<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2000
REGISTRATION NO. 333-31396
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NEW FOCUS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA
(PRIOR TO REINCORPORATION)
DELAWARE 3674 33-0404910
(AFTER REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>
2630 WALSH AVENUE
SANTA CLARA, CALIFORNIA 95051-0905
(408) 980-8088
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH E. WESTRICK
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2630 WALSH AVENUE
SANTA CLARA, CALIFORNIA 95051-0905
(408) 980-8088
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JUDITH M. O'BRIEN, ESQ. NORA L. GIBSON, ESQ.
ALISANDE M. ROZYNKO, ESQ. LAURA M. DE PETRA, ESQ.
MARGO M. EAKIN, ESQ. LORA D. BLUM, ESQ.
EDWARD F. VERMEER, ESQ. BROBECK PHLEGER & HARRISON LLP
WILSON SONSINI GOODRICH & ROSATI ONE MARKET, SPEAR STREET TOWER
PROFESSIONAL CORPORATION SAN FRANCISCO, CALIFORNIA 94105
650 PAGE MILL ROAD (415) 442-0900
PALO ALTO, CA 94304
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE(3)
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Common Stock, $0.001 par value.............................. $86,250,000 $22,770
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</TABLE>
(1) Includes shares which the underwriters have the option to purchase to cover
over-allotments, if any.
(2) Estimated solely for the purpose of Rule 457(o) of the Securities Act of
1933 solely for the purpose of computing the amount of the registration fee.
(3) A registration fee of $22,770 was paid in connection with the initial filing
on March 1, 2000.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
EXPLANATORY NOTE
The purpose of this Amendment No. 2 to the Registration Statement is solely
to file certain exhibits to the Registration Statement, as set forth below in
Item 16(a) of Part II.
<PAGE> 3
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 New Focus, Inc. in connection
with the sale of Common Stock being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $22,770
NASD filing fee............................................. 9,125
Nasdaq National Market listing fee.......................... *
Printing and engraving costs................................ *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. 3,000
Transfer Agent and Registrar fees........................... *
Miscellaneous expenses...................................... *
-------
Total....................................................... $ *
=======
</TABLE>
- -------------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Registrant's Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
The Registrant's Bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of the Registrant if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to the best interest of the Registrant, and, with respect to any criminal action
or proceeding, the indemnified party had no reason to believe his or her conduct
was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued unregistered securities to a limited number
of persons as described below:
None of these transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and we believe that each
transaction was exempt from the registration requirements of the Securities Act
by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule
701 pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients of securities in
each such transaction represented their intention 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 were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
- -------------------------
(1) On April 18, 1990, we sold 400,000 shares of common stock to Milton Chang
at a purchase price of $.005 per share. On April 18, 1990, the Board of
Directors granted Milton Chang an option outside
II-1
<PAGE> 4
of our Stock Option Plan for 800,000 shares of our Common Stock at an
exercise price of $.0025. Mr. Chang exercised this option on January 19,
2000.
(2) From February 28, 1997 through January 31, 2000, (the most recent
practicable date) we granted stock options to acquire an aggregate of
5,826,000, 422,000 and 1,989,200 shares of our common stock at prices
ranging from $.46 to $1.25, $.62 to $.62 and from $.62 to $1.25 to
employees, consultants and directors pursuant to our 1990 Incentive Stock
Option Plan, 1998 Stock Plan and 1999 Stock Plan, respectively.
(3) From April, 1991 through February, 1992, we issued 8,640,000 shares of
Series A preferred stock to Milton Chang pursuant to a series of put-option
agreements at a price of $.1250.
(4) From May, 1990 through January 1991 we sold 15,160,000 shares of Series A
Preferred Stock for $.125 per share to a group of private investors for an
aggregate purchase price of $1,895,000.
(5) On December 10, 1993, we sold 1,000,000 shares of Series B Preferred Stock
for $0.25 per share to a group of private investors for an aggregate
purchase price of $250,000.
(6) On July 24, 1998, we sold 600,000 shares of Series C Preferred Stock for
$.85 per share to a group of private investors for an aggregate purchase
price of $510,000.
(7) On July 31, 1998, and August 6, 1998, we sold 3,977,000 shares of Series D
Preferred Stock for $1.00 per share to a group of private investors for an
aggregate purchase price of $3,977,000.
(8) On February 9, 1999, in connection with a Loan and Security Agreement, we
issued a warrant to purchase 140,000 shares of Series D Preferred Stock at
an exercise price of $1.00 to Venture Lending and Leasing II, Inc.
(9) On June 14, 1999, we sold 10,857,616 shares of Series E Preferred Stock for
$1.20 per share to a group of private investors for an aggregate purchase
price of $13,029,139.20.
(10) We entered into a Technology Transfer Agreement dated June 24, 1999, with
Peter Chen pursuant to which we purchased certain technology from Mr. Chen
in consideration for options to purchase 230,000 shares of our common stock
at the fair market value and the sum of $220,000. Additional terms and
conditions are set forth in such Technology Transfer Agreement.
(11) On October 15, 1999, we sold 1,113,800 shares of Series F Preferred for
$1.20 per share to a group of private investors for an aggregate purchase
price of $1,336,560.
(12) On November 23, 1999, we sold 9,350,728 shares of Series G Preferred for
$3.25 per share to a group of private investors for an aggregate purchase
price of $30,389,866.
(13) On March 3, 1999 and November 1, 1999, we entered into consulting
agreements with John Dexheimer, one of our directors, for services rendered
in connection with the Series E, Series F and Series G Preferred Stock
financings. Pursuant to these agreements, Mr. Dexheimer received warrants
to purchase 111,792 shares of Series E Preferred Stock at a price per share
of $1.20.
(14) On February 28, 2000, we issued rights to 116,000 shares of our stock in
connection with a business acquisition.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of prospectus included herein.
The sales of the above securities were deemed to be exempt from
registration in reliance on Rule 701 promulgated under Section 3(b) under the
Securities Act as transactions pursuant to a compensatory benefit plan or a
written contract relating to compensation, or in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder as transactions by an
issuer not involving any public offering. The recipients of securities in each
such transaction represented their intention 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 were affixed to the share
certificates and other instruments issued in such transactions.
II-2
<PAGE> 5
All recipients either received adequate information about New Focus, Inc. or had
access, through employment or other relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Amended and Restated Certificate of Incorporation of the
Registrant
3.2** Bylaws of the Registrant
4.1* Form of stock certificates
4.2 Warrant to Purchase Series D Preferred Stock dated February
1999, between Registrant and Venture Lending and Leasing,
see Exhibit 10.15.
4.3** Warrant to Purchase Series E Preferred Stock dated February
9, 2000, between Registrant and John Dexheimer.
4.4** Warrant to Purchase Series E Preferred stock dated February
9, 2000, between Registrant and Pamela York.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1** Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.2** 2000 Stock Plan
10.3** 2000 Employee Stock Purchase Plan
10.4** 2000 Director Option Plan and form of agreement thereunder
10.5** Form of Amendment to New Focus, Inc. Non Statutory Stock
Option Agreement, Restated Stock Purchase Agreement,
including Security Agreement and Promissory Note between
Registrant and Kenneth E. Westrick, Paul Smith, Bao-Tong Ma,
George Yule, Robert Marsland, Timothy Day, dated January 12,
2000.
10.6** Premises Lease Contract between Registrant and Shenzhen New
and High-tech Village Development Company dated September
23, 1999.
10.7** Lease Agreement between Registrant and Silicon Valley
Properties dated December 23, 1999.
10.8+ Agreement on Terms and Conditions of Purchase and Sale of
Optical Components between Registrant and Corning,
Incorporated dated January 1, 2000.
10.9** Lease Agreement between Focused Research Inc. and University
Science Center Partnership, dated May 22, 1996, as amended,
June 19, 1997.
10.10** Fifth Amended and Restated Registration Rights Agreement
10.11+ Development Agreement between Registrant and Hewlett-Packard
GmbH dated December 23, 1996.
10.12+ Addendum to the Development Agreement between Registrant and
Hewlett-Packard GmbH dated November 6, 1997.
10.13+ Addendum No. 2 to the Development Agreement of December 23,
1996 between Registrant and Agilent Technologies Deutschland
GmbH dated December 10, 1999.
10.14+ Memorandum of Agreement between Registrant and Alcatel USA
Sourcing, L.P. dated January 7, 2000.
10.15 Loan and Security Financing Agreement between Registrant and
Venture Lending and Leasing II, Inc.
21.1** List of Subsidiaries
23.1** Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Counsel (see Exhibit 5.1)
24.1** Power of Attorney
27.1* Financial Data Schedules
</TABLE>
- -------------------------
+ The Registrant will request confidential treatment with respect to certain
portions of this Exhibit. The omitted portions will be separately filed with
the Commission.
* To be filed by amendment.
** Previously filed.
II-3
<PAGE> 6
(b) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
<TABLE>
<CAPTION>
ADDITIONS-
BALANCES AT CHARGED TO BALANCES
BEGINNING COSTS AND DEDUCTIONS- AT END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
----------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Year ended March 31, 1998...................... $ 70 $ 63 -- $$133
Year ended March 31, 1999...................... $133 $ 40 $(38) $135
Nine months ended December 31, 1999............ $135 $ 39 $(14) $160
</TABLE>
Schedules other than that listed above have been omitted since they are not
required or are not applicable or the required information is shown in the
financial statements or related notes.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being registered
hereunder, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Santa Clara, State of California, on the 28th day of March, 2000.
NEW FOCUS, INC.
By: /s/ KENNETH E. WESTRICK
------------------------------------
Kenneth E. Westrick
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 2 to the 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/ KENNETH E. WESTRICK President, Chief Executive March 28, 2000
- -------------------------------------------------------- Officer and Director
Kenneth E. Westrick (Principal Executive
Officer)
WILLIAM L. POTTS, JR.* Chief Financial Officer March 28, 2000
- -------------------------------------------------------- (Principal Financial and
William L. Potts, Jr. Accounting Officer)
CHARLES BOPPELL* Director March 28, 2000
- --------------------------------------------------------
Charles Boppell
DR. MILTON CHANG* Director March 28, 2000
- --------------------------------------------------------
Dr. Milton Chang
JOHN DEXHEIMER* Director March 28, 2000
- --------------------------------------------------------
John Dexheimer
DR. WINSTON FU* Director March 28, 2000
- --------------------------------------------------------
Dr. Winston Fu
R. CLARK HARRIS* Director March 28, 2000
- --------------------------------------------------------
R. Clark Harris
ROBERT D. PAVEY* Director March 28, 2000
- --------------------------------------------------------
Robert D. Pavey
*By: /s/ KENNETH E. WESTRICK
------------------------------------------------
Kenneth E. Westrick
Attorney-in-fact
</TABLE>
II-5
<PAGE> 8
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Amended and Restated Certificate of Incorporation of the
Registrant
3.2** Bylaws of the Registrant
4.1* Form of stock certificates
4.2 Warrant to Purchase Series D Preferred Stock dated February
1999, between Registrant and Venture Lending and Leasing,
see Exhibit 10.15.
4.3** Warrant to Purchase Series E Preferred Stock dated February
9, 2000, between Registrant and John Dexheimer.
4.4** Warrant to Purchase Series E Preferred stock dated February
9, 2000, between Registrant and Pamela York.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1** Form of Indemnification Agreement between the Registrant and
each of its directors and officers
10.2** 2000 Stock Plan
10.3** 2000 Employee Stock Purchase Plan
10.4** 2000 Director Option Plan and form of agreement thereunder
10.5** Form of Amendment to New Focus, Inc. Non Statutory Stock
Option Agreement, Restated Stock Purchase Agreement,
including Security Agreement and Promissory Note between
Registrant and Kenneth E. Westrick, Paul Smith, Bao-Tong Ma,
George Yule, Robert Marsland, Timothy Day, dated January 12,
2000.
