tenant's Alterations which were not constructed by
Landlord.
(f) Tenant hereby waives the provisions of California Civil Code Section
1932(2) and Section 1933(4) which permit termination of a lease upon destruction
of the leased premises, and the provisions of any similar law now or hereinafter
in effect, and the provisions of this Paragraph 22 shall govern exclusively in
case of such destruction.
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22 CONDEMNATION
(a) If twenty-five percent (25%) or more of either the Premises, the
Building or the Project or the parking areas for the Building or the Project is
taken for any public or quasi-public purpose by any lawful governmental power or
authority, by exercise of the right of appropriation, inverse condemnation,
condemnation or eminent domain, or sold to prevent such taking (each such event
being referred to as a "Condemnation"), Landlord may, at its option, terminate
this Lease as of the earlier of the date title vests in the condemning party and
the date possession is denied Tenant by the condemning party. If twenty-five
percent (25%) or more of the Premises is taken and if the Premises remaining
after such Condemnation and any repairs by Landlord would be untenantable for
the conduct of Tenant's business operations, Tenant shall have the right to
terminate this Lease as of the earlier of the date title vests in the condemning
party and the date possession is denied Tenant by the condemning party. If
either party elects to terminate this Lease as provided herein, such election
shall be made by written notice to the other party given within thirty (30) days
after the nature and extent of such Condemnation have been finally determined.
If neither Landlord nor Tenant elects to terminate this Lease to the extent
permitted above, Landlord shall promptly proceed to restore the Premises, to the
extent of any Condemnation award received by Landlord, to substantially the same
condition as existed prior to such Condemnation, allowing for the reasonable
effects of such Condemnation, and a proportionate abatement shall be made to the
Base Rent corresponding to the time during which, and to the portion of the
floor area of the Premises (adjusted for any increase thereto resulting from any
reconstruction) of which, Tenant is deprived on account of such Condemnation and
restoration, as reasonably determined by Landlord. Except as expressly provided
in the immediately preceding sentence with respect to abatement of Base Rent,
Tenant shall have no claim against Landlord for, and hereby releases Landlord
and Landlord's Agents from responsibility for and waives its entire claim of
recovery for any cost, loss or expense suffered or incurred by Tenant as a
result of any Condemnation or the repair or restoration of the Premises, the
Building or the Project or the parking areas for the Building or the Project
following such Condemnation, including, without limitation, any cost, loss or
expense resulting from any loss of use of the whole or any part of the Premises,
the Building, the Project or the parking areas and/or any inconvenience or
annoyance occasioned by such Condemnation, repair or restoration. The provisions
of California Code of Civil Procedure Section 1265.130, which allows either
party to petition the Superior Court to terminate the Lease in the event of a
partial taking of the Premises, the Building or the Project or the parking areas
for the Building or the Project, and any other applicable law now or hereafter
enacted, are hereby waived by Tenant.
(b) Landlord shall be entitled to any and all compensation, damages,
income, rent, awards, or any interest therein whatsoever which may be paid or
made in connection with any Condemnation, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease or otherwise;
provided, however, that Tenant shall be
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entitled to receive any award separately allocated by the condemning authority
to Tenant for Tenant's relocation expenses or the value of Tenant's Property
(specifically excluding fixtures, Alterations and other components of the
Premises which under this Lease or by law are or at the expiration of the Term
will become the property of Landlord), provided that such award does not reduce
any award otherwise allocable or payable to Landlord.
23 ASSIGNMENT AND SUBLETTING
(a) Tenant shall not voluntarily or by operation of law, (1) mortgage,
pledge, hypothecate or encumber this Lease or any interest herein, (2) assign or
transfer this Lease or any interest herein, sublease the Premises or any part
thereof, or any right or privilege appurtenant thereto, or allow any other
person (the employees and invitees of Tenant excepted) to occupy or use the
Premises, or any portion thereof, without first obtaining the written consent of
Landlord, which consent shall not be withheld unreasonably provided that (i)
Tenant is not then in Default under this Lease nor is any event then occurring
which with the giving of notice or the passage of time, or both, would
constitute a Default hereunder, and (ii) Tenant has not previously assigned or
transferred this Lease or any interest herein or subleased the Premises or any
part thereof. When Tenant requests Landlord's consent to such assignment or
subletting, it shall notify Landlord in writing of the name and address of the
proposed assignee or subtenant and the nature and character of the business of
the proposed assignee or subtenant and shall provide current and prior financial
statements for the proposed assignee or subtenant prepared in accordance with
generally accepted accounting principles. Tenant shall also provide Landlord
with a copy of the proposed sublease or assignment agreement, including all
material terms and conditions thereof. Landlord shall have the option, to be
exercised within thirty (30) days of receipt of the foregoing, to (1) terminate
this Lease as of the commencement date stated in the proposed sublease or
assignment, (2) sublease or take an assignment, as the case may be, from Tenant
of the interest in this Lease and/or the Premises that Tenant proposes to assign
or sublease, on the same terms and conditions as stated in the proposed sublet
or assignment agreement, (3) consent to the proposed assignment or sublease, or
(4) refuse its consent to the proposed assignment or sublease, providing that
such consent shall not be unreasonably withheld so long as Tenant is not then in
Default under this Lease nor is any event then occurring which with the giving
of notice or the passage of time, or both, would constitute a Default hereunder;
provided, however, that if Landlord makes the election set forth in the
foregoing clause (2), Tenant may revoke it request for consent by notifying
Landlord, within five (5) days after receiving notice of Landlord's election
under the foregoing clause (2), of Tenant's election to revoke its request, and,
in such event, it shall be deemed that Tenant never made such request for
consent. In the event Landlord elects to terminate this Lease` or sublease or
take an assignment from Tenant of the interest in the Lease and/or the Premises
that Tenant proposes to assign or sublease as provided in the foregoing clauses
(1) and (2), respectively, then Landlord shall have the additional right to
negotiate directly with Tenant's proposed assignee or subtenant and to enter
into a direct lease or
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occupancy agreement with such party on such terms as shall be acceptable to
Landlord in its sole and absolute discretion, and Tenant hereby waives any
claims against Landlord related thereto, including, without limitation, any
claims for any compensation or profit related to such lease or occupancy
agreement.
(b) Without otherwise limiting the criteria upon which Landlord may
withhold its consent, Landlord shall be entitled to consider all reasonable
criteria including, but not limited to, the following: (1) whether or not the
proposed subtenant or assignee is engaged in a business which, and the use of
the Premises will be in an manner which, is in keeping with the then character
and nature of all other tenancies in the Project, (2) whether the use to be made
of the Premises by the proposed subtenant or assignee will conflict with any
so-called "exclusive" use then in favor of any other tenant of the Building or
the Project, and whether such use would be prohibited by any other portion of
this Lease, including, but not limited to, any rules and regulations then in
effect, or under applicable Laws, and whether such use imposes a greater load
upon the Premises and the Building and Project services then imposed by Tenant,
(3) the business reputation of the proposed individuals who will be managing and
operating the business operations of the assignee or subtenant, and the
long-term financial and competitive business prospects of the proposed assignee
or subtenant, and (4) the creditworthiness and financial stability of the
proposed assignee or subtenant in light of the responsibilities involved. In any
event, Landlord may withhold its consent to any assignment or sublease, if (i)
the actual use proposed to be conducted in the Premises or portion thereof
conflicts with the provisions of Paragraph 9(a) or (b) above or with any other
lease which restricts the use to which any space in the Building or the Project
may be put, or (ii) the proposed assignment or sublease requires alterations,
improvements or additions to the Premises or portions thereof which would
otherwise require Landlord's consent.
(c) If Landlord approves an assignment or subletting as herein provided,
Tenant shall pay to Landlord, as Additional Rent, the difference, if any,
between (1) the Base Rent plus Additional Rent allocable to that part of the
Premises affected by such assignment or sublease pursuant to the provisions of
this Lease, and (2) the rent and any additional rent payable by the assignee or
sublessee to Tenant, less reasonable and customary market-based leasing
commissions, if any, incurred by Tenant in connection with such assignment or
sublease. The assignment or sublease agreement, as the case may be, after
approval by Landlord, shall not be amended without Landlord's prior written
consent, and shall contain a provision directing the assignee or subtenant to
pay the rent and other sums due thereunder directly to Landlord upon receiving
written notice from Landlord that Tenant is in default under this Lease with
respect to the payment of Rent. In the event that, notwithstanding the giving of
such notice, Tenant collects any rent or other sums from the assignee or
subtenant, then Tenant shall hold such sums in trust for the benefit of Landlord
and shall immediately forward the same to Landlord. Landlord's collection of
such rent and other sums shall not constitute an acceptance by Landlord of
attornment by such assignee or subtenant. A consent to one assignment,
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subletting, occupation or use shall not be deemed to be a consent to any other
or subsequent assignment, subletting, occupation or use, and consent to any
assignment or subletting shall in no way relieve Tenant of any liability under
this Lease. Any assignment or subletting without Landlord's consent shall be
void, and shall, at the option of Landlord, constitute a Default under this
Lease.
(d) Notwithstanding any assignment or subletting, Tenant and any guarantor
or surety of Tenant's obligations under this Lease shall at all times remain
fully responsible and liable for the payment of the Rent and for compliance with
all of Tenant's other obligations under this Lease (regardless of whether
Landlord's approval has been obtained for any such assignment or subletting).
(e) Tenant shall pay Landlord's reasonable fees not to exceed $1,500
(including, without limitation, the fees of Landlord's counsel), incurred in
connection with Landlord's review and processing of documents regarding any
proposed assignment or sublease.
(f) Notwithstanding anything in this Lease to the contrary, in the event
Landlord consents to an assignment or subletting by Tenant in accordance with
the terms of this Paragraph 24, Tenant's assignee or subtenant shall have no
right to further assign this Lease or any interest therein or thereunder or to
further sublease all or any portion of the Premises. In furtherance of the
foregoing, Tenant acknowledges and agrees on behalf of itself and any assignee
or subtenant claiming under it (and any such assignee or subtenant by accepting
such assignment or sublease shall be deemed to acknowledge and agree) that no
sub-subleases or further assignments of this Lease shall be permitted at any
time.
(g) Tenant acknowledges and agrees that the restrictions, conditions and
limitations imposed by this Paragraph 24 on Tenant's ability to assign or
transfer this Lease or any interest herein, to sublet the Premises or any part
thereof, to transfer or assign any right or privilege appurtenant to the
Premises, or to allow any other person to occupy or use the Premises or any
portion thereof, are, for the purposes of California Civil Code Section 1951.4,
as amended from time to time, and for all other purposes, reasonable at the time
that the Lease was entered into, and shall be deemed to be reasonable at the
time that Tenant seeks to assign or transfer this Lease or any interest herein,
to sublet the Premises or any part thereof, to transfer or assign any right or
privilege appurtenant to the Premises, or to allow any other person to occupy or
use the Premises or any portion thereof.