10.6** Premises Lease Contract between Registrant and Shenzhen New
and High-tech Village Development Company dated September
23, 1999.
10.7** Lease Agreement between Registrant and Silicon Valley
Properties dated December 23, 1999.
10.8+ Agreement on Terms and Conditions of Purchase and Sale of
Optical Components between Registrant and Corning,
Incorporated dated January 1, 2000.
10.9** Lease Agreement between Focused Research Inc. and University
Science Center Partnership, dated May 22, 1996, as amended,
June 19, 1997.
10.10** Fifth Amended and Restated Registration Rights Agreement
10.11+ Development Agreement between Registrant and Hewlett-Packard
GmbH dated December 23, 1996.
10.12+ Addendum to the Development Agreement between Registrant and
Hewlett-Packard GmbH dated November 6, 1997.
10.13+ Addendum No. 2 to the Development Agreement of December 23,
1996 between Registrant and Agilent Technologies Deutschland
GmbH dated December 10, 1999.
10.14+ Memorandum of Agreement between Registrant and Alcatel USA
Sourcing, L.P. dated January 7, 2000.
10.15 Loan and Security Financing Agreement between Registrant and
Venture Lending and Leasing II, Inc.
21.1** List of Subsidiaries
23.1** Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Counsel (see Exhibit 5.1)
24.1** Power of Attorney
27.1* Financial Data Schedules
</TABLE>
- -------------------------
+ The Registrant will request confidential treatment with respect to certain
portions of this Exhibit. The omitted portions will be separately filed with
the Commission.
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 10.8
CONFIDENTIAL
AGREEMENT ON TERMS AND CONDITIONS
OF PURCHASE AND SALE OF OPTICAL COMPONENTS
This Agreement ("Agreement") is made as of this 1st day of January, 2000
by and between Corning Incorporated, a New York Corporation, with an address at
Houghton Park, Corning, NY 14831 ("Corning") and New Focus, Inc. with an address
at 2630 Walsh Avenue, Santa Clara, CA 95051 ("Seller").
WHEREAS, Corning and certain of its affiliated companies plan to place
with Seller from time to time during the terms of this Agreement specific orders
for the purchase of certain Optical Components ("Materials"); and
WHEREAS, the parties wish to provide for the general terms and
conditions upon which such Materials purchase transactions shall be made; and
WHEREAS, the parties may wish to subsequently provide for certain
services for processing or additional goods and services related to the
Materials;
NOW THEREFORE, in consideration of the mutual covenants herein, Corning
and Seller hereby agree as follows:
1. Term. The Term of this Agreement shall be from January 1, 2000 through
December 31, 2000 If the parties are not in breach at the expiration of the
Term, then they may mutually agree in writing to continue this Agreement,
upon thirty (30) days' notice prior to the term expiration date, for an
additional one (1) year term.
2. Scope. During the Term of this Agreement, the terms and conditions
specified by this Agreement shall apply to all purchases of the Materials
by Corning from Seller. This Agreement is based upon an anticipated
procurement of Materials described in Appendix 1. The estimated quantity of
each item of Materials to be purchased hereunder is described in the same
Appendix. That estimated quantity for each item is based on an allocation
to Seller of a share (expressed as a percentage) of Corning's purchases
from unaffiliated companies of that item. Corning anticipates that this
share allocation to the Seller will not change during the term of this
Agreement provided the Seller can meet its delivery and other obligations
under this Agreement, and can continuously keep Corning competitive in the
market place. Corning may conduct business reviews with the Seller on a
periodic basis (monthly, quarterly, semi-annually) to review the overall
market situation and discuss changes needed to maintain a competitive
position in the communications industry.
3. Releases. When Corning wishes to purchase Materials pursuant to this
Agreement, it shall submit a written release form for a specific quantity
to Seller. Seller shall ship Materials in accordance with the Corning
release. Release forms may be delivered to Seller via fax, email, EDI, or
U.S. mail.
4. Schedule and Safety Stock. Corning's schedules depend upon timely delivery
of Materials and therefore, time is of the essence in Corning's release
forms issued to Seller hereunder. Seller agrees to make timely delivery in
accordance with agreed
<PAGE> 2
upon delivery dates. In order to assure Corning of continuity of supply,
Seller will keep as a safety stock a four-week supply of finished goods of
each Material exclusively for Corning for which Corning shall be
responsible to purchase upon termination or Material discontinuance.
Corning will authorize and update, on a quarterly basis, the safety stock
level required by product that the Seller will have available to ship. If
this level exceeds four (4) weeks of the demand, Corning shall only be
obligated to purchase the authorized four (4) weeks supply upon termination
or material discontinuance.
5. Price(s) and Quantity. During the Term, the guaranteed prices, and
estimated quantities of the Materials sold by Seller to Corning shall be as
specified in Appendix I hereto.
6. Delivery. Unless otherwise agreed, all price and delivery terms shall be on
a delivered basis, broken out specifying price, insurance, and freight
separately.
7. Performance. Corning will provide a minimum of 3 weeks lead time on new
purchase orders and 2 weeks lead time on schedule changes on forecasts.
Corning will provide at least a three (3) month or greater rolling Forecast
reflecting, by time period, shipping quantities required for each part
number to support Corning's manufacturing schedules.
Seller agrees to make timely deliveries in accordance with agreed upon
delivery dates.
8. Title. Title to and possession of all Materials shipped by Seller to
Corning shall pass to Corning upon delivery of materials at the Corning
location.
9. Warranty/Specifications. At the time of delivery, Seller warrants that
title to the Materials shall pass to Corning, free and clear of claims or
liens of third parties. Seller also warrants that the Materials supplied by
Seller to Corning hereunder shall meet the quality levels and specification
levels defined in Appendix II. Materials shall be free of objects or other
substances which, in the opinion of Corning, could render them until for
intended use. If quality levels are not defined in Appendix II for a
particular item, then Seller warrants that such Materials shall be
merchantable, of best quality and free from defects in materials,
processing or workmanship. This warranty shall survive any inspection by
Corning.
Any attempt by Seller to limit, disclaim, or restrict any such warranties
or any remedies of Corning, by acknowledgment or otherwise, in accepting or
performing this order, shall be null, void and ineffective without
Corning's written consent.
The initial warranty period of Materials shipped under the terms and
conditions of this Agreement will be [*] from the date of shipment by
Supplier. Any purchased device which is rejected for non-conformance to
Corning's specification will be returned to Seller. Seller will, at
Corning's option and without limiting any other rights of Corning, either:
(1) credit Corning the value of device, (2) replace the device at no
expense to Corning, or (3) repair the device at no cost to Corning.
10. Software & Systems Warranty. Seller warrants that the quality and delivery
of the Material will not be affected by any computer system and/or software
related
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 3
malfunction including, but not limited to, changes in dates, the passing of
the calendar years 1999 or 2000, the next millennium and/or leap years.
Should Seller fail to meet the requirements of this Agreement due to such
computer system and/or software related malfunctions, Corning may (without
prejudice to any other available remedy or cause of action) terminate this
Agreement on five (5) days advance written notice to Seller. Additionally,
Corning may terminate this Agreement if Seller, when requested, fails to
give adequate assurance that it or any of its suppliers are Year 2000
compliant.
11. Inspection. Corning shall be entitled to inspect Materials upon delivery.
Any prior inspection of Materials or sampling at the Seller's facility by
Corning personnel will imply neither delivery or acceptance of such
Materials by Corning.
12. Plant Access. Seller will allow representatives of Corning and Corning's
customers access to the facilities involved in performing this order for
purposes of reviewing the status and progress of production and witnessing
any test and inspections. Such access will not relieve Seller of any of its
obligations.
13. Inspection Reports. Seller shall furnish Corning with Inspection Reports
for each shipment of Materials hereunder. Seller shall collect all relevant
data for each Material prior to shipment. Such Certificates of Analysis
shall be specific by traceable notations and Corning may reject items that
do not meet the specifications in Appendix II. Inspection reports shall
accompany all Materials shipped to Corning. Duplicate copies shall be filed
and stored by Seller for a period of seven (7) years in case future
reference is required by Corning.
14. Invoicing and Payment. Seller shall invoice Corning in duplicate for
Materials ordered by and delivered to Corning. Corning shall pay such
invoices within forty-five (45) days after their receipt. Corning shall not
be required to pay invoices for any Materials which do not meet applicable
specifications or for quantities other than those it ordered.
15. Process Changes. Seller shall notify Corning in writing and at least 30
days in advance of any change in its manufacturing, assurance of supply,
refining, feedstock, process or equipment that might affect Corning's
results, its access to, or its use of the Materials purchased from Seller
hereunder.
16. Design Changes. In the event that Corning's requirements for Materials
change, Corning and Seller shall meet in good faith to discuss possible
changes in the design of Materials and may amend the specifications to
comply with Corning's new requirements. If Seller has the technical
capability to meet Corning's new requirements, Seller shall do so. Any
price adjustments resulting from proposed design changes will be negotiated
in godd faith by Seller and Corning.
17. Patents. Seller agrees to indemnify, hold harmless and protect Corning
against any costs (including reasonable attorneys' fees), liabilities, and
judgments arising from any claim made by a third party against Corning that
the materials supplied by Seller under this Agreement infringe patent or
copyrights of such third party. Corning shall promptly notify Seller of any
such claim, agrees to provide information and reasonable assistance, and
give Seller sole authority to defend or settle such claim. Upon notice of
an alleged infringement, Seller may, at its option and expense, (i) obtain
for Coming the right to continue using the Materials, (ii) replace or
modify the product so that is
<PAGE> 4
becomes non-infringing or non-violating, (iii) substitute an equivalent
non-infringing version of the Materials. In the event that none of the
above options is reasonably available, either party may terminate this
Agreement and Corning may return any and all Materials paid for and in
Corning's inventory and obtain a refund from Seller of the price paid by
Corning for such inventory. Termination hereunder does not discharge the
obligations of Seller to defend Corning and pay costs or judgments.
Notwithstanding the above provisions, Seller assumes no liability for any
infringement claims based upon the use of the Materials either (i) in
connection or in combination with equipment, devices, products or software
not provided by Seller if such claims would not have resulted but for some
combination or use, or (ii) for other than normal purposes.
THE FOREGOING STATES EACH PARTY'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO
CLAIMS OF INFRINGEMENT OR VIOLATION OF THIRD PARTY PROPRIETARY RIGHTS OF
ANY KIND.
18. Excusable Failure or Delay (Force Majeure). Neither party shall be held
responsible for the failure or delay in performance hereunder where such
failure or delay is due to any act of God or of the public enemy, war,
compliance with laws, governmental acts or regulations, fire, flood,
epidemic, accident, unusually severe weather or other causes similar to the
foregoing beyond their reasonable control. Any party whose performance is
affected by such force majeure shall promptly give notice to the other
party of the occurrence or circumstance upon which it intends to rely to
excuse its performance. If the circumstances of force majeure affecting
either party's performance hereunder delays performance for more than seven
(7) days, then the other party may terminate this Agreement upon seven (7)
days' advance written notice. In no event shall a failure or delay in
performance attributable to the "Year 2000" or other computer system and/or
software related malfunction be excusable under this paragraph or any other
paragraph of this Agreement.
19. [*]
20. Price Protection. If Corning submits substantial evidence in writing that
another producer of goods has lawfully offered Corning goods of similar
quality, in similar quantities and under like terms and conditions, at a
delivered cost at least [*] lower than the delivered cost hereunder, then
Corning will give Seller written notice of such lower offer.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 5
If Seller does not agree, in writing and within thirty (30) days of such
notice, to reduce its price immediately to meet that lower offer, then, at
the expiration of that thirty (30) day period, Corning's only purchase
obligation hereunder will be to purchase Materials for which releases have
already been issued by Corning and accepted by Seller. Upon the purchase by
Corning of the Materials under those prior releases, Corning will be deemed
to have satisfied any and all purchase commitments and obligations
hereunder, and will not be subject to any penalty, price adjustment or
other liability for failure to purchase any additional Materials from
Seller.