(h) Notwithstanding anything in this Lease to the contrary, an assignment
or sublet of this Lease shall not include (i) any initial or subsequent public
stock offering by Tenant or (ii) if Tenant is a public company, any sale or
transfer of capital stock of Tenant.
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24 TENANT'S DEFAULT
The occurrence of any one of the following events shall constitute an event
of default on the part of Tenant ("Default"):
(a) The vacation or abandonment of the Premises by Tenant for a period of
ten (10) consecutive days or any vacation or abandonment of the Premises by
Tenant which would cause any insurance policy to be invalidated or otherwise
lapse, or the failure of Tenant to continuously operate Tenant's business in the
Premises, in each of the foregoing cases irrespective of whether or not Tenant
is then in monetary default under this Lease. With respect to this clause (a),
Tenant agrees to notice and service of notice as provided for in this Lease and
waives any right to any other or further notice or service of notice which
Tenant may have under any statute or law now or hereafter in effect;
(b) Failure to pay any installment of Rent or any other monies due and
payable hereunder, said failure continuing for a period of five (5) days after
the same is due;
(c) A general assignment by Tenant or any guarantor or surety of Tenant's
obligations hereunder (collectively, "Guarantor") for the benefit of creditors;
(d) The filing of a voluntary petition in bankruptcy by Tenant or any
Guarantor, the filing by Tenant or any Guarantor of a voluntary petition for an
arrangement, the filing by or against Tenant or any Guarantor of a petition,
voluntary or involuntary, for reorganization, or the filing of an involuntary
petition by the creditors of Tenant or any Guarantor, said involuntary petition
remaining undischarged for a period of sixty (60) days;
(e) Receivership, attachment, or other judicial seizure of substantially
all of Tenant's assets on the Premises, such attachment or other seizure
remaining undismissed or undischarged for a period of sixty (60) days after the
levy thereof;
(f) Death or disability of Tenant or any Guarantor, if Tenant or such
Guarantor is a natural person, or the failure by Tenant or any Guarantor to
maintain its legal existence, if Tenant or such Guarantor is a corporation,
partnership, limited liability company, trust or other legal entity;
(g) Failure of Tenant to execute and deliver to Landlord any estoppel
certificate, subordination agreement, or lease amendment within the time periods
and in the manner required by Paragraphs 30 or 31 or 42;
(h) An assignment or sublease, or attempted assignment or sublease, of this
Lease or the Premises by Tenant contrary to the provision of Paragraph 24,
unless such assignment or sublease is expressly conditioned upon Tenant having
received Landlord's consent thereto;
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(i) Failure of Tenant to restore the Security Deposit to the amount and
within the time period provided in Paragraph 7 above;
(j) Failure in the performance of any of Tenant's covenants, agreements or
obligations hereunder (except those failures specified as events of Default in
subparagraphs (b), (l) or (m) of this Paragraph 24 or any other subparagraphs of
this Paragraph 24, which shall be governed by such other Paragraphs), which
failure continues for ten (10) days after written notice thereof from Landlord
to Tenant, provided that, if Tenant has exercised reasonable diligence to cure
such failure and such failure cannot be cured within such ten (10) day period
despite reasonable diligence, Tenant shall not be in default under this
subparagraph so long as Tenant thereafter diligently and continuously prosecutes
the cure to completion and actually completes such cure within sixty (60) days
after the giving of the aforesaid written notice. With respect to this clause
(j), Tenant agrees to notice and service of notice as provided for in this Lease
and waives any right to any other or further notice or service of notice which
Tenant may have under any statute or law now or hereafter in effect;
(k) Chronic delinquency by Tenant in the payment of Rent, or any other
periodic payments required to be paid by Tenant under this Lease. "Chronic
delinquency" shall mean failure by Tenant to pay Rent, or any other payments
required to be paid by Tenant under this Lease within three (3) days after
written notice thereof for any three (3) months (consecutive or nonconsecutive)
during any period of twelve (12) months. In the event of a Chronic Delinquency,
in addition to Landlord's other remedies for Default provided in this Lease, at
Landlord's option, Landlord shall have the right to require that Rent be paid by
Tenant quarterly, in advance;
(l) Chronic overuse by Tenant or Tenant's Agents of the number of
undesignated parking spaces set forth in the Basic Lease Information. "Chronic
Overuse" shall mean use by Tenant or Tenant's Agents of a number of parking
spaces greater than the number of parking spaces set forth in the Basic Lease
Information more than three (3) times during the Term after written notice by
Landlord;
(m) Any insurance required to be maintained by Tenant pursuant to this
Lease shall be canceled or terminated or shall expire or be reduced or
materially changed, except as permitted in this Lease; and
(n) Any failure by Tenant to discharge any lien or encumbrance placed on
the Project or any part thereof arising out of any work performed, material
furnished, or obligations incurred by or for Tenant within Twenty (20) days
after the date such lien or encumbrance is filed or recorded against the Project
or any part thereof.
Tenant agrees that any notice given by Landlord pursuant to Paragraph
25(j), (k) or (l) above shall satisfy the requirements for notice under
California Code of Civil
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Procedure Section 1161, and Landlord shall not be required to give any
additional notice in order to be entitled to commence an unlawful detainer
proceeding.
25 LANDLORD'S REMEDIES
(a) TERMINATION. In the event of any Default by Tenant, then in addition to
any other remedies available to Landlord at law or in equity and under this
Lease, Landlord shall have the immediate option to terminate this Lease and all
rights of Tenant hereunder by giving written notice of such intention to
terminate. In the event that Landlord shall elect to so terminate this Lease
then Landlord may recover from Tenant:
(1) the worth at the time of award of any unpaid Rent and any other
sums due and payable which have 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 and any other sums due and payable which would have been earned after
termination until the time of award exceeds the amount of such rental loss
Tenant proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount by which the unpaid
Rent and any other sums due and payable for the balance of the term of this
Lease after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus
(4) any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform its obligations
under this Lease or which in the ordinary course would be likely to result
therefrom, including, without limitation, (A) any costs or expenses incurred by
Landlord (1) in retaking possession of the Premises; (2) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering, remodeling or
rehabilitating the Premises or any affected portions of the Building or the
Project, including such actions undertaken in connection with the reletting or
attempted reletting of the Premises to a new tenant or tenants; (3) for leasing
commissions, advertising costs and other expenses of reletting the Premises; or
(4) in carrying the Premises, including taxes, insurance premiums, utilities and
security precautions; (B) any unearned brokerage commissions paid in connection
with this Lease; (C) reimbursement of any previously waived or abated Base Rent
or Additional Rent or any free rent or reduced rental rate granted hereunder;
and (D) any concession made or paid by Landlord to the benefit of Tenant in
consideration of this Lease including, but not limited to, any moving
allowances, contributions, payments or loans by Landlord for tenant improvements
or build-out allowances (including without limitation, any unamortized portion
of the Tenant Improvement Allowance (such Tenant Improvement Allowance to be
amortized over the Term in the manner reasonably determined by Landlord), if
any, and any outstanding balance (principal and accrued interest) of the
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Tenant Improvement Loan, if any), or assumptions by Landlord of any of Tenant's
previous lease obligations; plus
(5) such reasonable attorneys' fees incurred by Landlord as a result
of a Default, and costs in the event suit is filed by Landlord to enforce such
remedy; and plus
(6) at Landlord'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.
As used in subparagraphs (1) and (2) above, the "worth at the time of award" is
computed by allowing interest at an annual rate equal to twelve percent (12%)
per annum or the maximum rate permitted by law, whichever is less. As used in
subparagraph (3) above, the "worth at the time of award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award, plus one percent (1%). Tenant waives redemption
or relief from forfeiture under California Code of Civil Procedure Sections 1174
and 1179, or under any other pertinent present or future Law, in the event
Tenant is evicted or Landlord takes possession of the Premises by reason of any
Default of Tenant hereunder.
(b) CONTINUATION OF LEASE. In the event of any Default by Tenant, then in
addition to any other remedies available to Landlord at law or in equity and
under this Lease, Landlord shall have the remedy described in California Civil
Code Section 1951.4 (Landlord may continue this Lease in effect after Tenant's
Default and abandonment and recover Rent as it becomes due, provided Tenant has
the right to sublet or assign, subject only to reasonable limitations). In
addition, but without limitation upon Landlord's statutory obligation to
mitigate damages, Landlord shall not be liable in any way whatsoever for its
failure or refusal to relet the Premises. For purposes of this Paragraph 26(b),
the following acts by Landlord will not constitute the termination of Tenant's
right to possession of the Premises:
(1) Acts of maintenance or preservation or efforts to relet the
Premises, including, but not limited to, alterations, remodeling, redecorating,
repairs, replacements and/or painting as Landlord shall consider advisable for
the purpose of reletting the Premises or any part thereof; or
(2) The appointment of a receiver upon the initiative of Landlord to
protect Landlord's interest under this Lease or in the Premises.
(c) RE-ENTRY. In the event of any Default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, in compliance with
applicable law, to re-enter the Premises and remove all persons and property
from the Premises; such property may be removed and stored in a public warehouse
or elsewhere at the cost of and for the account of Tenant.
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(d) RELETTING. In the event of the abandonment of the Premises by Tenant or
in the event that Landlord shall elect to re-enter as provided in Paragraph
26(c) or shall take possession of the Premises pursuant to legal proceeding or
pursuant to any notice provided by law, then if Landlord does not elect to
terminate this Lease as provided in Paragraph 26(a), Landlord may from time to
time, without terminating this Lease, relet the Premises or any part thereof for
such term or terms and at such rental or rentals and upon such other terms and
conditions as Landlord in its sole discretion may deem advisable with the right
to make alterations and repairs to the Premises in Landlord's sole discretion.
In the event that Landlord shall elect to so relet, then rentals received by
Landlord from such reletting shall be applied in the following order: (1) to
reasonable attorneys' fees incurred by Landlord as a result of a Default and
costs in the event suit is filed by Landlord to enforce such remedies; (2) to
the payment of any indebtedness other than Rent due hereunder from Tenant to
Landlord; (3) to the payment of any costs of such reletting; (4) to the payment
of the costs of any reasonable alterations and repairs to the Premises; (5) to
the payment of Rent due and unpaid hereunder; and (6) the residue, if any, shall
be held by Landlord and applied in payment of future Rent and other sums payable
by Tenant hereunder as the same may become due and payable hereunder. Should
that portion of such rentals received from such reletting during any month,
which is applied to the payment of Rent hereunder, be less than the Rent payable
during the month by Tenant hereunder, then Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred by
Landlord in such reletting or in making such alterations and repairs not covered
by the rentals received from such reletting.
(e) TERMINATION. No re-entry or taking of possession of the Premises by
Landlord pursuant to this Paragraph 26 shall be construed as an election to
terminate this Lease unless a written notice of such intention is given to
Tenant or unless the termination thereof is decreed by a court of competent
jurisdiction. Notwithstanding any reletting without termination by Landlord
because of any Default by Tenant, Landlord may at any time after such reletting
elect to terminate this Lease for any such Default.
(f) CUMULATIVE REMEDIES. The remedies herein provided are not exclusive and
Landlord shall have any and all other remedies provided herein or by law or in
equity.
(g) NO SURRENDER. No act or conduct of Landlord, whether consisting of the
acceptance of the keys to the Premises, or otherwise, shall be deemed to be or
constitute an acceptance of the surrender of the Premises by Tenant prior to the
expiration of the Term, and such acceptance by Landlord of surrender by Tenant
shall only flow from and must be evidenced by a written acknowledgment of
acceptance of surrender signed by Landlord. The surrender of this Lease by
Tenant, voluntarily or otherwise, shall not work a merger unless Landlord elects
in writing that such merger take place, but shall operate as an assignment to
Landlord of any and all existing subleases, or Landlord may, at its
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option, elect in writing to treat such surrender as a merger terminating
Tenant's estate under this Lease, and thereupon Landlord may terminate any or
all such subleases by notifying the sublessee of its election so to do within
five (5) days after such surrender.
26. LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
(a) Without limiting the rights and remedies of Landlord contained in
Paragraph 26 above, if Tenant shall be in Default in the performance of any of
the terms, provisions, covenants or conditions to be performed or complied with
by Tenant pursuant to this Lease, then Landlord may at Landlord's option,
without any obligation to do so, and without notice to Tenant perform any such
term, provision, covenant, or condition, or make any such payment and Landlord
by reason of so doing shall not be liable or responsible for any loss or damage
thereby sustained by Tenant or anyone holding under or through Tenant or any of
Tenant's Agents.
(b) Without limiting the rights of Landlord under Paragraph 26(a) above,
Landlord shall have the right at Landlord's option, without any obligation to do
so, to perform any of Tenant's covenants or obligations under this Lease without
notice to Tenant in the case of an emergency, as determined by Landlord in its
sole and absolute judgment, or if Landlord otherwise determines in its sole
discretion that such performance is necessary or desirable for the proper
management and operation of the Building or the Project or for the preservation
of the rights and interests or safety of other tenants of the Building or the
Project.
(c) If Landlord performs any of Tenant's obligations hereunder in
accordance with this Paragraph 26, the full amount of the cost and expense
incurred or the payment so made or the amount of the loss so sustained shall
immediately be owing by Tenant to Landlord, and Tenant shall promptly pay to
Landlord upon demand, as Additional Rent, the full amount thereof with interest
thereon from the date of payment by Landlord at the lower of (1) ten percent
(10%) per annum, or (2) the highest rate permitted by applicable law.
27. ATTORNEY'S FEES
(a) If either party hereto fails to perform any of its obligations under
this Lease or if any dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Lease, then the defaulting
party or the party not prevailing in such dispute, as the case may be, shall pay
any and all costs and expenses incurred by the other party on account of such
default and/or in enforcing or establishing its rights hereunder, including,
without limitation, court costs and reasonable attorneys' fees and
disbursements. Any such attorneys' fees and other expenses incurred by either
party in enforcing a judgment in its favor under this Lease shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys' fees
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obligation is intended to be severable from the other provisions of this Lease
and to survive and not be merged into any such judgment.
(b) Without limiting the generality of Paragraph 27(a) above, if Landlord
utilizes the services of an attorney for the purpose of collecting any Rent due
and unpaid by Tenant or in connection with any other breach of this Lease by
Tenant, Tenant agrees to pay Landlord reasonable attorneys' fees as determined
by Landlord for such services, regardless of the fact that no legal action may
be commenced or filed by Landlord.
28. TAXES
Tenant shall be liable for and shall pay, prior to delinquency, all taxes
levied against Tenant's Property. If any Alteration installed by Tenant pursuant
to Paragraph 11 or any of Tenant's Property is assessed and taxed with the
Project or Building, Tenant shall pay such taxes to Landlord within ten (10)
days after delivery to Tenant of a statement therefor.
29. EFFECT OF CONVEYANCE
The term "Landlord" as used in this Lease means, from time to time, the
then current owner of the Building or the Project containing the Premises, so
that, in the event of any sale of the Building or the Project, Landlord shall be
and hereby is entirely freed and relieved of all covenants and obligations of
Landlord hereunder, and it shall be deemed and construed, without further
agreement between the parties and the purchaser at any such sale, that the
purchaser of the Building or the Project has assumed and agreed to carry out any
and all covenants and obligations of Landlord hereunder.
30. TENANT'S ESTOPPEL CERTIFICATE
From time to time, upon written request of Landlord, Tenant shall execute,
acknowledge and deliver to Landlord or its designee, a written certificate
stating (a) the date this Lease was executed, the Commencement Date of the Term
and the date the Term expires; (b) the date Tenant entered into occupancy of the
Premises; (c) the amount of Rent and the date to which such Rent has been paid;
(d) that this Lease is in full force and effect and has not been assigned,
modified, supplemented or amended in any way (or, if assigned, modified,
supplemented or amended, specifying the date and terms of any agreement so
affecting this Lease); (e) that this Lease represents the entire agreement
between the parties with respect to Tenant's right to use and occupy the
Premises (or specifying such other agreements, if any); (f) that all obligations
under this Lease to be performed by Landlord as of the date of such certificate
have been satisfied (or specifying those as to which Tenant claims that Landlord
has yet to perform); (g) that all required contributions by Landlord to Tenant
on account of Tenant's improvements have been received (or stating exceptions
thereto); (h) that on such date there exist no defenses or
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offsets that Tenant has against the enforcement of this Lease by Landlord (or
stating exceptions thereto); (i) that no Rent or other sum payable by Tenant
hereunder has been paid more than one (1) month in advance (or stating
exceptions thereto); (j) that security has been deposited with Landlord, stating
the original amount thereof and any increases thereto; and (k) any other matters
evidencing the status of this Lease that may be required either by a lender
making a loan to Landlord to be secured by a deed of trust covering the Building
or the Project or by a purchaser of the Building or the Project. Any such
certificate delivered pursuant to this Paragraph 30 may be relied upon by a
prospective purchaser of Landlord's interest or a mortgagee of Landlord's
interest or assignee of any mortgage upon Landlord's interest in the Premises.
If Tenant shall fail to provide such certificate within ten (10) days of receipt
by Tenant of a written request by Landlord as herein provided, such failure
shall, at Landlord's election, constitute a Default under this Lease, and Tenant
shall be deemed to have given such certificate as above provided without
modification and shall be deemed to have admitted the accuracy of any
information supplied by Landlord to a prospective purchaser or mortgagee.
31. SUBORDINATION
Landlord shall have the right to cause this Lease to be and remain subject
and subordinate to any and all mortgages, deeds of trust and ground leases, if
any ("Encumbrances") that are now or may hereafter be executed covering the
Premises, or any renewals, modifications, consolidations, replacements or
extensions thereof, for the full amount of all advances made or to be made
thereunder and without regard to the time or character of such advances,
together with interest thereon and subject to all the terms and provisions
thereof; provided only, that in the event of termination of any such ground
lease or upon the foreclosure of any such mortgage or deed of trust, so long as
Tenant is not in default, the holder thereof ("Holder") shall agree to recognize
Tenant's rights under this Lease as long as Tenant shall pay the Rent and
observe and perform all the provisions of this Lease to be observed and
performed by Tenant. Within ten (10) days after Landlord's written request,
Tenant shall execute, acknowledge and deliver any and all reasonable documents
required by Landlord or the Holder to effectuate such subordination. If Tenant
fails to do so, such failure shall constitute a Default by Tenant under this
Lease. Notwithstanding anything to the contrary set forth in this Paragraph 31,
Tenant agrees to attorn to any person or entity purchasing or otherwise
acquiring the Premises at any sale or other proceeding or pursuant to the
exercise of any other rights, powers or remedies under such Encumbrance;
provided, however, that if the Lease is subject and subordinate to such
Encumbrance, Tenant's agreement to attorn shall be subject to the agreement of
such person or entity to recognize Tenant's rights under this Lease as long as
Tenant shall pay the Rent and observe and perform all the provisions of this
Lease to be observed and performed by Tenant.
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32. ENVIRONMENTAL COVENANTS
(a) Prior to executing this Lease, Tenant has completed, executed and
delivered to Landlord a Hazardous Materials Disclosure Certificate ("Initial
Disclosure Certificate"), a fully completed copy of which is attached hereto as
Exhibit F and incorporated herein by this reference. Tenant covenants,
represents and warrants to Landlord that the information on the Initial
Disclosure Certificate is true and correct and accurately describes the
Hazardous Materials which will be manufactured, treated, used or stored on or
about the Premises by Tenant or Tenant's Agents. Tenant shall, on each
anniversary of the Commencement Date and at such other times as Tenant desires
to manufacture, treat, use or store on or about the Premises new or additional
Hazardous Materials which were not listed on the Initial Disclosure Certificate,
complete, execute and deliver to Landlord an updated Disclosure Certificate
(each, an "Updated Disclosure Certificate") describing Tenant's then current and
proposed future uses of Hazardous Materials on or about the Premises, which
Updated Disclosure Certificates shall be in the same format as that which is set
forth in Exhibit F or in such updated format as Landlord may require from time
to time. Tenant shall deliver an Updated Disclosure Certificate to Landlord not
less than thirty (30) days prior to the date Tenant intends to commence the
manufacture, treatment, use or storage of new or additional Hazardous Materials
on or about the Premises, and Landlord shall have the right to approve or
disapprove such new or additional Hazardous Materials in its sole and absolute
discretion. Tenant shall make no use of Hazardous Materials on or about the
Premises except as described in the Initial Disclosure Certificate or as
otherwise approved by Landlord in writing in accordance with this Paragraph
32(a).