21. No Assignment. This Agreement shall not be assigned and is not assignable
or delegable by either party without the written consent of the other,
which shall not be unreasonably withheld.
22. Compliance with Laws. Seller shall comply with all applicable federal,
state and local laws and regulations in the manufacture, processing, sale
and transport of the Materials to be delivered hereunder. In the event that
Seller's work does not comply with any such laws, codes, and regulations,
Seller shall correct any such noncompliance at its sole expense and
indemnify and hold Corning harmless from any claims, costs, fines,
penalties, expenses, liabilities or losses on account of any such
noncompliance.
23. Default and Termination. This Agreement and all rights granted hereunder
may be terminated by either party: (a) in the event of a continuing default
by the other party of any obligation hereunder, effective seven Corning
business (7) days after written notice of such default is given to the
defaulting party; or (b) immediately in the event that either a delivery
that is more than fifteen (15) Corning business days late, or if any three
(3) deliveries are more than seven (7) Corning business days late in any
six-month period; or (c) immediately upon written notice in the event of
bankruptcy, insolvency or any other financial condition creating reasonable
doubt as to that party's ability to perform hereunder. If any instance
under (a) or (b) occur, Corning must notify Seller in writing within (30)
days of each event. In the event that Corning does not notify Seller,
termination rights for that event lapse.
No such termination shall affect or discharge any obligations of either
party which arose prior to the effective date of termination with respect
to warranties, indemnification, moneys owed or confidential information.
24. Cancellation for Buyer's Convenience. Corning may cancel a firm Purchase
Order at any time prior to delivery. In the event of such cancellation,
Seller shall immediately cease to incur expense against the affected
Purchase Order.
If the purchase order covered standard product which is easily sellable to
Seller's other customers, the Corning will have no liability to Seller for
cancellation of the Purchase Order.
For Purchase Orders for nonstandard products, Corning's liability in the
event of cancellation shall be limited to the following for deliveries
cancelled under such Purchase Order:
<PAGE> 6
a. Actual cost incurred by Seller, up to and including the date of
cancellation for material costs and direct labor costs; and
b. Reasonable costs that Seller has reasonably committed to pay to its
suppliers; and for the materials for undelivered quantities.
Seller shall use reasonable endeavors to mitigate the amount of such
charges. Seller will provide Corning with clear documentation of all costs
and charges which Corning is liable under this provision. In no event will
Corning be liable for cancellation charges in excess of the contract value
of the Materials cancelled. Upon payment of such cancellation charges by
Corning, Seller shall deliver to Corning, in accordance with the delivery
terms of this Agreement, all work in progress and inventory for which
Corning has made payment.
25. Obsolescent. Corning reserves the right to reduce estimated quantities (but
maintaining share percentage) or substitute new products for those
referenced in Appendix I, in the event that new products offering a
superior technological or economic advantage become available during the
term of this Agreement. Seller shall be given a reasonable amount of time
to match such new products.
26. Waiver. The failure of Corning to insist in any one or more instances upon
the full performance of any of the terms, covenants or conditions of this
order or to exercise any rights it may have hereunder shall not be
construed as a waiver of any legal rights it may have with respect to such
nonperformance or be construed as Corning's condoning further
nonperformance of such terms, covenants or conditions.
27. Confidential Information. The nondisclosure agreement entered into by the
Parties on March 15, 1999 will govern the use of confidential information
by Seller. The term of the nondisclosure agreement will be the term of this
Agreement. This Agreement and its terms are subject to that nondisclosure
agreement.
28. Promotion Limitation: Seller agrees that it will not use Corning's name
whether by including reference to Corning in any list of customers
advertising that its services or products are used by Corning or otherwise,
without written authorization by Corning's authorized representative.
29. Liability. To the fullest extent permitted by law, Seller hereby
indemnifies and agrees to hold harmless Corning, its affiliates,
subsidiaries, agents, employees, directors, or representatives from and
against all claims, damages, losses and expenses, including but not limited
to attorneys' fees, arising out of or resulting from Seller's supply of
Materials or performance of these services.
30. Insurance. If Seller performs any services for Corning on Corning's
premises, Seller shall, at any time(s) upon request, furnish Corning with
an insurance certificate(s) from its insurance carrier(s) naming Corning as
an additional insured, evidencing the existence of insurance coverage of
the following kinds in at least the following amounts:
A. Workers' compensation insurance as required by law and Employer's
liability insurance with limits not less than One Million Dollars
($1,000,000).
<PAGE> 7
B. Comprehensive public liability insurance for personal injury
(including death) and property damage with limits of not less than
Five Million Dollars ($5,000,000) for personal injury and property
damage, including coverage for owned and nonowned automobiles and
Seller's contractual obligations.
C. Umbrella liability insurance with limits not less than Five Million
Dollars ($5,000,000).
31. Choice of Law and Forum. This Agreement shall be governed by, interpreted
and construed and performance hereunder shall be determined in accordance
with the law of the State of New York, without regard to its conflicts of
law principles. In the event of disputes or claims relating to this
Agreement, both parties agree to seek an amicable settlement prior to
commencing any litigation. In the event of litigation, any action shall be
venued in either the Supreme Court of the State of New York, Steuben
County, or in the United States District Court, Western District of New
York.
32. Conflict of Terms. The terms and conditions of Corning stated on this
Agreement shall govern in the event of any conflict with any terms proposed
by Seller, and are not subject to change by reason of any written or oral
statements by Seller or by any terms stated in Seller's acknowledgement of
this order, unless such conflicting or additional terms are accepted in a
writing making reference to this Agreement and signed by Corning. Shipment
of goods or materials, or performance of services pursuant to this order
shall be deemed to be an unqualified acceptance of the terms and conditions
contained herein.
33. Counterparts. This Agreement may be executed simultaneously 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.
34. Notices, Entire Agreement and Change Orders. All notices delivered or
demands given by either party under this Agreement shall be delivered in
person, or forwarded by U.S. Mail, postage prepaid, or they may be faxed
properly addressed to the authorized representatives of the party. This
Agreement constitutes the entire agreement between Corning and Seller with
respect to the Work, and supersedes all prior and contemporaneous
negotiations, agreements, representations, understandings and commitments.
No change, modification or extension of this Agreement shall be effective
unless it is made in writing, makes specific reference to this Agreement
and signed by duly authorized representatives of Corning and Seller. Such
approval shall not be unreasonably withheld. For the purposes of this
Agreement, the following persons are the authorized representatives of
Buyer and Corning:
For Corning: Kathryn M. Murphy, Division Vice President,
Materials Management
For Seller: Paul G. Smith, Vice President and General Manager
35. Ownership of Tools and Intellectual Property. Corning shall have title to
and the right of immediate possession of any tools, equipment or prototypes
furnished or paid for by Corning, and if and when any such Corning property
is in the possession of Seller,
<PAGE> 8
Seller shall not use such property for any work other than that of Corning
and shall maintain such property in good and usable condition at no further
cost to Corning.
Pursuant to the terms of the confidentiality agreement between Corning and
Seller, Seller will not use any confidential information of Coming (as
defined in that agreement) for any purpose other than the supply of
Materials to Corning. Accordingly, if Seller uses any such confidential
information of Corning to design or make any Materials, then those
Materials will be sold only to Corning and Seller will not sell or offer to
sell those Materials to any third party without the prior written consent
of Corning.
IN WITNESS WHEREOF, Seller and Corning have executed this Agreement by
their respective duly authorized representatives as of the date first above
written.
SUPPLIER NAME CORNING INCORPORATED
By: /s/ PAUL SMITH By: /s/ KATHRYN M. MURPHY
-------------------------------- --------------------------------
Kathryn M. Murphy
Title: VP/GM Telecom Division Title: Division Vice President,
Materials Management
Date: 2/18/00 Date: 2/14/00
<PAGE> 9
APPENDIX I
Quantity and Pricing
1. Quantity. Corning will purchase from New Focus a percentage (listed below
in Share) of its external requirements of the Materials during the term of
this Agreement. The forecasted volumes below are an estimate to be used for
the Seller's information purposes only, and is not intended to bind or
obligate Corning to purchase said amount.
2. Pricing.
<TABLE>
<CAPTION>
Product Share Est Volume Price (1/1-6/30)* Price (7/1-12/31)*
----------------- ----- ---------- ----------------- ------------------
<S> <C> <C> <C> <C>
[*]
</TABLE>
All pricing takes effect 1/1/00. Any current purchase orders will
cancelled 12/30/99 and new purchase orders placed at the new pricing.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 10
APPENDIX II
PURCHASE SPECIFICATION
<TABLE>
<CAPTION>
CORNING SPEC
CORNING PART NUMBER DESCRIPTION NUMBER/DATE
- ------------------- ----------- ------------
<S> <C> <C>
[*]
</TABLE>
This product shall be free from all other material or objects which, in the
opinion of Corning Incorporated, could render it unfit for its intended
use.
All measurements made to determine compliance with this specification shall
be done in accordance with analytical procedures approved by Corning
Incorporated.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 1
EXHIBIT 10.11
Agreement No. .......
DEVELOPMENT AGREEMENT
by and between
HEWLETT-PACKARD GmbH
HERRENBERGER STRASSE 130
71034 BOEBLINGEN
GERMANY
- hereinafter referred to as "HP" -
and
NEW FOCUS INC.
2630 WALSH AVE.
SANTA CLARA CA
USA
- hereinafter referred to as "New Focus" -
REGARDING THE DEVELOPMENT OF A TUNABLE LASER SOURCE MODULE
1
<PAGE> 2
1. SUBJECT-MATTER OF THE AGREEMENT
This agreement pertains to and covers the development of a Tunable Laser
Source Module (including hard- and software) which is described in
greater detail in the specifications in Schedule 1 hereto, as well as to
the manufacture of prototypes and production units by New Focus whilst
adhering to the project schedule as set forth in Schedule 3 hereof.
2. BREAK-DOWN OF COSTS / REMUNERATION
2.1 In return for the services outlined in Article 1 above, HP shall effect
payment in installments as laid out in A.) 5. of Schedule 1 according to
the development phases described in A.) 4. of Schedule 1 hereto. The
payments shall become due and payable in accordance with the terms and
conditions outlined in A.) 5. of Schedule 1.
All prices quoted are FOB Santa Clara, CA, USA. HP is responsible for
all taxes, customs, and freight.
2.2 Should the parties agree upon payment by installments which are due
prior to final and complete performance of the entire development
service, New Focus undertakes, prior to payment of the respective
installment, to provide HP with an irrevocable, unconditional and
absolute guarantee from a bank recognized as guarantor in the amount of
the respective installment. HP shall return such guarantee to the
supplier upon written confirmation of acceptance of the prototypes or
the software.
Installments by HP shall not include any acceptance of the prototypes,
developed software or the production units. With payment of the
installment all performances and expenses of New Focus in regard of the
respective development phase shall be covered.
2.3 All obligations regarding payment of costs and expenses incurred by New
Focus in connection with the performance of services to be provided
shall be deemed discharged upon payment of the agreed remuneration.
3. DEVELOPMENT
3.1 The prototypes as well as the software shall be manufactured by New
Focus in accordance with the project schedule (Schedule 3) and the
development phases contained therein as well as in Schedule 1.
3.2 Prior to the commencement of development, New Focus shall ensure that
the specifications are complete and that implementation of the contents
thereof is feasible. Should New Focus detect any defects or omissions
upon examination of the specifications, it shall inform HP hereof in
writing without any undue delay.
2
<PAGE> 3
3.3 The deadlines outlined in the agreed project schedule (Schedule 3) shall
be binding upon both parties.
3.3 In order to ensure successful and timely performance of the Development
agreement for both parties, the parties hereto agree that New Focus
shall submit to HP a written report detailing key aspects of the project
at regular monthly intervals. Both parties shall have the option of
requesting that the other party engage in discussions regarding the
current stage of development, problems arising in connection therewith,
matters pertaining to coordination etc.
New Focus shall, in particular, advise HP of the following in this
regard:
3.4.1 PROJECT STATUS
Classification of the system components on which work was performed
during the period under review. The stage of work carried out and of the
semi-finished work, as well as a comparison of the target and actual
situation if the project schedule and/or the specification requirements
have not (yet) been complied with. Any deviations or postponement of
deadlines must be justified and the supplier is further required to
indicate the measures planned for re-establishing the target situation.
3.4.2 FORECAST
New Focus shall advise HP of the work scheduled for the next period
under review, also with a view to enabling HP to arrange, in good time,
for any support which it may be required to provide.
On HP's request, New Focus shall, during the course of discussions,
provide HP with copies of HP-specific documentation regarding the
development of prototypes and software available at the time of such
discussions.
Minutes, to be duly countersigned by both parties, shall be kept of all
such discussions.
3.5 New Focus shall document the development result and the individual
development steps and make such material available to HP in
machine-readable form.
4. RESOURCES
4.1 New Focus avails of a development center which is suitably equipped to
develop the developed software defined under the subject-matter hereof.
In the event HP employees are assigned to the development project New
Focus shall provide appropriate support to these employees.
4.2 HP shall support New Focus as described in Schedule 5.
3
<PAGE> 4
5. MODIFICATIONS/AMENDMENTS TO THE SYSTEM DESCRIPTION/SPECIFICATIONS
5.1 Modifications to the specifications are subject to HP's prior written
approval. HP may request that New Focus incorporate modifications or
amendments. New Focus may also request that HP incorporate modifications
or amendments. Any such request must be submitted in writing. New Focus
shall perform the modified services if and to the extent that New Focus
can be reasonably expected to do so and New Focus has not provided HP
with written justification as to why it cannot be reasonably expected to
do so within 1 week of receipt for the modification request.
5.2 Should such modifications affect contractual agreements (relating to
costs or performance deadlines for example), the parties hereto shall
accordingly revise such agreements taking the increase/decrease in
time/expenditure required into consideration. The modifications shall be
performed within the framework of existing contractual agreements if no
such demand for review is submitted to the other party to the agreement
in writing within 2 weeks of receipt of the modification request by New
Focus. HP undertakes to advise New Focus of the significance of its
actions prior to commencement of the period in question.
5.3 In the event of a dispute regarding the scope of any increase/decrease
in time/expenditure required on the basis of modifications, both
parties hereto shall be entitled to request that an independent,
publicly-appointed and certified expert decide the issue with binding
effect for both parties.
5.4 New Focus shall inform HP immediately upon receipt of a modification
request if work already carried out by New Focus would become unusable
as a result of this modification.
6. FAILURE TO ADHERE TO THE PROJECT SCHEDULE
6.1 If, during the development phases, it already becomes apparent that the
completion date agreed upon in the project schedule (schedule 3) cannot
be adhered to, New Focus shall advise HP hereof without delay indicating
the reasons therefor. New Focus shall simultaneously advise HP of the
period of delay by which the completion date is to be postponed
vis-a-vis the deadline agreed upon in the project schedule.
6.2 If a deadline agreed upon in the project schedule is already or will
apparently be exceeded by more than 2 weeks, HP may extend the deadline
by a reasonable period of time. If this extended period expires to no
avail, HP shall be entitled to rescind the agreement. This shall not
apply if New Focus bears no responsibility for the existing or
foreseeable failure to adhere to the project schedule or for the expiry
to no avail of the period of grace.
6.3 Irrespective of the right to rescind the agreement pursuant to Article
6.2 above, the following contractual penalty shall apply:
4
<PAGE> 5
Should New Focus be unable to adhere to the delivery deadlines agreed
upon in the project schedule (Schedule 3) for the prototypes or the
software during the respective development phases, HP shall be entitled,
without providing any further evidence, to demand a contractual penalty
in the amount of [*] of the net value of each development phase
according to Schedule 1 for each working day beginning two weeks after
the delivery deadlines of Schedule 3 or part thereof up to an amount
not exceeding [*] of the total value of each development phase
according to Schedule 1 however. This shall not apply if New Focus does
not bear responsibility for the delay.
7. EXAMINATION AND DELIVERY BY NEW FOCUS
7.1 Upon completion of development and manufacture of the prototypes
together with the developed software in accordance with the
specifications (Schedule 1), New Focus shall subject the prototypes and
the software to a functional check pursuant to HP specifications in
regard of the respective development phase according to Schedule 1 with
a view to establishing conformity with the specifications. A test report
shall be submitted.
7.2 New Focus shall deliver the tested prototypes and the developed software
to HP on or before the deadline defined in the project schedule
(Schedule 3). Tested means that no deviations from the specification
requirements in regard of the respective development phase according to
Schedule 1 and no other defects were detected during testing at New
Focus.
New Focus shall provide HP with all the necessary documentation/data
sheets, source codes etc. upon delivery of the prototypes as described
in Schedule 1.
7.3 New Focus shall produce further prototypes and production units in
accordance with the terms and provisions hereof according to Schedule 1.
8. EXAMINATION AND ACCEPTANCE BY HP
8.1 HP shall examine the design of the prototypes. HP shall accept the
design provided that the prototypes to be manufactured in accordance
with this design will ensure the fulfillment of the product
specifications as described in Schedule 1.
8.2 HP shall subject any prototype as well as the developed software to a
separate functional check within eight weeks of delivery, according to
Schedule 1. HP shall provide weekly updates/reports on the progress
and results of the testing. A test report shall be submitted.
8.3 HP shall submit a written acceptance certificate of the prototypes and
the developed software to New Focus if the prototypes and the developed
software conform to all of the specification requirements of Schedule 1
and if no other defects can be detected.
5
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 6
8.4 Should HP detect deviations from the specifications or defects during
the course of the functional check, HP shall inform New Focus thereof in
writing.
In this event, New Focus shall provide HP with repaired or newly
manufactured prototypes or developed software which is/are free of the
respective defect(s) within five working days. New Focus shall ensure
that the defects are remedied and rectified according to Schedule 4 by
employees who were already involved in the development of the developed
software defined under the subject-matter hereof. Subject to mutual
agreement between the parties, such rectification of defects may be
carried out by HP. In the case that New focus can not rectify such
defects within short term New Focus shall provide HP a temporary
solution.
8.5 Following delivery of the repaired / newly manufactured prototypes or
developed software, HP shall conduct another functional test. If
deviations from the specifications (Schedule 1) or defects are still
detected in the repaired / newly manufactured prototypes or developed
software and these are not remedied and rectified within 15 working
days of receipt of appropriate notice thereof from HP, HP may, at its
discretion, rescind the Agreement, rectify the defect itself or have it
rectified by a third party at New Focus's expense. Any further claims
shall remain unaffected thereby.
8.6 In the case that HP does not accept the manufactured prototypes or the
developed software within a reasonable period of time after delivery,
New Focus may set forth a deadline in order to declare the acceptance.
The manufactured prototypes or the developed software shall deemed to
be accepted if HP does neither declare the acceptance nor informs about
defects. HP shall not refuse the acceptance because of insignificant
defects. If HP accepts the manufactured prototypes or the developed
software without regard of defects, these defects shall be written down
within the minutes of the acceptance.
8.7 According to Schedule 1 HP shall release the prototypes for production
and delivery of 30 production units to HP upon acceptance of the
prototypes. In this case, the New Focus prices for these production
units as set forth in Schedule 1 shall apply.
HP shall be entitled to purchase additional production units and
building blocks thereof (for additional use in other future developed
products) after completion of the development according to this
Agreement. The scope of delivery/supply shall form the subject matter
of a separate agreement (standard purchase Agreement). The parties
hereto will enter into good faith negotiations in order to conclude
such an agreement, in which New Focus shall guarantee the same warranty
as described in clause 10 as well as a product support for a period of
five years after delivery of the last production unit.
9. CONTACT PERSONS
9.1 Both parties shall appoint contact persons in Schedule 2 to facilitate
close cooperative links in an atmosphere of mutual trust. The contact
persons shall be entitled to issue
6
<PAGE> 7
and receive legally binding statements on behalf of the respective
party, always provided that this Agreement is not modified thereby.
9.2 New Focus assures that the employees listed in Schedule 2 designated by
New Focus for support and development for the entire duration of the
project avail of the requisite knowledge and necessary experience in
this field.
9.3 During the phase of development the parties hereto shall schedule
regular meetings every 3 to 4 months in order to discuss any problems
regarding the fulfillment of this Agreement and for any other purpose as
described in this clause 9. Such meeting shall be attended by the
contact persons designated according to 9.1 and/or any other persons as
deemed appropriate in mutual agreement by the parties hereto. The
meetings shall alternately take place at the respective business sites
of the parties hereto.
10. WARRANTIES
(a) PRODUCTS AND SERVICES
New Focus warrants that for twelve (12) months following the acceptance
of the manufactured prototypes, the developed software and associated
documentation in accordance with section 8 the manufactured prototypes,
the developed software and associated documentation shall be free from
defects in workmanship and materials; the developed software shall be
free from significant programming errors; the manufactured prototypes
and the developed software shall conform to the performance
capabilities, characteristics, specifications, functions and other
descriptions and standards applicable thereto as set forth in Schedule 1
hereto; and that, in general, the services to be performed by New Focus
shall be performed in a timely and professional manner by qualified
technicians totally familiar with the manufactured prototypes and the
developed software. In the event that defects are discovered during the
warranty period, New Focus shall promptly remedy such defects at no
additional expense to HP, according to Schedule 4.
This section 10(a) shall in no way limit any of HP's rights under the
applicable law.
(b) COMPLIANCE WITH APPLICABLE LAWS
New Focus warrants that the manufactured prototypes and the developed
software and all other products, documentation and other materials
required to be delivered to HP hereunder, the development and use by HP
thereof, and the performance by New Focus of its obligations hereunder
shall be in compliance with all applicable laws, rules and regulations
as of the date of delivery thereof.
7
<PAGE> 8
11. RIGHTS OF USE
11.1 HP is hereby vested with an irrevocable, exclusive, transferable production
and distribution right regarding the Tunable Laser Source Module (including
software, the respective prototypes, the production units and any and all
parts, such parts including, but not limited to, any building blocks) in
its respective state of processing, such right being unlimited with respect
to time, contents and geographical scope.
HP may grant third parties sub-licensing rights and the above mentioned
rights of use, subject to the agreement of the respective third parties to
enter into an agreement on the payment of royalty fees with respect to the
two patents on the design of external cavity diode lasers (US Patent No.:
[*] and US Patent No.: [*]) held by New Focus.
With respect to the manufacturing and the supply of the Tunable Laser
Source Module, HP agrees to exclusively enter into negotiations with New
Focus on the terms and conditions of a respective agreement, provided that
HP shall have total discretion as to whether or not entering into such
agreement.
11.2 New Focus shall grant HP a non-exclusive, international license to all
industrial property rights, copyrights included, at no extra cost provided
New Focus is entitled to grant such a license, if and to the extent that
this is necessary to exercise the rights of use granted to HP as set forth
under sub-clause 11.1 above.
11.3 With regard to HP's exclusive production and distribution right to the
subject-matter hereof, New Focus shall not process or otherwise use the
subject-matter either for its own purposes or for those of third parties.
12. INDUSTRIAL PROPERTY RIGHTS
12.1 New Focus hereby represents and covenants that it is the unlimited and
undisputed holder of all copyrights and other intellectual property rights
(business and trade secrets included) to the development system, thus
enabling New Focus to grant HP the rights of use pursuant to Article 11
hereof.
12.2 In the event of any violation of a third party's industrial property right,
New Focus shall establish HP's right to continued use of the development
system without payment of any additional remuneration, or, if this should
not be possible, alter or replace the subject-matter hereof in such a way
as to circumvent violation of industrial property rights whilst, however,
conforming to the specification requirements. HP shall be entitled, pending
the above, to withhold any payments due.