(b) As used in this Lease, the term "Hazardous Materials" shall mean and
include any substance that is or contains (1) any "hazardous substance" as now
or hereafter defined in Section 101(14) of the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA") (42
U.S.C. Section 9601 et seq.) or any regulations promulgated under CERCLA; (2)
any "hazardous waste" as now or hereafter defined in the Resource Conservation
and Recovery Act, as amended ("RCRA") (42 U.S.C. Section 6901 et seq.) or any
regulations promulgated under RCRA; (3) any substance now or hereafter regulated
by the Toxic Substances Control Act, as amended ("TSCA") (15 U.S.C. Section 2601
et seq.) or any regulations promulgated under TSCA; (4) petroleum, petroleum
by-products, gasoline, diesel fuel, or other petroleum hydrocarbons; (5)
asbestos and asbestos-containing material, in any form, whether friable or
non-friable; (6) polychlorinated biphenyls; (7) lead and lead-containing
materials; or (8) any additional substance, material or waste (A) the presence
of which on or about the Premises requires reporting, investigation or
remediation under any Environmental Laws (as hereinafter defined), or (B) which
is now or is hereafter classified or considered to be hazardous or toxic under
any Environmental Laws.
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(c) As used in this Lease, the term "Environmental Laws" shall mean and
include (1) CERCLA, RCRA and TSCA; and (2) any other federal, state or local
laws, ordinances, statutes, codes, rules, regulations, orders or decrees now or
hereinafter in effect relating to (A) pollution, (B) the protection or
regulation of human health, natural resources or the environment, (C) the
treatment, storage or disposal of Hazardous Materials, or (D) the emission,
discharge, release or threatened release of Hazardous Materials into the
environment.
(d) Tenant agrees that during its use and occupancy of the Premises it will
(1) not (A) permit Hazardous Materials to be present on or about the Premises
except in a manner and quantity necessary for the ordinary performance of
Tenant's business or (B) release, discharge or dispose of any Hazardous
Materials on, in, at, under, or emanating from, the Premises, the Building or
the Project; (2) comply with all Environmental Laws relating to the Premises and
the use of Hazardous Materials on or about the Premises and not engage in or
permit others to engage in any activity at the Premises in violation of any
Environmental Laws; and (3) immediately notify Landlord of (A) any inquiry,
test, investigation or enforcement proceeding by any governmental agency or
authority against Tenant, Landlord or the Premises, Building or Project relating
to any Hazardous Materials or under any Environmental Laws or (B) the occurrence
of any event or existence of any condition that would cause a breach of any of
the covenants set forth in this Paragraph 32.
(e) If Tenant's use of Hazardous Materials on or about the Premises results
in a release, discharge or disposal of Hazardous Materials on, in, at, under, or
emanating from, the Premises, the Building or the Project, Tenant agrees to
investigate, clean up, remove or remediate such Hazardous Materials in full
compliance with (1) the requirements of (A) all Environmental Laws and (B) any
governmental agency or authority responsible for the enforcement of any
Environmental Laws; and (2) any additional requirements of Landlord that are
reasonably necessary to protect the value of the Premises, the Building or the
Project.
(f) Provided that Landlord reasonably believes that there may exist on or
about the Premises and surrounding areas any Hazardous Material or other
condition or activity that may be in violation of the requirements of this Lease
or any Environmental Laws, upon reasonable notice to Tenant, Landlord may
inspect the Premises and surrounding areas for the purpose of determining
whether there exists on or about the Premises any Hazardous Material or other
condition or activity that is in violation of the requirements of this Lease or
of any Environmental Laws. Such inspections may include, but are not limited to,
entering the Premises or adjacent property with drill rigs or other machinery
for the purpose of obtaining laboratory samples. Landlord shall not be limited
in the number of such inspections during the Term of this Lease. In the event
(1) such inspections reveal the presence of any such Hazardous Material or other
condition or activity in violation of the requirements of this Lease or of any
Environmental Laws, or
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(2) Tenant or its Agents contribute or knowingly consent to the presence of any
Hazardous Materials in, on, under, through or about the Premises, the Building
or the Project or exacerbate the condition of or the conditions caused by any
Hazardous Materials in, on, under, through or about the Premises, the Building
or the Project, Tenant shall reimburse Landlord for the cost of such inspections
within ten (10) days of receipt of a written statement therefor. Tenant will
supply to Landlord such historical and operational information from and after
the Commencement Date regarding the Premises and surrounding areas as may be
reasonably requested to facilitate any such inspection and will make available
for meetings appropriate personnel having knowledge of such matters. Tenant
agrees to give Landlord at least sixty (60) days' prior notice of its intention
to vacate the Premises so that Landlord will have an opportunity to perform such
an inspection prior to such vacation. The right granted to Landlord herein to
perform inspections shall not create a duty on Landlord's part to inspect the
Premises, or liability on the part of Landlord for Tenant's use, storage,
treatment or disposal of Hazardous Materials, it being understood that Tenant
shall be solely responsible for all liability in connection therewith.
(g) Landlord shall have the right, but not the obligation, prior or
subsequent to a Default, without in any way limiting Landlord's other rights and
remedies under this Lease, to enter upon the Premises, or to take such other
actions as it deems necessary or advisable, to investigate, clean up, remove or
remediate any Hazardous Materials or contamination by Hazardous Materials
present on, in, at, under, or emanating from, the Premises, the Building or the
Project in violation of Tenant's obligations under this Lease or under any
Environmental Laws. Notwithstanding any other provision of this Lease, Landlord
shall also have the right, at its election, to negotiate, defend, approve and
appeal, at Tenant's expense, any action taken or order issued by any
governmental agency or authority with regard to any such Hazardous Materials or
contamination by Hazardous Materials. If any such inspection reveals any
Hazardous Material or other condition or activity on or about the Premises that
is in violation of the requirements of this Lease or of any Environmental Laws,
all costs and expenses paid or incurred by Landlord in the exercise of the
rights set forth in this Paragraph 32 shall be payable by Tenant upon demand.
(h) Tenant shall surrender the Premises to Landlord upon the expiration or
earlier termination of this Lease free of debris, waste or Hazardous Materials
placed on, about or near the Premises by Tenant or Tenant's Agents, and in a
condition which complies with all Environmental Laws and any additional
reasonable requirements of Landlord that are reasonably necessary to protect the
value of the Premises, the Building or the Project, including, without
limitation, the obtaining of any closure permits or other governmental permits
or approvals related to Tenant's use of Hazardous Materials in or about the
Premises. Tenant's obligations and liabilities pursuant to the provisions of
this Paragraph 32 shall survive the expiration or earlier termination of this
Lease. If it is determined by Landlord that the condition of all or any portion
of the Premises, the
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Building, and/or the Project is not in compliance with the provisions of this
Lease with respect to Hazardous Materials as a result of a breach or default by
Tenant of its representations, warranties and covenants under this Lease with
respect to Hazardous Materials, including, without limitation, all Environmental
Laws, at the expiration or earlier termination of this Lease, then at Landlord's
sole option, Landlord may require Tenant to hold over possession of the Premises
until Tenant can surrender the Premises to Landlord in the condition in which
the Premises existed as of the Commencement Date and prior to the appearance of
such Hazardous Materials except for normal wear and tear, including, without
limitation, the conduct or performance of any closures as required by any
Environmental Laws. The burden of proof hereunder shall be upon Tenant. For
purposes hereof, the term "normal wear and tear" shall not include any
deterioration in the condition or diminution of the value of any portion of the
Premises, the Building, and/or the Project in any manner whatsoever related to
directly, or indirectly, Hazardous Materials. Any such holdover by Tenant will
be with Landlord's consent, will not be terminable by Tenant in any event or
circumstance and will otherwise be subject to the provisions of Paragraph 35 of
this Lease.
(i) Tenant agrees to indemnify and hold harmless Landlord from and against
any and all claims, losses (including, without limitation, loss in value of the
Premises, the Building or the Project, liabilities and expenses (including
reasonable attorney's fees)) sustained by Landlord attributable to (1) any
Hazardous Materials placed on or about the Premises, the Building or the Project
by Tenant or Tenant's Agents, or (2) Tenant's breach of any provision of this
Paragraph 32.
(j) The provisions of this Paragraph 32 shall survive the expiration or
earlier termination of this Lease.
33. NOTICES
All notices and demands which are required or may be permitted to be given
to either party by the other hereunder shall be in writing and shall be sent by
United States mail, postage prepaid, certified, or by personal delivery or
overnight courier, addressed to the addressee at Tenant's Address or Landlord's
Address as specified in the Basic Lease Information, or to such other place as
either party may from time to time designate in a notice to the other party
given as provided herein. Copies of all notices and demands given to Landlord
shall additionally be sent to Landlord's property manager at the address
specified in the Basic Lease Information or at such other address as Landlord
may specify in writing from time to time. Notice shall be deemed given upon
actual receipt (or attempted delivery if delivery is refused ), if personally
delivered, or one (1) business day following deposit with a reputable overnight
courier that provides a receipt, or on the third (3rd) day following deposit in
the United States mail in the manner described above.
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34. WAIVER
The waiver of any breach of any term, covenant or condition of this Lease
shall not be deemed to be a waiver of such term, covenant or condition or of any
subsequent breach of the same or any other term, covenant or condition herein
contained. The subsequent acceptance of Rent by Landlord shall not be deemed to
be a waiver of any preceding breach by Tenant, other than the failure of Tenant
to pay the particular rental so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such Rent. No delay or
omission in the exercise of any right or remedy of Landlord in regard to any
Default by Tenant shall impair such a right or remedy or be construed as a
waiver. Any waiver by Landlord of any Default must be in writing and shall not
be a waiver of any other Default concerning the same or any other provisions of
this Lease.
35. HOLDING OVER
Any holding over after the expiration of the Term, without the express
written consent of Landlord, shall constitute a Default and, without limiting
Landlord's remedies provided in this Lease, such holding over shall be construed
to be a tenancy at sufferance, at a rental rate of one hundred fifty percent
(150%) of the Base Rent last due in this Lease, plus Additional Rent, and shall
otherwise be on the terms and conditions herein specified, so far as applicable;
provided, however, in no event shall any renewal or expansion option or other
similar right or option contained in this Lease be deemed applicable to any such
tenancy at sufferance. If the Premises are not surrendered at the end of the
Term or sooner termination of this Lease, and in accordance with the provisions
of Paragraphs 11 and 32(h), Tenant shall indemnify, defend and hold Landlord
harmless from and against any and all loss or liability resulting from delay by
Tenant in so surrendering the Premises including, without limitation, any loss
or liability resulting from any claim against Landlord made by any succeeding
tenant or prospective tenant founded on or resulting from such delay and losses
to Landlord due to lost opportunities to lease any portion of the Premises to
any such succeeding tenant or prospective tenant, together with, in each case,
reasonable attorneys' fees and costs.
36. SUCCESSORS AND ASSIGNS
The terms, covenants and conditions of this Lease shall, subject to the
provisions as to assignment, apply to and bind the heirs, successors, executors,
administrators and assigns of all of the parties hereto. If Tenant shall consist
of more than one entity or person, the obligations of Tenant under this Lease
shall be joint and several.
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37. TIME
Time is of the essence of this Lease and each and every term, condition and
provision herein.
38. BROKERS
Landlord and Tenant each represents and warrants to the other that neither
it nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker except the Broker(s) specified in the Basic Lease Information
in the negotiating or making of this Lease, and each party agrees to indemnify
and hold harmless the other from any claim or claims, and costs and expenses,
including reasonable attorneys' fees, incurred by the indemnified party in
conjunction with any such claim or claims of any other broker or brokers to a
commission in connection with this Lease as a result of the actions of the
indemnifying party.
39. LIMITATION OF LIABILITY
Tenant agrees that, in the event of any default or breach by Landlord with
respect to any of the terms of the Lease to be observed and performed by
Landlord (1) Tenant shall look solely to the then current landlord's interest in
the Building for the satisfaction of Tenant's remedies for the collection of a
judgment (or other judicial process) requiring the payment of money by Landlord;
(2) no other property or assets of Landlord, its partners, shareholders,
officers, directors or any successor in interest shall be subject to levy,
execution or other enforcement procedure for the satisfaction of Tenant's
remedies; (3) no personal liability shall at any time be asserted or enforceable
against Landlord's partners or successors in interest (except to the extent
permitted in (1) above), or against Landlord's shareholders, officers or
directors, or their respective partners, shareholders, officers, directors or
successors in interest; and (4) no judgment will be taken against any partner,
shareholder, officer or director of Landlord. The provisions of this section
shall apply only to the Landlord and the parties herein described, and shall not
be for the benefit of any insurer nor any other third party.
40. FINANCIAL STATEMENTS
Within ten (10) days after Landlord's request, Tenant shall deliver to
Landlord the most recent (but in no event older than 12 months) financial
statements of Tenant (including interim periods following the end of the last
fiscal year for which annual statements are available), prepared or compiled by
a certified public accountant, including a balance sheet and profit and loss
statement for the most recent prior year, all prepared in accordance with
generally accepted accounting principles consistently applied.
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41. RULES AND REGULATIONS
Tenant agrees to comply with such reasonable rules and regulations as
Landlord may adopt from time to time for the orderly and proper operation of the
Building and the Project. Such rules may include but shall not be limited to the
following: (a) restriction of employee parking to a limited, designated area or
areas; and (b) regulation of the removal, storage and disposal of Tenant's
refuse and other rubbish at the sole cost and expense of Tenant. The then
current rules and regulations shall be binding upon Tenant upon delivery of a
copy of them to Tenant. Landlord shall not be responsible to Tenant for the
failure of any other person to observe and abide by any of said rules and
regulations. Landlord's current rules and regulations are attached to this Lease
as Exhibit D.
42. MORTGAGEE PROTECTION
(a) MODIFICATIONS FOR LENDER. If, in connection with obtaining financing
for the Project or any portion thereof, Landlord's lender shall request
reasonable modifications to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent to such
modifications, provided such modifications do not materially adversely affect
Tenant's rights or increase Tenant's obligations under this Lease.
(b) RIGHTS TO CURE. Tenant agrees to give to any trust deed or mortgage
holder ("Holder"), by registered mail, at the same time as it is given to
Landlord, a copy of any notice of default given to Landlord, provided that prior
to such notice Tenant has been notified, in writing, (by way of notice of
assignment of rents and leases, or otherwise) of the address of such Holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided for in this Lease, then the Holder shall have an
additional twenty (20) days after expiration of such period, or after receipt of
such notice from Tenant (if such notice to the Holder is required by this
Paragraph 42(b)), whichever shall last occur within which to cure such default
or if such default cannot be cured within that time, then such additional time
as may be necessary if within such twenty (20) days, any Holder has commenced
and is diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure proceedings, if
necessary to effect such cure), in which event this Lease shall not be
terminated.
43. ENTIRE AGREEMENT
This Lease, including the Exhibits and any Addenda attached hereto, which
are hereby incorporated herein by this reference, contains the entire agreement
of the parties hereto, and no representations, inducements, promises or
agreements, oral or otherwise, between the parties, not embodied herein or
therein, shall be of any force and effect.
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44. INTEREST
Any installment of Rent and any other sum due from Tenant under this Lease
which is not received by Landlord within ten (10) days from when the same is due
shall bear interest from the date such payment was originally due under this
Lease until paid at an annual rate equal to ten percent (10%). Payment of such
interest shall not excuse or cure any Default by Tenant. In addition, Tenant
shall pay all costs and reasonable attorneys' fees incurred by Landlord in
collection of such amounts.
45. CONSTRUCTION
This Lease shall be construed and interpreted in accordance with the laws
of the State of California. The parties acknowledge and agree that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall be employed in the interpretation of this Lease, including
the Exhibits and any Addenda attached hereto. All captions in this Lease are for
reference only and shall not be used in the interpretation of this Lease.
Whenever required by the context of this Lease, the singular shall include the
plural, the masculine shall include the feminine, and vice versa. If any
provision of this Lease shall be determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease and all such
other provisions shall remain in full force and effect.
46. REPRESENTATIONS AND WARRANTIES OF TENANT
Tenant hereby makes the following representations and warranties, each of
which is material and being relied upon by Landlord, is true in all respects as
of the date of this Lease, and shall survive the expiration or termination of
the Lease.
(a) If Tenant is an entity, Tenant is duly organized, validly existing and
in good standing under the laws of the state of its organization and the persons
executing this Lease on behalf of Tenant have the full right and authority to
execute this Lease on behalf of Tenant and to bind Tenant without the consent or
approval of any other person or entity. Tenant has full power, capacity,
authority and legal right to execute and deliver this Lease and to perform all
of its obligations hereunder. This Lease is a legal, valid and binding
obligation of Tenant, enforceable in accordance with its terms.
(b) Tenant has not (1) made a general assignment for the benefit of
creditors, (2) filed any voluntary petition in bankruptcy or suffered the filing
of an involuntary petition by any creditors, (3) suffered the appointment of a
receiver to take possession of all or substantially all of its assets, (4)
suffered the attachment or other judicial seizure of all or substantially all of
its assets, (5) admitted in writing its inability to pay its debts as they come
due, or (6) made an offer of settlement, extension or composition to its
creditors generally.
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47. SECURITY
(a) Tenant acknowledges and agrees that, while Landlord may engage security
personnel to patrol the Building or the Project, Landlord is not providing any
security services with respect to the Premises, the Building or the Project and
that Landlord shall not be liable to Tenant for, and Tenant waives any claim
against Landlord with respect to, any loss by theft or any other damage suffered
or incurred by Tenant in connection with any unauthorized entry into the
Premises or any other breach of security with respect to the Premises, the
Building or the Project.
(b) Tenant hereby agrees to the exercise by Landlord and Landlord's Agents,
within their sole discretion, of such security measures as, but not limited to,
the evacuation of the Premises, the Building or the Project for cause, suspected
cause or for drill purposes, the denial of any access to the Premises, the
Building or the Project and other similarly related actions that it deems
necessary to prevent any threat of property damage or bodily injury. The
exercise of such security measures by Landlord and Landlord's Agents, and the
resulting interruption of service and cessation of Tenant's business, if any,
shall not be deemed an eviction or disturbance of Tenant's use and possession of
the Premises, or any part thereof, or render Landlord or Landlord's Agents
liable to Tenant for any resulting damages or relieve Tenant from Tenant's
obligations under this Lease.
48. JURY TRIAL WAIVER
Tenant hereby waives any right to trial by jury with respect to any action
or proceeding (i) brought by Landlord, Tenant or any other party, relating to
(A) this Lease and/or any understandings or prior dealings between the parties
hereto, or (B) the Premises, the Building or the Project or any part thereof, or
(ii) to which Landlord is a party. Tenant hereby agrees that this Lease
constitutes a written consent to waiver of trial by jury pursuant to the
provisions of California Code of Civil Procedure Section 631, and Tenant does
hereby constitute and appoint Landlord its true and lawful attorney-in-fact,
which appointment is coupled with an interest, and Tenant does hereby authorize
and empower Landlord, in the name, place and stead of Tenant, to file this Lease
with the clerk or judge of any court of competent jurisdiction as a statutory
written consent to waiver of trial by jury.
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49. SECURITY DEPOSIT
Tenant shall pay a Security Deposit of Eighty-Four Thousand Three Hundred
Ninety-Six and 00/100 Dollars ($84,396.00) which shall be in the form of a
Letter of Credit issued by Silicon Valley Bank and which form shall be
acceptable to Landlord in Landlord's sole discretion. At the end of the
thirtieth (30th) month of the term, Landlord shall review Tenant's current
financial condition and credit and, at Landlord's sole election, Landlord may
reduce Tenant's Security Deposit to Thirty-Two Thousand Two Hundred Eighty-Four
and 00/100 Dollars ($32,284.00).
50. EARLY OCCUPANCY
Tenant shall have the right to enter the Premises fifteen (15) days prior
to the estimated commencement date, provided that Tenant shall have first
executed the Lease, delivered to Landlord a certificate of insurance as required
under the Lease and delivered to Landlord all monies owing under the Lease.
Tenant's entry upon the premises pursuant to this paragraph 50 shall be subject
to all of the terms and conditions of the Lease, excepting only the covenant to
pay rent.
51. RENEWAL OPTION
Tenant shall have one (1) option (the "Renewal Option") to extend the Term
for a period of five (5) years beyond the Expiration Date (the "Renewal Term").
The Renewal Option shall be effective only if Tenant is not in Default under
this Lease, nor has any event occurred which with the giving of notice or the
passage of time, or both, would constitute a Default hereunder, either at the
time of exercise of the Renewal Option or the time of commencement of the
Renewal Term. The Renewal Option must be exercised, if at all, by written notice
(the "Election Notice") from Tenant to Landlord given not more than eight (8)
months nor less than six (6) months prior to the expiration of the initial Term.
Except as hereinafter provided in this Paragraph 51, any such notice given by
Tenant to Landlord shall be irrevocable. If Tenant fails to exercise the Renewal
Option in a timely manner as provided for above, the Renewal Option shall be
void. The Renewal Term shall be upon the same terms and conditions as the
initial Term, except that the annual Base Rent during the Renewal Term shall be
equal to the prevailing market rate for space in well located, high visibility
buildings in Irvine, California comparable to the Premises in location, size,
condition, quality and type, and with a comparable landlord (taking into
account, among other things, the availability of tenant improvement dollars) at
the commencement of the Renewal Term. As used herein, the term "prevailing
market rate" shall mean the base annual rental for such comparable space, taking
into account any additional rental and all other payments and escalations
payable hereunder and by tenants under leases of such comparable space. Landlord
shall notify Tenant in writing (such notice being hereinafter referred to as the
"Renewal Rate Notice") of the prevailing market rate for the Renewal Term within
thirty (30) days after Landlord's receipt of the
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Election Notice. Tenant shall have ten (10) days after receipt of the Renewal
Rate Notice (the "Response Period") to advise Landlord whether or not Tenant
agrees with Landlord's determination of the prevailing market rate. If Tenant
agrees with Landlord's determination, then Landlord and Tenant shall promptly
enter into an amendment to this Lease providing for the lease of the Premises by
Tenant during the Renewal Term upon the terms stated in the Renewal Rate Notice.