12.3 In the event of any such violation of an industrial property right, New
Focus shall [*], if and to the extent that [*]. Should third parties [*] HP
on account of the [*], New Focus shall [*] and shall further [*] by HP in
connection with such [*]. This shall apply analogously in
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 9
favor of those persons who, up to such time, have been [*] the
subject-matter hereof in accordance with Article 11 above.
13. AUDIT RIGHTS
At any time HP is entitled to make or cause to be made a special audit
regarding the production processes and the quality ensurance systems
established by New Focus, on reasonable request made in writing no less
than 15 days in advance. New Focus shall make all relevant matters
available for examination during regular business hours. A written summary
of the results of any such special audit shall be provided by HP to New
Focus.
14. CONFIDENTIALITY
14.1 The parties to this Agreement undertake to treat as confidential all of the
other party's information identified as such in writing and not to disclose
or divulge such information to third parties, unless such information was
released by the other party or became public knowledge without any breach
of obligations under this Agreement.
This shall apply in particular to facts and information on operational
procedures, operating results, production figures, products, business
policies, duties, claims, organizational and social services or business
management measures as well as data on purchasing/procurement functions.
The confidential information provided by HP shall solely be used by New
Focus for the purpose of this Agreement.
In doing so, the parties hereto shall apply the same level of care and
diligence as they would exercise in their own affairs.
14.2 This obligation shall expire for each party hereto four years subsequent to
receipt of the last confidential fact or item of information from the other
party.
14.3 New Focus shall take the necessary measures to ensure that the results of
development are not inadmissibly used, disclosed or copied.
15. TERMINATION
15.1 This Agreement may be terminated in writing by either party only in the
event of good cause.
Good cause shall be deemed to exist, in particular, if one of the parties
hereto fails to perform its contractual obligations, despite a reminder to
this effect. Good cause shall also be deemed to exist for HP if composition
or bankruptcy proceedings are instigated or initiated against New Focus's
assets or in the event of a lasting modi-
[*] Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
9
<PAGE> 10
fication to the ownership rights within New Focus (for example, if New
Focus will be taken over by competitors).
Furthermore, HP shall be entitled to terminate the Agreement on
extraordinary grounds if HP comes to the conclusion that continued
implementation of the general project which incorporates the developed
system is no longer feasible in view of the economic and/or technical
situation.
15.2 Should this Agreement be terminated for reasons in respect of which New
Focus bears responsibility, New Focus shall only be remunerated for
services commissioned and performed prior to termination. This is subject
to the provision that HP is in a position to use the relevant services to
further use the developed system.
15.3 In all other cases, New Focus shall be entitled to the agreed remuneration
as determined by the date of termination, subject however, to the
deduction of expenditure saved, estimated at 90% of the remuneration for
services not yet performed by New Focus. HP reserves the right to prove
that additional expenditure was saved.
15.4 In the event of termination of this Agreement, New Focus shall, without
exception, deliver and surrender to HP without delay all documents which
HP made available to New Focus within the framework of this Agreement, as
well as all and any prototypes and/or parts of them already in existence
at the time of termination and all and any documentation and other
information including but not limited to the respective source code
regarding the HP-specific development result available at the time of
termination. HP shall be vested with the rights to this development result
in accordance with Article 11 above (rights of use).
15.5 In the event of termination hereof, the obligations set forth under
Article 14 (confidential information) shall prevail and continue for a
period of four years subsequent to termination and those set forth under
Article 10 (warranty) shall also prevail and continue.
16. SCHEDULES TO THIS AGREEMENT
The Schedules listed in the following shall be deemed an integral part of
this Agreement:
Schedule 1 - Specifications, Development phases, Payment,
Schedule 2 - Contact persons
Schedule 3 - Project schedule
Schedule 4 - Bugfixing
Schedule 5 - Resources provided by HP
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<PAGE> 11
17. MISCELLANEOUS PROVISIONS
17.1 No ancillary verbal agreements have been made. Any alterations and
amendments hereto must be made in writing in order to be valid and must
expressly indicate that they constitute an alteration or amendment hereto.
This shall similarly apply to any waiver of this written form requirement.
17.2 Unless otherwise expressly agreed upon herein, any transfer of the rights
arising in connection herewith to third parties by one of the parties
hereto shall be subject to the prior written approval of the other party.
17.3 Should one or more of the provisions hereof be or become void or invalid,
the parties hereto undertake to replace such a provision with a valid
provision which approximates the economic purpose or intent of the void or
invalid provision as closely as possible. The validity of the remaining
provisions shall remain unaffected thereby.
17.4 This Agreement shall be governed by and construed in accordance with the
laws of the Federal Republic of Germany. The Uniform Laws of the UN
Convention on Contracts for the International Sale of Goods shall not
apply. The courts of Stuttgart, Germany, shall have jurisdiction and
venue over any claims asserted under or in connection herewith.
For HP: For New Focus:
Boeblingen 23/12/96 Santa Clara 1/9/97
/s/ WERNER BERKEL /s/ TIMOTHY DAY
- ------------------------------------- -----------------------------------
Name Name
Business Manager Vice President, Engineering
- ------------------------------------- -----------------------------------
Area of activity/title Area of activity/title
11
<PAGE> 12
SCHEDULE 1 - SPECIFICATIONS, DEVELOPMENT PHASES, PAYMENT
A.) PRODUCT TO BE DEVELOPED:
1. A 1550 nm tunable laser source module (entire plug-in module) which will be
based on the patented (US Patent No. [*] and [*]) opto-mechanical design of
the New Focus ECDL product family for integration into the HP optical
component test platforms (or additional purposes).
2. This includes the development and production of the opto-mechanical
sub-assemblies as well as the assembly and test of the chassis and
interface electronics. Specifically, New Focus will reduce the cost and
size of the opto-mechanical head associated with the current New Focus
products, develop the low cost electronics needed to interface the
multimeter platform, and refine the packaging of the isolated fiber launch.
In addition, New Focus will develop an operations approach that allows for
the production of up to [*] plug-in modules per year. In the event that [*]
plug-in modules per year are desired an option, which requires additional
funding and a [*] period to increase capacity to [*] per year, may be
exercised by HP. The additional funding for this option will be part of a
separate development contract.
A focused team operating in a project management infrastructure and
reporting directly to the New Focus management team will be employed for
that purpose.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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3. New Focus will develop and deliver a final module that will meet all of the
specifications described below.
Condition: The Module is [*]
(currently under development at HP)
All Specifications apply over the Operating Temperature Range and under the
Humidity Conditions.
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
13
<PAGE> 14
MODULE KEY FUNCTIONS AND FEATURES
3.1.0 TUNABLE WAVELENGTH LASER SOURCE PARAMETERS
From the customer point of view this source will have the following parameters.
All these parameters must be accessible via the user interface.
[*]
3.1.1 TUNABLE WAVELENGTH LASER SOURCE FUNCTIONALITY
[*]
3.1.2 TUNABLE WAVELENGTH LASER SOURCE EXCEPTIONS/EVENTS
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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4. Development requirement and payment criteria:
The Development will proceed in accordance with the development phases as
described below.
A: MODULE HARDWARE
Start Contract
o Final contract signed from both parties
o Agreement on development schedule (see appendix "Development
Schedule")
o Agreement on all product specifications (see appendix "Module
Specification")
1. Design Review
a) Complete product documentation available, and documentation is
supposed to be capable to fulfill the product requirements.
[*]
2. Phase 1 Prototypes
[*]
3. Phase 2 Prototype
[*]
4. Release to Production
[*]
5. Final Contact close
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 16
B: MODULE SOFTWARE
1. Design Review
[*]
2. Prototype (alpha)
[*]
3. Prototype (beta)
[*]
4. Release to Production
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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5. The delivery dates are laid down within the project schedule (Schedule 3).
The remuneration will be paid [*]. The respective installment will be due
[*] provided that HP will not detect major deviations in regard of the
requirements of the respective development phase. The installments are as
follows.
<TABLE>
<S> <C>
Start Contract $[*]
Design Review $[*]
Phase 1 Prototypes $[*]
High Power diodes in cavities $[*]
Phase 2 Prototypes $[*]
Release to Production $[*]
Final Contract close $[*]
30 Production Units $[*]
</TABLE>
The development cost approach is to use non-recurring engineering funding
from HP to develop the product and production line so that the per unit
price in 3/98 will be $[*]. The per unit price will be $[*] and the
development cost will be $[*] to get to [*] fully tested plug in modules
per year. This $[*] non-recurring engineering effort will include delivery
of [*] units but the [*] delivered at the end of the project will be $[*]
each (FOB Santa Clara, CA). This $[*] per unit price is based on a cost for
the coated diodes of $[*]. If a qualified source of AR coated diodes could
be identified that would work in our cavity then the per unit price would be
$[*] plus the cost (to NFI) of the diodes.
An option to increase the capacity in a separate development contract has
been offered, but not exercised by HP at this time, that will allow New
Focus to tool up to the [*]/year numbers associated with the high end of the
HP marketing numbers. This effort would be covered under a separate
development project and New Focus would need [*] advance notice before the
increased capacity could be realized. If this option is chosen the per unit
price for a quantity of [*] units would be $[*] (FOB Santa Clara, CA) (New
Focus are essentially only increasing capacity with this approach) and the
per unit price at [*] units would be $[*] (FOB Santa Clara, CA). In these
cases the assumed cost of the AR coated diode is $[*] and $[*],
respectively.
B.) TECHNICAL APPROACH (PROPOSED BY NEW FOCUS):
1. [*]
2. [*]
3. [*]
4. [*]
5. [*]
6. [*]
7. [*]
8. [*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 18
The above Technical Approach is understood as a proposal by New Focus which may
be amended, provided that the development requirements as set out in this
Schedule 1 are fully met.
New Focus will use the HP communications and interface design, which uses a [*],
together with New Focus design for [*] to [*] a complete [*]. To do this New
Focus will acquire the [*] development environment necessary to design with this
processor, New Focus will use [*] and New Focus will work to ensure that there
is complete overlap between the development effort at [*] and at [*].
C.) OPERATIONS APPROACH (PROPOSED BY NEW FOCUS):
New Focus will develop a production line solely dedicated to the assembly and
test of the [*] in Santa Clara CA using some of New Focus' available
manufacturing space. The approach is summarized below:
1. [*]
2. [*]
3. [*]
4. [*]
New Focus will expand and improve its present [*] production line (model [*])
for use in the production of up to [*] per year.
D.) PROJECT MANAGEMENT BY NEW FOCUS:
This development effort will require a focused team operating within a tight
schedule. The scope of the project is well understood as are the resources
necessary to accomplish the task. New Focus will create a development team that
will report directly to the VP of Engineering. This team will be solely
dedicated to this project. The team will consist of but not be limited to:
1. Project Manager: Extensive experience with ECDL's,
project management, and e-o-engineering
2. Senior Electro-Optics Engineer: One of our senior laser designers with
extensive control and AR coating
experience
3. Senior Mechanical/Control Engineer: One of our engineers associated with the
DC servo control of precision
opto-mechanical hardware
4. Electrical Engineer: Engineer focusing on low cost
analog/digital electronics and rapid
prototyping
5. Electrical Engineer: Engineer focused on firmware and
interface to HP platform
6. Mechanical Engineer: Engineer focused on tooling
designs/documentation/incorporation of
fiber launch designs
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 19
7. Manufacturing Engineer: Engineer focused on production line
layout / manufacturing tooling / testing
New Focus will commit additional resources to this project as it moves forward.
SCHEDULE 2 - CONTACT PERSONS
For a better fulfillment of this Agreement both parties name the following
contact persons
By HP: By New Focus
Name: Edgar Leckel Name: Timothy Day
Telephone-No.: (49) 7031-142691 Telephone-No.: 408-980-8088
FAX: (49) 7031-147023 FAX: 408-980-8883
Name: Emmerich Muller Name: Michael Brownell
Telephone-No.: (49) 7031-144861 Telephone-No.: 408-980-8088
FAX: (49) 7031-147023 FAX: 408-980-8883
SCHEDULE 3 - PROJECT SCHEDULE
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<PAGE> 20
SCHEDULE 4 - BUGFIXING
1. Any bugs in the developed software shall be recorded and verified by HP.
Following verification, HP shall forward the bug report to New Focus.
Bugs shall be categorized as follows:
A. Serious bugs
Bugs that result in system crashes (hangs or halts), loss of data,
destruction of data, corruption of data or cases of unreasonable
handling effort for which no "workaround" is available (i.e. there is
no method accepted by HP or by the customer for either avoiding the
bug or using the developed software).
Any medium bug as defined in B of this schedule 4 which causes a
serious bug as defined above within the final optical component
platforms shall additionally be categorized as a serious bug.
B. Medium bugs
Bugs as specified under A above, but for which a "workaround" is
available for bug avoidance.
C. Minor bugs
Any bugs not included in categories A and B above.
2. Any serious bugs in the developed software shall be immediately fixed by
New Focus. New Focus will begin to fix the bug 24 hours after the
respective report by HP the latest. New Focus shall fix the bug during 3
days or during a longer period agreed by HP. If New Focus is unable to
reproduce or to fix any bug immediately on its own computer system, it
shall fix the bug - if decided by HP - on-site in customer's place.
3. Any medium bug in the developed software shall be fixed in a reasonable
period of time. New Focus shall begin fixing the bug during 48 hours after
the respective report by HP. New Focus shall fix the bug during two weeks
or during a longer period agreed by HP.
4. Any other bugs shall be fixed as soon as possible within the scope of the
maintenance of the developed software.
5. New Focus shall update the documentation in accordance with the bug fix.
20
<PAGE> 21
6. New Focus shall ensure that any serious and medium bugs shall be fixed for
both the current and the previous operating system release.
7. New Focus will maintain a telephone number with a designated knowledgeable
contact to HP to call during normal business hours to report problems and
receive assistance.
8. The Bugfixing according to this schedule 4 shall be free of charge during
the warranty period.
21
<PAGE> 22
SCHEDULE 5 - RESOURCES PROVIDE BY HP
1. HARDWARE RELATED DOCUMENTS (see separate Documentation Package)
a) Drawings of all mechanical parts of the Module Chassis
o Module Bottom Cover
o Module Top Cover
o Module Sub Panel
o Plastic Front Panel
o Module Extractor
o Fiber Connector Bushing at Front Panel
o Module Fiber Interface
b) Description of Module Interface and digital Hardware
o Printed Circuit Board Outline
o Interface Connector to Module/Mainframe Positioning Dwg.
c) Schematics of digital parts including part list
d) Documentation and File of FPGA Communication Part
2. SOFTWARE RELATED DOCUMENTS (see separate Documentation Package)
a) Description of Communication between Mainframe and Module
b) HP Coding Standards
c) Documentation and Source Code Template for Operating System, Start-up
and Communication of Module
3. HARDWARE SUPPORT
a) For first Phase of Development (December 96 - March 97 Time Frame)
o HP8153 Mainframe
o Dummy and Extendermodule
--> Delivery January 1997
b) For the rest of the Development (April 97 - March 98)
o New OCT Mainframe Prototype
--> Delivery End of March
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<PAGE> 23
[GRAPH]
[*]
Page 1
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 24
[GRAPH]
[*]
Page 2
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 1
EXHIBIT 10.12
ADDENDUM TO THE
DEVELOPMENT AGREEMENT OF 23.12.1996
REGARDING THE DEVELOPMENT OF A TUNABLE LASER SOURCE MODULE
by and between
HEWLETT-PACKARD GmbH
HERRENBERGER STRABE 130
71034 BOEBLINGEN
GERMANY
- hereinafter referred to as "HP" -
and
NEW FOCUS INC.
2630 WALSH AVE.
SANTA CLARA CA 95051
USA
- hereinafter referred to as "New Focus" -
1
<PAGE> 2
1. If not expressly stated to the contrary herein, all provisions set forth
in the Development Agreement of 23.12.1996 (the "Agreement") shall fully
apply to this Addendum and shall remain in full force and effect.
2. Delivery by New Focus of the [*] units as described in the Agreement shall
be due on July 31, 1998. The per unit price for these production units
shall remain unchanged at $[*].--([*] U.S. Dollars).
3. The parties hereto will agree on separate terms and conditions for a
contract regarding the production and delivery of the Tunable Laser Source
Modules as defined in Clause 11.1 of the Agreement. In amendment of
Schedule 1 A.) 5. of the Agreement, the parties agree on an initial per
unit price ("HP Purchase Price") of $[*]. -- ([*] U.S. Dollars) for the
Module. This HP Purchase Price is based on the initial HP U.S. List Price
for the Module of $[*]. -- ([*] U.S. Dollars). To the extent HP decreases
or increases the HP U.S. List Price for the Module, New Focus will decrease
or increase the HP Purchase Price by half of the percentage the HP List
Price decreased or increased. If and to the extent the HP Purchase Price
falls below $[*],-- ([*] U.S. Dollars), New Focus shall have the right to
terminate the contract regarding the production and delivery of the Tunable
Laser Source Modules. If and to the extent the HP List Price falls below
$[*] -- ([*] U.S. dollars), HP shall have the right to terminate such
contract. These rights of termination shall be specified in detail in such
contract. It is understood between the parties hereto that, in this case,
HP shall be absolutely free to manufacture the Modules itself or have the
Modules manufactured and delivered by a third party provided licensing
agreements as outlined in Clause 7 of this Addendum are strictly adhered
to. In addition, HP shall not be responsible for any additional development
costs associated with supplying HP with the PMF Option of the Module due to
the fact that such additional development costs were already covered by the
NRE payments documented in the Development Contract of December 23, 1996.
4. HP agrees to pay to New Focus an amount of $[*].--([*] U.S. Dollars) within
30 days of the execution of this Addendum in order to ensure timely
manufacturing and delivery of the Modules by New Focus. Payment shall be
subject to New Focus providing HP a guarantee for [*]% ($[*].--[*] U.S.
Dollars) of the above amount from an internationally recognized Bank
substantially in the form as laid out in Schedule 1 hereto.
5. New Focus shall repay up to [*]% ($[*].--[*] U.S. Dollars) of the above
amount to the extent that one or more of the following applies:
(i) New Focus being in delay with any deadline set forth in the
Agreement, this Addendum or the production and delivery contract;
provided that a delay with respect to the delivery of the production
units according to Clause 2 above shall
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 3
only trigger repayment if such delay exceeds one month and New Focus
does not provide HP with reasonably sufficient justification for such
delay
and/or HP may not be reasonably expected to accept such delay and/or
the delay has not been primarily caused by HP.
(ii) New Focus being in default of any other material provision of the
Agreement, this Addendum or the production and delivery contract.
The following repayment schedule shall be binding:
$[*].--([*] U.S. Dollars) on [*], 1998
$[*].--([*] U.S. Dollars) on [*], 1998
$[*].--([*] U.S. Dollars) on [*], 1998
$[*].--([*] U.S. Dollars) on [*], 1998
$[*].--([*] U.S. Dollars) on [*], 1998
Clauses 5 (i) and 5(ii) of this Addendum shall not apply for any failure or
delay in the performance of New Focus due to causes including, but not
limited to, an act of God, an act of civil or military authority, fire,
epidemic, flood, earthquake, riot, war, sabotage, and governmental action
which are beyond its reasonable control; provided that New Focus: (i)
promptly gives HP written notice of such cause and, in any event, within
fifteen (15) calendar days of discovery thereof; and (ii) uses diligent
efforts to correct such failure or delay in its performance.
6. In view of HP's exclusive rights of use as described in Clause 11 of the
Agreement, the Parties agree upon the following:
(i) New Focus may solely sell Modules in their completely assembled form
(as defined by form factor, HW and SW interface) to HP.
(ii) Until HP officially informs New Focus of the obsolescence of the
Module, New Focus shall not in any way manufacture and/or sell the
Module and/or the building blocks (defined as the complete assembled
opto-mechanical sub-assembly including but not limited to, the diode
laser, external cavity, cavity optics, and drive train, in the exact
configuration) thereof either under its own brand name in a way that
direct competition to the HP Module is created or to direct HP Module
competitors (including but not limited to corporations such as Anritsu,
Photonetics, EXFO, Tektronix, Santec etc.) without the expressed
written consent of HP.
Subject to the foregoing, none of HP's rights according to Clause 11 of the
Agreement and Clause 7 of this Addendum nor any other of HP's rights under
the Agreement shall be in any way affected hereby.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 4
7. With respect to HP's rights of use pursuant to 11.1 of the Agreement, and
to the extent HP decides to manufacture the Modules itself or decides to
have the Modules manufactured and delivered by a third party, the Parties
shall enter into negotiations regarding the amount of the license fee for
the New Focus patent in question (U.S. Patent No.: [*]). This license fee
shall not exceed $[*]. -- ([*] U.S. Dollars) per manufactured Module. New
Focus warrants that it is the sole owner of U.S. patent No. [*] and the
therewith related applications [*] and [*] and any other patent or patent
application claiming the priority of this patent or patent application.
Furthermore, it is the understanding of the parties:
(i) that no further royalty or license fees shall in any way be payable by
HP to New Focus for the Module.
(ii) that HP's use of the patent in question is limited to the Module in
its completely assembled form (as defined by form factor, HW and SW
interface).
8. No ancillary verbal agreements have been made. Any alterations and
amendments hereto must be made in writing in order to be valid and must
expressly indicate that they constitute an alteration or amendment hereto.
This shall similarly apply to any waiver of this written form requirement.
Should one or more of the provisions hereof be or become void or invalid,
the parties hereto undertake to replace such a provision with a valid
provision which approximates the economic purpose or intent of the void or
invalid provision as closely as possible. The validity of the remaining
provisions shall remain unaffected thereby.
For HP: For New Focus:
Boeblingen, 10/30/97 Santa Clara, 11/6/97
/s/ WERNER BERKEL /s/ TIMOTHY DAY
- ----------------------------- -----------------------------
Werner Berkel Timothy Day
Fiber Optic Test/Business Manager Engineering/Vice President
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 5
MID-PENINSULA BANK
October 23, 1997
Hewlett-Packard GmbH
Herrenberger Str. 130
71034 Boeblingen
Germany
Dear Sirs:
Mid-Peninsula Bank (the "Bank") herewith confirms that it has knowledge that
Hewlett-Packard GmbH (hereinafter referred to as HP), Herrenberger Str. 130,
71034 Boeblingen, Germany has granted to New Focus, Inc. a payment in the amount
of $USD[*] ([*] US Dollars). The payment to New Focus, Inc. is specified within
the terms and conditions of the Addendum dated October 28, 1997 to the
Development Agreement (the "Agreement") dated December 23, 1996 by and between
HP and New Focus, Inc.
The Bank herewith provides assurance to HP as follows. The Bank, acting as a
principal obligor, guarantees to HP prompt payment by New Focus, Inc. of all of
its (repayment) obligations under the terms specified in that certain Addendum
to the Agreement, in an amount not to exceed $USD[*] ([*] US Dollars), such
amount to exclude accrued interest and/or costs. In the event that New Focus,
Inc. does not make payment to HP in accordance with Clause 5 of the Addendum to
the Agreement, the Bank shall forthwith upon the first demand of HP, make
payment to HP in such amount(s) (not to exceed $USD[*] - [*] US Dollars) as was
not paid by New Focus, Inc. (as if the Bank instead of New Focus, Inc. were
expressed to be the principal obligor).
This guaranty shall remain in effect as long as New Focus, Inc. has a potential
payment obligation towards HP under Clause 5 of the Addendum to the Agreement.