If Tenant disputes Landlord's determination of the prevailing market rate,
Tenant shall have the right to rescind its Election Notice in writing within the
Response Period and neither party shall have any further rights or obligations
under this paragraph 51. If Tenant fails to provide Landlord with written notice
of rescission prior to the expiration of the Response Period, then Tenant shall
be deemed to have accepted Landlord's determination of the prevailing market
rate.
52. LIMITATIONS ON TENANT'S RESPONSIBILITY
(a) Notwithstanding anything to the contrary set forth in this Lease other
than the provisions of Paragraph 32 of this Lease, Tenant shall not be
responsible for the cost (other than as an item of Expense covered by the
Additional Rent to be paid by Tenant hereunder, but subject to the express
exclusions therefrom) of any repairs to the Premises, nor be obligated to
perform any alterations, improvements or repairs to the Premises, which are
required to cause the Premises to comply with applicable Laws. Notwithstanding
the preceding sentence, Tenant shall be responsible for any such repairs,
alterations or improvements as are required by reason of (A) damage to the
Premises caused by Tenant or by Tenant's employees, agents or contractors, or
(B) Tenant's particular use of and operations within the Premises (as opposed to
any such repairs, alterations, or improvements which would be generally required
under applicable Laws with respect to any tenant or occupant of the Premises),
or (C) alterations or improvements to the Premises made by or on behalf of
Tenant. For the purposes of this paragraph, "Laws" shall include Private
Restrictions.
(b) Notwithstanding anything in Paragraph 32 of the Lease, Tenant shall not
be responsible for the clean up or remediation of , and shall not be required to
indemnify Landlord against, any costs or liabilities attributable to, Hazardous
Materials placed on or about the Premises (i) prior to the date upon which
Tenant occupied the Premises, by third parties not related to Tenant or Tenant's
Agents, or (ii) by Landlord at any time, except in either case to the extent
that Tenant or its Agents have contributed to or exacerbated the presence of
such Hazardous Materials.
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Landlord and Tenant have executed and delivered this Lease as of the Lease
Date specified in the Basic Lease Information.
LANDLORD: TENANT:
AETNA LIFE INSURANCE COMPANY, ARCXEL TECHNOLOGIES, INC.,
a Connecticut corporation a California corporation
By: Allegis Realty Investors LLC By: /s/ Jay O'Donald
Its Investment Advisor and Agent -------------------------------
Print Name: Jay O'Donald
Its: CEO
By: /s/ Cynthia Stevenin
-----------------------------
Cynthia Stevenin By:
Vice President -------------------------------
Print Name:
-----------------------
Its:
------------------------------
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<PAGE> 51
EXHIBIT A
DIAGRAM OF THE PREMISES
<PAGE> 52
EXHIBIT B
INTENTIONALLY OMITTED
1.
<PAGE> 53
EXHIBIT B-1
INTENTIONALLY OMITTED
1
<PAGE> 54
EXHIBIT C
COMMENCEMENT AND EXPIRATION DATE MEMORANDUM
LANDLORD: AETNA LIFE INSURANCE COMPANY
TENANT: ARCXEL TECHNOLOGIES, INC.
LEASE DATE: November 1, 1997
PREMISES: Located at 15245 Alton Parkway, Irvine, California
Tenant hereby accepts the Premises as being in the condition required under
the Lease, with all Tenant Improvements completed (except for minor punchlist
items which Landlord agrees to complete).
The Commencement Date of the Lease is hereby established as December 1,
1997 and the Expiration Date is November 30, 2002.
TENANT: ARCXEL TECHNOLOGIES, INC.,
a California corporation
By: /s/ Jay O'Donald
------------------------------------
Print Name: Jay O'Donald
Its: CEO
By: ____________________________________
Print Name: ____________________________
Its: ___________________________________
Approved and Agreed:
LANDLORD:
AETNA LIFE INSURANCE COMPANY,
a Connecticut corporation
By: Allegis Realty Investors LLC
Its Investment Advisor and Agent
By: /s/ Cynthia Stevenin
------------------------------
Cynthia Stevenin
Vice President
<PAGE> 55
EXHIBIT D
RULES AND REGULATIONS
This exhibit, entitled "Rules and Regulations," is and shall constitute
Exhibit D to the Lease Agreement, dated as of the Lease Date, by and between
landlord and Tenant for the Premises. The terms and conditions of this Exhibit D
are hereby incorporated into and are made a part of the Lease. Capitalized terms
used, but not otherwise defined, in this Exhibit D have the meanings ascribed to
such terms in the Lease.
1. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord without the consent of Landlord.
2. All window coverings installed by Tenant and visible from the outside of
the building require the prior written approval of Landlord.
3. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance or any flammable or combustible materials on or around
the Premises, except to the extent that Tenant is permitted to use the same
under the terms of Paragraph 32 of the Lease.
4. Tenant shall not alter any lock or install any new locks or bolts on any
door at the Premises without the prior consent of Landlord.
5. Tenant shall not make any duplicate keys without the prior consent of
Landlord.
6. Tenant shall park motor vehicles in parking areas designated by Landlord
except for loading and unloading. During those periods of loading and unloading,
Tenant shall not unreasonably interfere with traffic flow around the Building or
the Project and loading and unloading areas of other tenants. Tenant shall not
park motor vehicles in designated parking areas after the conclusion of normal
daily business activity.
7. Tenant shall not disturb, solicit or canvas any tenant or other occupant
of the Building or Project and shall cooperate to prevent same.
8. No person shall go on the roof without Landlord's permission.
9. Business machines and mechanical equipment belonging to Tenant which
cause noise or vibration that may be transmitted to the structure of the
Building, to such a degree as to be objectionable to Landlord or other tenants,
shall be placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or in noise-dampening housing or other devices sufficient to
eliminate noise or vibration.
10. All goods, including material used to store goods, delivered to the
Premises of Tenant shall be immediately moved into the Premises and shall not be
left in parking or
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receiving areas overnight.
11. Tractor trailers which must be unhooked or parked with dolly wheels
beyond the concrete loading areas must use steel plates or wood blocks under the
dolly wheels to prevent damage to the asphalt paving surfaces. No parking or
storing of such trailers will be permitted in the auto parking areas of the
Project or on streets adjacent thereto.
12. Forklifts which operate on asphalt paving areas shall not have solid
rubber tires and shall only use tires that do not damage the asphalt.
13. Tenant is responsible for the storage and removal of all trash and
refuse. All such trash and refuse shall be contained in suitable receptacles
stored behind screened enclosures at locations approved by Landlord.
14. Tenant shall not store or permit the storage or placement of goods or
merchandise in or around the common areas surrounding the Premises. No displays
or sales or merchandise shall be allowed in the parking lots or other common
areas.
15. Tenant shall not permit any animals, including but not limited to, any
household pets, to be brought or kept in or about the Premises, the Building,
the Project or any of the common areas.
INITIALS:
TENANT: /s/ Jay
------------
LANDLORD: /s/ DS
---------
2
<PAGE> 57
EXHIBIT E
SIGN CRITERIA
See Attached
<PAGE> 58
EXHIBIT F
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Landlord to evaluate your proposed uses of the premises (the "Premises")
and to determine whether to enter into a lease agreement with you as tenant. If
a lease agreement is signed by you and the Landlord (the "Lease Agreement"), on
an annual basis in accordance with the provisions of Paragraph 32 of the Lease
Agreement, you are to provide an update to the information initially provided by
you in this certificate. Any questions regarding this certificate should be
directed to, and when completed, the certificate should be delivered to:
Landlord: c/o Allegis Realty Investors LLC
1740 Technology Drive, Suite 600
San Jose, California 95110
Attention: Cynthia Stevenin
Phone: (408) 437-5451
Name of (Prospective) Tenant: Arcxel Technologies, Inc., a California
corporation
Mailing Address: 2691 Richter, #106, Irvine, California 92606
Contact Person, Title and Telephone Number(s): Jay O'Donald, CEO; (714) 475-4350
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):____________________________________________________________
Address of (Prospective) Premises: 15425 Alton Parkway, Suite 100, Irvine,
California
Length of (Prospective) initial Term: Sixty (60) Months
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1. GENERAL INFORMATION:
Describe the proposed operations to take place in, on, or about the
Premises, including, without limitation, principal products processed,
manufactured or assembled, and services and activities to be provided or
otherwise conducted. Existing tenants should describe any proposed
changes to on-going operations.
General office use, research & development, light manufacturing
------------------------------------------------------------------------
warehouse storage
------------------------------------------------------------------------
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS:
2.1 Will any Hazardous Materials (as hereinafter defined) be used,
generated, treated, stored or disposed of in, on or about the
Premises? Existing tenants should describe any Hazardous
Materials which continue to be used, generated, treated, stored
or disposed of in, on or about the Premises.
Wastes Yes [ ] No [X]
Chemical Products Yes [ ] No [X]
Other Yes [ ] No [X]
If Yes is marked, please explain:________________________________
_________________________________________________________________
_________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any Hazardous
Materials to be used, generated, treated, stored or disposed of
in, on or about the Premises, including the applicable hazard
class and an estimate of the quantities of such Hazardous
Materials to be present on or about the Premises at any given
time; estimated annual throughput; the proposed location(s) and
method of storage (excluding nominal amounts of ordinary
household cleaners and janitorial supplies which are not
regulated by any Environmental Laws, as hereinafter defined); and
the proposed location(s) and method(s) of treatment or disposal
for each Hazardous Material, including, the estimated frequency,
and the proposed contractors or subcontractors. Existing tenants
should attach a list setting forth the information requested
above and such list should include actual data from on-going
operations and the identification of any variations in such
information from the prior year's certificate.
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3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage or treatment of gasoline,
diesel, petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants should
describe any such actual or proposed activities.
Yes [ ] No [X]
If yes, please explain:__________________________________________
_________________________________________________________________
_________________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes [ ] No [X]
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe any
new reports filed.
Yes [ ] No [X]
If yes, attach a copy of the most recent report filed.
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
storm drain? sewer?
----- -----
surface water? X no wastewater or other wastes
----- ----- discharged.
3
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Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
_________________________________________________________________
_________________________________________________________________
5.2 Will any such wastewater or waste be treated before discharge?
Yes [ ] No [ ] N/A
If yes, describe the type of treatment proposed to be conducted.