Mid-Peninsula Bank
By: /s/ MURRAY B DEY
---------------------------------
Murray B. Dey
Executive Vice President
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 6
Schedule 1
GUARANTEE
Whereas
We, the undersigned, Bank, herewith confirm that we have knowledge that
Hewlett-Packard GmbH, Herrenberger Str. 130, 71034 Boblingen, Germany has
granted to New Focus payment of an amount of $[*] -- ([*] U.S. Dollars).
Therefore
We guarantee, as principal obligor, to HP prompt performance by New Focus
of all its (repayment) obligations under the Addendum. We undertake with HP
up to a maximum amount of $[*] -- ([*] U.S. Dollars), such maximum amount
not including accrued interest and/or costs, that whenever New Focus does
not pay amount when due in accordance with Clause 5 of the Addendum, we
shall forthwith on first demand pay that amount as if we instead of New
Focus were expressed to be the principal obligor.
This guarantee shall be valid until final performance of New Focus of all
its obligations under the Agreement, the Addendum or the production and
delivery contract.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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<PAGE> 1
EXHIBIT 10.13
ADDENDUM NO 2
to the
Development Agreement of 23.12.1996 regarding the development of a Tunable Laser
Source Module, amended by an Addendum of 30.10.1997
by and between
AGILENT TECHNOLOGIES
DEUTSCHLAND GMBH
Herrenberger Str. 130
71034 Boblingen
Germany
hereinafter referred to as "AGILENT"
and
NEW FOCUS INC.
2630 Walsh Ave.
Santa Clara CA
U.S.A.
hereinafter referred to as "New Focus"
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WHEREAS, New Focus developed a tunable laser module for AGILENT known as the
"Happy module" under the Development Agreement of 23.12.1996, amended of
30.10.1997 (hereinafter "the Development Agreement").
WHEREAS, the parties wish to develop a version of this module that provides more
power, referred to hereinafter as the "TL1502 Module" as well as an
L-band version, referred to hereinafter as the "TL1601 Module" (together
hereinafter called "Monet Module").
NOW THEREFORE, the parties agree as follows:
1. DEVELOPMENT AGREEMENT AND THIS ADDENDUM
If not expressly stated to the contrary herein, all provisions set forth
in the Development Agreement of 23.12.1996 and the Addendum of
30.10.1997 shall fully apply to this Addendum No 2 and shall remain in
full force and effect.
With respect to the penalty clause set forth in section 5.2 of the
Addendum 1 to the Development Agreement regarding the Happy Module,
AGILENT agrees not to enforce such clause with respect to any delays
having occurred before the date of this Addendum (altogether $[*];
[*] Dollars).
2. AMENDMENTS REGARDING THE DEVELOPMENT AGREEMENT
2.1 PRICES AND RAMP-UP
In amendment of Schedule 1 A.) 5. Of the Development Agreement of
23.12.1996, the parties agree on an initial per unit price ("AGILENT
Purchase Price") of $[*]-([*] U.S. Dollars) for the Happy Module. The
parties agree that this price shall not be increased in case the initial
AGILENT U.S. List Price increases or decreases.
AGILENT agrees to purchase [*] "Modules" from New Focus prior to March
2000. A "Module" is defined as a Happy Module or a Monet Module.
2.2 DELIVERY MILESTONES
2.2.i New Focus shall deliver the Happy Module according to the following
delivery milestones.
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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It is hereby agreed that the deliveries of the Happy Module as of the
date of signing of this Addendum are in full compliance with the
delivery milestones listed above.
From December 1999 on, the parties take into account a rolling three
months window (further delivery milestones after March 2000 will be
agreed to in a separate purchase agreement). The numbers of units
delivered by New Focus will be reviewed on a monthly basis. If the total
number for one month is below the numbers agreed to this respective
month, New Focus will have a two months period to bring the total number
of units back to the number agreed to for the respective three months
period.
2.2.ii In the event that New Focus fails to deliver the number of units agreed
to for a three months period, AGILENT may terminate this Agreement upon
90 days notice.
AGILENT may also terminate this Addendum without notice if New Focus
fails to deliver the first PM beta unit by February 29, 2000 or fails to
deliver the first PM production unit by March 31st, 2000.
AGILENT must inform New Focus that AGILENT wishes to terminate the agreement in
writing within 60 days of failure by New Focus to deliver. If AGILENT fails to
do so, then AGILENT's right to terminate will lapse until the next trigger event
occurs.
2.3 QUALITY TRIGGER (HAPPY MODULE)
Regarding the Annualized Failure Rate (AFR) as defined in schedule 7,
the parties will monitor a 6 months rolling average starting in June
2000. The parties will notify each other in writing every month of the
six month rolling average of the AFR.
Regarding the rate of Defect on Arrival (DOA) as defined in schedule 7,
the parties will measure a rolling three months average starting in
December 1999. The parties will notify each other in writing every month
of the three month rolling average of the DOA.
In the event that the following trigger events apply, AGILENT may
terminate this Addendum to the Development Agreement upon 90 days prior
notice:
- the six month rolling average of the AFR is above [*]%
- the three month rolling average of the DOA exceeds [*]%
AGILENT must inform New Focus in writing within 60 days of the occurrence of the
above trigger events that AGILENT wishes to terminate the agreement. If AGILENT
fails to do so, then AGILENT's right to terminate will lapse until the next
trigger event occurs.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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2.4 TRANSITION
In the event that this Addendum will be terminated according to Article
2.2, 2.3,5,6,7 or according to any provision regarding the Monet Module
herein, New Focus agrees to provide the following documents and
transition services to AGILENT:
i. [*]
ii. [*]
iii. [*]
iv. [*]
v. [*]
vi. [*]
vii. [*]
viii. [*]
ix. [*]
3. DEVELOPMENT OF THE MONET MODULE
New Focus agrees to develop a Tunable Laser Source Module (including
hard- and software), hereinafter "Monet Module", which is described in
greater detail in the specifications in Schedule 1 hereto, as well as to
manufacture prototypes and produce units whilst adhering to the project
schedule as set forth in Schedule 2 hereof.
4. BREAK-DOWN OF COSTS / REMUNERATION FOR THE MONET MODULE
4.1 In return for the services outlined in Article 3 above, AGILENT shall
effect payment in installments as laid out in Section3. "Payment
Criteria" of Schedule 1 according to the development phases for hardware
and software described in 2 Sections 2. A-B of Schedule 1 hereto. The
payments shall become due and payable in accordance with the terms and
conditions outlined in Section3. "Payment Criteria" of Schedule 1.
4.2 A) AGILENT agrees to an initial payment to New Focus of [*] U.S. Dollars
($[*]) within 30 days of the execution of this Addendum in order to
ensure timely manufacturing and delivery of the Monet Module by New
Focus. This sum represents [*]% of the total developmental amount of [*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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U.S. dollars ($[*]) which Agilent is hereby obligated to pay according
to the terms and of this Addendum and the schedules attached hereto for
the development of the Monet Module. This sum is in addition to any
contract amounts which Agilent has previously agreed to pay New Focus
(See for Example: Section 4 of the Addendum No. 1 of 30.10.1997 to the
Development Agreement.)
B) The initial and subsequent payments for the Monet Module set forth
above in Section 4.2A and which are detailed in the attached schedules
1-2 shall be subject to New Focus providing AGILENT a performance
guarantee of [*] U.S. Dollars ($[*]) from an internationally recognized
Bank. This subsection shall, for the Monet Module, supercede and replace
the guarantees set forth in Section 5 of Addendum No 1 of 30.10.1997 to
the Development Agreement.
C) The parties agree on an initial per unit price for the Monet Module
(either for the TL1502 or the TL1601 single mode fiber version) of $[*]
for the first [*] units and for any further unit $[*], as well as for
the [*] of these Modules $[*]. The parties agree that this price shall
not be increased within the [*] after delivery of the first production
unit. The parties to this Addendum will renegotiate the per unit price
one year after acceptance by AGILENT of the first units of Monet Modules
produced under this Addendum. New Focus shall work continuously on
reducing the cost of the products. Any share of cost advantages will be
part of a future procurement agreement.
4.3 The production and delivery of the Monet Modules shall be subject to a
separate Framework Purchase Agreement. The parties shall negotiate such
terms and conditions and have an agreement in place 2 months before the
first product shipment. This agreement shall contain the ramp up
quantities for the first six months of production. The target capacity,
without any commitment herein, is intended to be in total (for SMF/PC,
SMF/APC, PMF/PC; PMF/APC) [*] units up to [*] per year.
5. DEVELOPMENT
5.1 The prototypes as well as the software of the Monet Modules shall be
manufactured and developed by New Focus in accordance with the project
schedule (Schedule 2 to this Addendum No 2) and the development phases
contained therein as well as in Schedule 1.
5.2 AGILENT may terminate this Addendum upon 90 days notice if New Focus
fails to deliver the TL1502 prototype and production unit as well as the
TL1601 prototype and production unit as defined in section 2 of schedule
1 of this Addendum, until 3 months after the milestones as defined in
Schedule 2 of this Addendum. Article 2.4 ("Transition") shall apply
accordingly.
Agilent must inform New Focus in writing of Agilent's intention to terminate the
agreement within 60 days of the occurrence of the failure by New Focus to
deliver the TL1502 and TL1601 prototype and production units. If AGILENT fails
to do so, then AGILENT's right to terminate
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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will lapse until the next trigger event occurs.
6. QUALITY TRIGGER (MONET MODULE)
Regarding the Annualized Failure Rate (AFR) as defined in schedule 7,
the parties will monitor a 6 months rolling average starting 6 months
after the first production unit is delivered. The parties will notify
each other in writing every month of the six month rolling average of
the AFR.
Regarding the rate of Defect on Arrival (DOA) as defined in schedule 7
the parties will measure a rolling three months average starting three
months after the first production unit is delivered. The parties will
notify each other in writing every month of the six month rolling
average of the AFR.
In the event that the following trigger events apply, AGILENT may
terminate this Addendum upon 90 days notice:
- the six month rolling average of the AFR is above [*]%
- the three month rolling average of the DOA exceeds [*]%
- the absolute number of DOA is higher than 3 during the first
three months after the delivery of the first production unit.
AGILENT must inform New Focus in writing within 60 days of the occurrence of a
trigger event that AGILENT wishes to terminate the agreement. If AGILENT fails
to do so, then AGILENT's right to terminate will lapse until the next trigger
event occurs.
7. RIGHTS OF USE
7.1 All rights of use set forth in Section 11 of the Development Agreement
of 23.12.1996 granted to AGILENT regarding the Happy Modules under the
Development Agreement shall remain in full force and effect and shall
not be amended in any way by this Addendum. Only with respect to the
Monet Modules being subject of this Addendum, section 11.1 shall be
amended as follows.
7.2 AGILENT is hereby vested with an irrevocable, exclusive, transferable
distribution right regarding the Monet Modules (including software, the
respective prototypes, the production units and any and all parts
including, but not limited to any building blocks) in their respective
state of process, such right being unlimited with respect to time,
contents and geographical scope.
7.3 It is the intent of the parties that the manufacturing and supply of the
Monet Module be performed for AGILENT exclusively by New Focus provided
that the quality, timeliness
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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of delivery of the Monet Modules as supplied by New Focus meet the
commitments made herein. The parties will establish an escrow account to
protect AGILENT in the event that New Focus is unable to meet its
commitments under this Addendum, or in the event that the agreement is
terminated under section 2, 5 or 6. The terms of the escrow account are
set forth below in subsections 7.3 i to v.
7.3.i As soon as available, New Focus shall deposit any
prototypes and/or parts of them as well as any
documentation with the latest version of the source code
regarding the AGILENT-specific development result and
update such deposits in escrow with a mutually agreeable
escrow trustee. AGILENT shall bear the costs of the
escrow trust.