Existing tenants should describe the actual treatment conducted.
_________________________________________________________________
_________________________________________________________________
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be used
in your company's operations in, on or about the Premises that
will discharge into the air; and will such air emissions be
monitored? Existing tenants should indicate whether or not there
are any such air filtration systems or stacks in use in, on or
about the Premises which discharge into the air and whether such
air emissions are being monitored.
Yes [ ] No [X]
If yes, please describe:_________________________________________
_________________________________________________________________
_________________________________________________________________
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing tenants should specify any such equipment being
operated in, on or about the Premises.
_____ Spray booth(s) _____ Incinerator(s)
_____ Dip tank(s) _____ Other (Please describe)
X
_____ Drying oven(s) _____ No Equipment Requiring Air
Permits
4
<PAGE> 62
If yes, please describe:_________________________________________
_________________________________________________________________
_________________________________________________________________
6.3 Please describe (and submit copies of with this Hazardous
Materials Disclosure Certificate) any reports you have filed in
the past [thirty-six] months with any governmental or
quasi-governmental agencies or authorities related to air
discharges or clean air requirements and any such reports which
have been issued during such period by any such agencies or
authorities with respect to you or your business operations.
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("Management Plan") or
Hazardous Materials Business Plan and Inventory ("Business Plan")
pursuant to Fire Department or other governmental or regulatory
agencies' requirements? Existing tenants should indicate whether
or not a Management Plan is required and has been prepared.
Yes [ ] No [X]
If yes, attach a copy of the Management Plan or Business Plan.
Existing tenants should attach a copy of any required updates to
the Management Plan or Business Plan.
5
<PAGE> 63
7.2 Are any of the Hazardous Materials, and in particular chemicals,
proposed to be used in your operations in, on or about the
Premises listed or regulated under Proposition 65? Existing
tenants should indicate whether or not there are any new
Hazardous Materials being so used which are listed or regulated
under Proposition 65.
Yes [ ] No [X]
If yes, please explain:__________________________________________
_________________________________________________________________
_________________________________________________________________
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws, has
your company ever been subject to any agency enforcement actions,
administrative orders, or consent decrees or has your company
received requests for information, notice or demand letters, or
any other inquiries regarding its operations? Existing tenants
should indicate whether or not any such actions, orders or
decrees have been, or are in the process of being, undertaken or
if any such requests have been received.
Yes [ ] No [X]
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of these
actions, orders or decrees and also describe any requests,
notices or demands, and attach a copy of all such documents.
Existing tenants should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not
already delivered to Landlord pursuant to the provisions of
Paragraph 32 of the Lease Agreement.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health and
safety concerns?
Yes [ ] No [X]
6
<PAGE> 64
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and other documents
related thereto as requested by Landlord. Existing tenants should
describe and attach a copy of any new complaint(s),
cross-complaint(s), pleadings and other related documents not
already delivered to Landlord pursuant to the provisions of
Paragraph 32 of the Lease Agreement.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
8.3 Have there been any problems or complaints from adjacent tenants,
owners or other neighbors at your company's current facility with
regard to environmental or health and safety concerns? Existing
tenants should indicate whether or not there have been any such
problems or complaints from adjacent tenants, owners or other
neighbors at, about or near the Premises and the current status
of any such problems or complaints.
Yes [ ] No [X]
If yes, please describe. Existing tenants should describe any
such problems or complaints not already disclosed to Landlord
under the provisions of the signed Lease Agreement and the
current status of any such problems or complaints.
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
7
<PAGE> 65
9. PERMITS AND LICENSES
9.1 Attach copies of all permits and licenses issued to your company
with respect to its proposed operations in, on or about the
Premises, including, without limitation, any Hazardous Materials
permits, wastewater discharge permits, air emissions permits, and
use permits or approvals. Existing tenants should attach copies
of any new permits and licenses as well as any renewals of
permits or licenses previously issued.
As used herein, "Hazardous Materials" shall mean and include any substance
that is or contains (a) any "hazardous substance" as now or hereafter defined in
Section 101(14) of the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA") (42 U.S.C. Section 9601 et seq.) or
any regulations promulgated under CERCLA; (b) any "hazardous waste" as now or
hereafter defined in the Resource Conservation and Recovery Act, as amended
("RCRA") (42 U.S.C. Section 6901 et seq.) or any regulations promulgated under
RCRA; (c) any substance now or hereafter regulated by the Toxic Substances
Control Act, as amended ("TSCA") (15 U.S.C. Section 2601 et seq.) or any
regulations promulgated under TSCA; (d) petroleum, petroleum by-products,
gasoline, diesel fuel, or other petroleum hydrocarbons; (e) asbestos and
asbestos-containing material, in any form, whether friable or non-friable; (f)
polychlorinated biphenyls; (g) lead and lead-containing materials; or (h) any
additional substance, material or waste (A) the presence of which on or about
the Premises requires reporting, investigation or remediation under any
Environmental Laws (as hereinafter defined), or (B) which is now or is hereafter
classified or considered to be hazardous or toxic under any Environmental Laws;
and "Environmental Laws" shall mean and include (a) CERCLA, RCRA and TSCA; and
(b) any other federal, state or local laws, ordinances, statutes, codes, rules,
regulations, orders or decrees now or hereinafter in effect relating to (i)
pollution, (ii) the protection or regulation of human health, natural resources
or the environment, (iii) the treatment, storage or disposal of Hazardous
Materials, or (iv) the emission, discharge, release or threatened release of
Hazardous Materials into the environment.
The undersigned hereby acknowledges and agrees that this Hazardous
Materials Disclosure Certificate is being delivered to Landlord in connection
with the evaluation of a Lease Agreement and, if such Lease Agreement is
executed, will be attached thereto as an exhibit. The undersigned further
acknowledges and agrees that if such Lease Agreement is executed, this Hazardous
Materials Disclosure Certificate will be updated from time to time in accordance
with Paragraph 32 of the Lease Agreement. The undersigned further acknowledges
and agrees that the Landlord and its partners, lenders and representatives may,
and will, rely upon the statements, representations, warranties, and
certifications made herein and the truthfulness thereof in entering into the
Lease Agreement and the continuance thereof throughout the term, and any
renewals thereof, of the Lease Agreement. I [print name] Jay O'Donald, acting
with full authority
i
<PAGE> 66
to bind the (proposed) Tenant and, not personally, but in such capacity on
behalf of the (proposed) Tenant, certify, represent and warrant that the
information contained in this certificate is true and correct.
(PROSPECTIVE TENANT: ARCXEL TECHNOLOGIES, INC.
By: /s/ Jay R. O'Donald
----------------------------
Title: President, CEO
-------------------------
Date: 11/17/97
--------------------------
INITIALS:
TENANT: /s/ Jay
------------------------
LANDLORD: /s/ CDS
----------------------
ii
<PAGE> 67
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Demise........................................................................1
Premises......................................................................1
Term .........................................................................2
Rent .........................................................................3
Utility Expenses..............................................................7
Late Charge...................................................................7
Security Deposit..............................................................8
Possession....................................................................8
Use of Premises...............................................................9
Acceptance of Premises.......................................................11
Surrender....................................................................11
Alterations and Additions....................................................12
Maintenance and Repairs of Premises..........................................14
Landlord's Insurance.........................................................15
Tenant's Insurance...........................................................15
Indemnification..............................................................16
Subrogation..................................................................17
Signs........................................................................18
Free from Liens..............................................................18
Entry by Landlord............................................................18
Destruction and Damage.......................................................19
Condemnation.................................................................21
</TABLE>
iii
<PAGE> 68
<TABLE>
<S> <C>
Assignment and Subletting....................................................22
Tenant's Default.............................................................25
Landlord's Remedies..........................................................27
Landlord's Right to Perform Tenant's Obligations.............................30
Attorney's Fees..............................................................30
Taxes........................................................................31
Effect of Conveyance.........................................................31
Tenant's Estoppel Certificate................................................31
Subordination................................................................32
Environmental Covenants......................................................32
Notices......................................................................36
Waiver.......................................................................36
Holding over.................................................................36
Successors and Assigns.......................................................37
Time ........................................................................37
Brokers......................................................................37
Limitation of Liability......................................................37
Financial Statements.........................................................38
Rules and Regulations........................................................38
Mortgagee Protection.........................................................38
Entire Agreement.............................................................39
Interest.....................................................................39
Construction.................................................................39
Representations and Warranties of Tenant.....................................39
Security.....................................................................40
</TABLE>
iv
<PAGE> 69
<TABLE>
<S> <C>
Jury Trial Waiver............................................................40
Security Deposit.............................................................41
Early Occupancy..............................................................41
Renewal Option...............................................................41
Limitations on Tenant's Responsibility.......................................42
</TABLE>
v
<PAGE> 70
Exhibit
A Diagram of the Premises
B Intentionally Omitted
B-1 Intentionally Omitted
C Commencement and Expiration Date Memorandum
D Rules and Regulations
E Sign Criteria
F Hazardous Materials Disclosure Certificate
G Intentionally Omitted
Addenda
None
vi
<PAGE> 71
ASSIGNMENT OF LEASE
Arcxel Technologies, Inc., a California corporation ("Assignor"), hereby
grants, assigns, transfers, conveys, and delivers to Vixel Corporation, a
Delaware corporation ("Assignee"), all of Assignor's right, title, and interest
in and to that certain Lease Agreement dated as of November 1, 1997 (the
"Lease"), by and between Aetna Life Insurance Company, a Connecticut
corporation, as Landlord, and Assignor, as Tenant, for that certain real
property commonly known as 15245 Alton Parkway, Suite 100, Irvine, California,
as more particularly described in the Lease. Assignee hereby accepts such
assignment and agrees to timely discharge, pay, perform, and be bound by all of
the obligations imposed in connection with the Lease arising from and after the
date hereof to the same extent as if Assignee had been an original party
thereto.
This Assignment of Lease shall not release Assignor from its obligation to
pay rent and to perform all of its other obligations under the Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment of
Lease as of July __, 1998.
"Assignor" "Assignee"
Arcxel Technologies, Inc., Vixel Corporation,
a California corporation a Delaware corporation
By: /s/ JAY O'DONALD By: /s/ GREGORY R. OLBRIGHT
-------------------------- -----------------------------
Name: Jay O'Donald Name: Greg Olbright
------------------------ ---------------------------
Its: CEO Its: CEO
------------------------- ----------------------------
By: /s/ KAY CHURCH By: /s/ KAREN HOWARD
-------------------------- -----------------------------
Name: Kay Church Name: Karen Howard
------------------------ ---------------------------
Its: Controller Its: Human Resources
------------------------- ----------------------------
By:
-----------------------------
<PAGE> 72
CONSENT TO ASSIGNMENT
THIS AGREEMENT (the "Agreement") is made as of the 24th day of August, 1998, by
and between Aetna Life Insurance Company, a Connecticut corporation
("Landlord"), Arxcel Technologies, Inc., a California corporation ("Tenant"),
and Vixel Corporation, a Delaware corporation ("Assignee"), with reference to
the following facts:
A. Landlord and Tenant entered into that certain Lease Agreement dated
November 1, 1997 (the "Lease"), relating to certain premises commonly
known as 15245 Alton Parkway, Suite 100, Irvine, California ("Premises").
B. Tenant and Assignee have entered into an Assignment dated as of July, 1998
(the "Assignment Agreement") pursuant to which Tenant has assigned to
Assignee and Assignee has assumed Tenant's entire right, title and interest
in and to the Lease.
C. Tenant has requested that Landlord consent to the assignment of the Lease
to Assignee pursuant to the Assignment Agreement. Landlord has agreed to
consent to the assignment of the Lease on the following terms and
conditions.
NOW, THEREFORE, in consideration of the foregoing, and in consideration of the
mutual agreements and covenants hereinafter set forth, Landlord, Tenant and
Assignee agree as follows:
1. DEFINITIONS
Unless otherwise defined in this Agreement, all defined terms used in this
Agreement shall have the same meaning and definition given them in the
Lease.
2. ASSUMPTION OF OBLIGATIONS
Notwithstanding anything to the contrary contained in the Assignment
Agreement, Assignee agrees to perform all of the covenants of Tenant
contained in the Lease, whether arising prior to, concurrently with or
after the execution of the Assignment Agreement. In furtherance of the
foregoing, Assignee understands and agrees that it shall be fully liable
to Landlord for the performance of all covenants, duties, agreements and
obligations of Tenant under the Lease to the same degree as if Assignee
were the original signatory to the Lease. Without limiting the generality
of the foregoing, Assignee agrees to pay rent and all other sums due under
the Lease directly to Landlord and Tenant shall have no right or claim to
or interest in any such sums. Tenant hereby absolutely and irrevocably
assigns and transfers to Landlord Tenant's rights under the Assignment
Agreement to all rentals and other sums due Tenant thereunder.
3. CONSENT OF LANDLORD
Landlord hereby consents to the assignment of the Lease to Assignee
pursuant to the terms of the Assignment Agreement. Landlord's consent
shall not release Tenant of any of its obligations under the Lease or
release or alter the liability of Tenant to pay rent and all other sums
due under the Lease and to perform and comply with all other obligations
of Tenant under the Lease, all as such Lease may be modified from time to
time by Landlord and Assignee with or without the consent of Tenant. As
between Landlord and Tenant, the assignment of the Lease to Assignee shall
not alter, amend or otherwise modify any provisions of the Lease. Landlord
shall have no obligations to any party in connection with the Premises
other than those obligations set forth in the Lease.
4. INDEMNIFICATION
Tenant shall indemnify and hold harmless Landlord and its Agents, against
and from any and all claims, losses, liabilities, judgments, costs,
demands, causes of action and expenses (including, without limitation,
attorneys' fees and consultants' fees) (collectively, "Claims") arising
from or related to the following: Assignee's use of the Premises or any
activity done, permitted or suffered by Assignee in, on or about the
Premises, the Building, or the Property; (b) any act or omission by
Assignee or its Agents in connection with or related to the Assignment
Agreement, the Premises, the Building, or the Property; (c) any Hazardous
Material used, stored, released, disposed, generated, or transported by
Assignee or its Agents in, on or about the Premises, including without
limitation, any Claims arising from or related to any Hazardous Material
investigations, monitorings, cleanup or other remedial action; and (d) any
action or proceeding brought on account of any matter referred to in items
(a), (b), and/or (c). If any action or proceeding is brought against
Landlord by reason of any such Claims, upon notice from Landlord, Tenant
shall defend the same at Tenant's expense with counsel reasonably
satisfactory to Landlord. The obligations of Tenant under this Section 5.1
shall survive and termination of the Assignment Agreement or the Lease.
5. MISCELLANEOUS PROVISIONS
(a) Tenant shall pay to Landlord, upon Landlord's demand, Landlord's fees
incurred in connection with Landlord's review and processing of
documents relating to the assignment of the Lease to Assignee.
(b) Tenant and Assignee agree not to amend, modify, supplement, or
otherwise change in any respect the Assignment Agreement except with
the prior written consent of Landlord.
<PAGE> 73
(c) This Agreement, together with the provisions of the Lease relating to
assigning, contains the entire agreement between the parties hereto
regarding the matters which are the subject of this Agreement. The
terms, covenants and conditions of this Agreement shall apply to and
bind the heirs, successors, executors and administrators and
permitted assigns of all the parties hereto; provided, however, that
neither Tenant nor Assignee shall assign any of its rights or
obligations hereunder without the prior written consent of Landlord.
The parties acknowledge and agree that no rule or construction, to
the effect that any ambiguities are to be resolved against the
drafting party, shall be employed in the interpretation of this
Agreement. If any provision of this Agreement is determined to be
illegal or unenforceable, such determination shall not affect any
other provisions of this Agreement, and all such other provisions
shall remain in full force and effect.
(d) If any party hereto fails to perform any of its obligations under
this Agreement or if any dispute arises between the parties hereto
concerning the meaning or interpretation of any provision of this
Agreement, then the defaulting party(ies) or the party(ies) not
prevailing in such dispute, as the case may be, shall pay any and all
costs and expenses incurred by the other party(ies) on account of such
default and/or in enforcing or establishing its (their) rights
hereunder, including, without limitation, court costs and reasonable
attorneys' fees and disbursements. Any such attorneys' fees and other
expenses incurred by any party in enforcing a judgment in its favor
under this Agreement shall be recoverable separately from and in
addition to any other amount included in such judgment, and such
attorneys' fees obligation is intended to be severable from the other
provisions of this Agreement and to survive and not be merged into
any such judgment.
IN WITNESS WHEREOF, the parties hereto have executed this Consent as of
the date first above stated.
LANDLORD: Aetna Life Insurance Company,
a Connecticut corporation
By: Allegis Realty Investors LLC,
Its Investment Advisor and Agent
By: /s/ CYNTHIA STEVENIN
------------------------------
Cynthia Stevenin
Vice President
TENANT: Arxcel Technologies, Inc.,
a California corporation
By: /s/ JAY R. O'DONALD
-----------------------------------
Title: CEO
--------------------------------
Date: 9/2/98
---------------------------------
By: /s/ KAY CHURCH
-----------------------------------
Title: Controller
--------------------------------
Date: 9/2/98
---------------------------------
ASSIGNEE: Vixel Corporation
a Delaware corporation
By: /s/ GREGORY R. OLBRIGHT
-----------------------------------
Title: CEO
--------------------------------
Date: 9/2/98
---------------------------------
By: /s/ KAREN L. HOWARD
-----------------------------------
Title: VP Human Resources
--------------------------------
Date: Sept. 2-98
---------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated May 19, 1999 except for the last paragraph of Note 8 which is
as of June 22, 1999, relating to the financial statements and financial
statement schedules of Vixel Corporation which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts"
and "Selected Financial Data" in such Prospectus. However, it should be noted
that PricewaterhouseCoopers LLP has not prepared or certified "Selected
Financial Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ---------------------------------------------------------
PricewaterhouseCoopers LLP
Seattle,Washington
June 22, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Vixel Corporation
We consent to the use of our report included herein dated May 1, 1997
relating to the balance sheet of Arcxel Technologies, Inc. as of December 31,
1996 and the related statements of operations, stockholders' equity and cash
flows for the period from June 18, 1996 (inception) to December 31, 1996, and to
the reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
- ---------------------------------------------------------
Orange County, California
June 22, 1999
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated April 24, 1998 relating to the financial statements of Arcxel
Technologies, Inc., which appears in such Registration Statement. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified "Selected Financial
Data" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
- ---------------------------------------------------------
PricewaterhouseCoopers LLP
Seattle, Washington
June 22, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) BALANCE
SHEET, STATEMENT OF OPERATIONS, STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(DEFICIT), STATEMENT OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH (B) S-1
</LEGEND>
<RESTATED>
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-29-1996 DEC-28-1997 JAN-03-1999 APR-04-1999 MAR-29-1998
<PERIOD-START> DEC-31-1995 DEC-29-1996 DEC-29-1997 JAN-04-1999 DEC-28-1997
<PERIOD-END> DEC-29-1996 DEC-28-1997 JAN-03-1999 APR-04-1999 MAR-29-1998
<CASH> 3,776 3,841 596 0 0
<SECURITIES> 0 2,490 3,635 0 0
<RECEIVABLES> 5,640 6,263 5,478 0 0
<ALLOWANCES> 36 231 255 0 0
<INVENTORY> 861 1,546 1,245 0 0
<CURRENT-ASSETS> 495 616 801 0 0
<PP&E> 11,629 10,444 10,719 0 0
<DEPRECIATION> 4,060 3,066 3,435 0 0
<TOTAL-ASSETS> 19,934 28,165 24,421 0 0
<CURRENT-LIABILITIES> 8,384 21,568 21,738 0 0
<BONDS> 6,057 6,528 6,525 0 0
19,523 19,993 20,042 0 0
12 14 14 0 0
<COMMON> 2 5 5 0 0
<OTHER-SE> (14,044) (19,943) (23,903) 0 0
<TOTAL-LIABILITY-AND-EQUITY> 19,943 28,165 24,421 0 0
<SALES> 6,941 22,783 39,445 10,623 10,522
<TOTAL-REVENUES> 6,941 22,783 39,445 10,623 10,522
<CGS> 7,342 19,047 36,199 8,365 7,529
<TOTAL-COSTS> 7,342 19,047 36,199 8,365 7,529
<OTHER-EXPENSES> 16,859 17,261 32,806 10,682 6,589
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 610 920 1,256 273 527
<INCOME-PRETAX> (17,652) (13,759) (21,233) 502 (4,039)
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> (17,652) (13,759) (21,233) 502 (4,039)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (17,652) (13,759) (21,233) 502 (4,039)
<EPS-BASIC> (37.91) (12.60) (6.88) .28 (.94)
<EPS-DILUTED> (37.91) (12.60) (6.88) .03 (.94)
<FN>
<F1>Organization and summary of significant accounting policies, Acquisitions, Sale
of division, Inventory, Property and equipment, Goodwill and intangibles,
Accrued liabilities, Line of credit and short-term note payable, Long-term debt
and capital leases. Commitments and contingencies, Mandatorily redeemable
convertible preferred stock, Stockholders' equity, Income taxes, Retirement
savings plan, Subsequent events
</FN>
</TABLE>