The provisions applicable to the deposit of source code by New
Focus shall be as follows:
In the event that one or more of the following trigger
events apply AGILENT is automatically vested with an
irrevocable, transferable, non-exclusive production
right regarding the Products under this Addendum.: New
Focus
a. is no longer able to meet its maintenance and support
contract obligations to AGILENT, provided that the
cessation of maintenance services is not solely
attributable to the failure of the licensee to make
timely payment of any charges under such maintenance
contract;
b. has ceased to do business;
c. has ceased to produce the Products specified in
Schedule 1 hereto;
d. has significantly changed its quality management in
such a way that it becomes unacceptable to AGILENT
(e.g. audit reasons, administrative or governmental
regulations) or if the Modules will not reach an
acceptable level and if after AGILENT informs New
Focus in writing New Focus fails to remedy such
quality deficiency within 90 days;
e. has increased prices of the Products specified in
Schedule 1 hereto by more than [*]%;
f. has become insolvent, suffers or permits the
appointment of a receiver for its business or assets
or becomes subject to, any bankruptcy proceedings or
any statute relating to insolvency or the protection
of rights of creditors.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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7.3.ii The escrow trustee shall follow the procedures set forth
herein below:
- Escrow trustee shall promptly notify New Focus of the
occurrence of the Release Condition and shall provide
to New Focus a copy of AGILENT's notice to escrow
trustee. "Release Condition" for the purposes of this
Agreement shall mean all of the trigger events
described above.
- If the escrow trustee does not receive Contrary
Instructions, as defined below, from New Focus within
thirty (30) days following escrow trustee's delivery
of a copy of such notice to New Focus, Escrow trustee
shall deliver a copy of the source code to AGILENT.
"Contrary Instructions" for the purposes of this
subclause shall mean the filing of written notice with
escrow trustee by New Focus, with a copy to AGILENT
demanding delivery, stating that the Release Condition
has not occurred or has been cured.
- If Escrow trustee receives Contrary Instructions from
New Focus within thirty (30) days of the giving of
such notice to New Focus, Escrow trustee shall not
deliver a copy of the Source Material to AGILENT, but
shall continue to store the source code until:
a) otherwise directed by New Focus and AGILENT
jointly;
b) Escrow trustee has received a copy of an order of a
court of competent jurisdiction directing Escrow
trustee as to the disposition of the Source
Material; or
c) Escrow trustee has deposited the source code with a
court of competent jurisdiction or a Trustee or
receiver.
7.3.iii Upon receipt of Contrary Instructions from New Focus,
escrow trustee shall have the absolute right, at escrow
trustee's election to file an action in interpleader
requiring the New Focus and AGILENT to answer and
litigate their several claims and rights amongst
themselves.
7.3.iv Upon execution of this Addendum, AGILENT shall be
granted, at no charge, a non-exclusive,
non-transferable, irrevocable and perpetual right of
utilization to the deposited source codes. AGILENT may
only exercise
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its rights under this license and use the source code in
the event that the requirements of subclause 7.3.ii are
met.
7.3.v Prior to depositing the source codes, AGILENT may
inspect the source material to assure itself of the
quality thereof and of the fact that they are complete.
7.4 New Focus grants to AGILENT a non-exclusive, worldwide, transferable and
irrevocable license to all international property rights in the Monet
Module which are owned by New Focus, copyrights included, Said grant
will be provided royalty free for the Monet Modules sold to AGILENT by
New Focus. Said grant will be provided under the royalty provisions set
forth in subsection 7.7 hereof for Monet Modules not sold by New Focus
to AGILENT..
7.5 AGILENT grants to New Focus a non-exclusive, transferable, irrevocable
production and distribution right regarding the optoblock as defined in
Schedule 3. New Focus will pay to AGILENT a royalty of $[*] for the
first [*] and $[*] for any further sold optoblock. In the event of an
acquisition of New Focus, New Focus will be allowed to produce the
optoblock under the same agreement. AGILENT grants to New Focus a
non-exclusive, non-transferable, irrevocable production and distribution
right regarding the Digital/analog part as defined in Schedule 3. The
rights granted shall be revocable if New Focus will be taken over by
competitors as defined in Article 8.2 of this Addendum.
7.6 AGILENT grants to New Focus a non-exclusive, non-transferable,
irrevocable production and distribution right regarding the
Computing/interface part as defined in Schedule 3. New Focus will pay to
AGILENT a royalty of $[*] for each sold Computing/interface part. The
rights granted shall be revocable if New Focus will be taken over by
competitors as defined in Article 8.2 of this Addendum.
7.7 In the event of termination of this Addendum by AGILENT, AGILENT will
pay to New Focus a royalty for the Monet Module based on AGILENT's net
revenues for Monet or other modules which are based on the optoblock as
defined in schedule 3 of this Addendum or other modules which are based
on the optoblock as defined in schedule 3 of this Addendum per calendar
year as follows:
- 2000: [*]%
- 2001: [*]%
- 2002: [*]%
- 2003 and onward: [*]%
The above royalty payments will not be due in case that one or more of
the trigger events mentioned in Article 7.3i a-f apply.
In case that this Addendum will be terminated by AGILENT because of
Article 7.3.i.a-f, AGILENT agrees to pay a royalty of $[*] for each unit
of the Monet Modules built after
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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termination.
AGILENT agrees to keep records showing the sales or other disposition of
Monet Modules or other modules based on the optoblock defined in
schedule 3 of this Addendum in sufficient detail to enable the royalties
payable hereunder by AGILENT to be determined, and further agrees to
permit its books and records to be examined to the extent necessary to
verify the Royalties payable. Such examination to be made at the expense
of New Focus by an independent auditor acceptable to AGILENT. Costs
shall be born by AGILENT if discrepancies occur.
8. MISCELLANEOUS
8.1 With respect to section 8.5 of the Development Agreement of 23.12.1996,
the liability for New Focus under this section, regarding AGILENT's
right to rectify the defect itself or have it rectified by a third party
at New Focus's expense, shall be limited to [*] U.S. dollars ($[*].)
8.2 Article 15.1 second paragraph of the Development Agreement of 23.12.1996
shall be modified as follows:
Good cause shall be deemed to exist, in particular, if one of the
parties hereto fails to perform its contractual obligations, despite a
reminder to this effect. Good cause shall also be deemed to exist for
AGILENT if bankruptcy proceedings are instigated or initiated against
New Focus's assets or in the event of a lasting modification to the
ownership rights within New Focus (for example, if New Focus will be
taken over by competitors within the market of telecommunication, test
and measurement).
8.3 Article 15.1 third paragraph of the Development Agreement of 23.12.1996
shall not apply to this Addendum.
8.4 No ancillary verbal agreements have been made. Any alterations and
amendments hereto must be made in writing in order to be valid and must
expressly indicate that they constitute an alteration or amendment
hereto. This shall similarly apply to any waiver of this written form
requirement.
8.5 Should one or more of the provisions hereof be or become void or
invalid, the parties hereto undertake to replace such a provision with a
valid provision which approximates the economic purpose or intent of the
void or invalid provision as closely as possible. The validity of the
remaining provisions shall remain unaffected thereby.
8.6 In the case that AGILENT transfers all or part of its assets to a new
legal entity and therefore has to assign and/or transfer the rights and
obligations under the agreement and this Addendum No 2 to such new legal
entity, New Focus declares its agreement to such assignment or transfer
and AGILENT accepts such agreement.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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9. SCHEDULES TO THIS ADDENDUM
The Schedules listed in the following shall form an integral part of
this Addendum:
Schedule 1 Specifications, Development Phases, Payment
Schedule 2 Project schedule
Schedule 3 Definition of the "Tunable Laser Module" and Parts thereof
Schedule 4 Contact persons
Schedule 5 Bugfixing
Schedule 6 Resources provided by AGILENT
Schedule 7 Definition of Annualized Failure Rate (AFR) and Defect on
Arrval(DOA)
For AGILENT: For New Focus:
Boeblingen, 12/16/1999 Boeblingen, Dec 10, 1999
/s/ JORGE SCHULTZ /s/ PAUL SMITH
- ----------------------------------- ------------------------------------
Name Name
CONTROLLER, OCMD VP/GM Telecom Division
- ---------------------------- ---------------------------------
Area of activity/title Area of activity/title
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Final Version - 10.12.1999
SCHEDULE 1 SPECIFICATIONS, DEVELOPMENT PHASES, PAYMENT
Complete specification should be according to specification control
drawings!
1. MODULE KEY FUNCTIONS AND FEATURES
1.0 TUNABLE WAVELENGTH LASER SOURCE PARAMETERS
From the customer point of view this source will have the following
parameters. All these parameters must be accessible via the user
interface.
<TABLE>
<CAPTION>
Parameter Limits Preset Remarks
- --------- ------ ------ -------
<S> <C> <C> <C>
[*]
</TABLE>
1.1 TUNABLE WAVELENGTH LASER SOURCE FUNCTIONALITY
[*]
1.2 TUNABLE WAVELENGTH LASER SOURCE EXCEPTIONS / EVENTS
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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2. Development requirement:
The Development will proceed in accordance with the development phases
as described below.
("of each" herein means of [*] and of [*] modules)
A: MODULE HARDWARE
Start Contract
[*]
1. Design Review
[*]
2. Phase 1 Prototypes
[*]
3. Phase 2 Prototypes
[*]
4. Release to Production
[*]
5. Final Contact close
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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Final Version - 10.12.1999
B: MODULE SOFTWARE
1. Design Review
[*]
2. Phase 1 Prototypes (alpha units)
[*]
3. Phase 2 Prototypes (beta units)
[*]
4. Release to Production
[*]
3. Payment criteria:
[*]% ($[*]) will be due at contract start (payment criteria; contract
signing by AGILENT and NFI).
[*]% ($[*]) will be due after shipment of [*] with waiver spec and [*]
(payment criteria is an [*] module successfully tested by AGILENT in
Germany meeting specifications according to specification control
drawing [*]). Estimated completion date [*].
[*]% due [*] modules with coherence control and with the original
environmental spec. (payment criteria both Alpha Modules pass
environmental testing by AGILENT in Germany according to specification
control drawing [*] and specification control drawing [*]. Estimated
completion date [*].
[*]% ($[*]) due after the first shipment of the [*] with coherence
control (payment criteria: units meet the same specification control
drawing limits as the [*] according to [*]). Estimated Completion date
[*].
[*]% ($[*]) due at final contract close (payment criteria: final
contract close which shall occur after 30 production units of both the
[*] modules have been accepted by AGILENT in Germany). Estimated
completion date [*].
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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Final Version - 10.12.1999
SCHEDULE 2 - PROJECT SCHEDULE
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Agilent Technologies
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 19
Agilent Technologies
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 20
Agilent Technologies
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 21
Agilent Technologies
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 22
Final Version - 10.12.1999
SCHEDULE 3: DEFINITION OF THE "TUNABLE LASER MODULE" AND PARTS THEREOF
Digital/analog part
Comprising the [*] and the Analog board as well as the related Low Level
Software drivers.
Computing/interface part
Comprising the Computing Platform and the Bus interface as well as the
adaptation to the Wind River OS and the High Level Software Functions.
The optoblock
as the complete assembled opto-mechanical sub-assembly, including but not
limited to the diode laser, external cavity, cavity optics and drive train, in
the exact configuration, as subject of the Addendum to the Development
Agreement, last signed on Oct. 30, 1997.
[*]
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
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Final Version - 10.12.1999
SCHEDULE 4 - CONTACT PERSONS
For a better fulfillment of this Agreement both parties name the following
contact persons
By AGILENT: By New Focus
Name: Edgar Leckel Name: Bruce Pittman
Telephone-No.: (49) 7031-142691 Telephone-No.: (01) 408 919-2741
FAX: (49) 7031-143387
Name: Emmerich Muller Name: Dave Arnone
Telephone-No.: (49) 7031-144861 Telephone-No.: (01) 408-919-1528
FAX: (49) 7031-143387
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Final Version - 10.12.1999
SCHEDULE 5 - BUGFIXING
1. Any bugs in the developed software shall be recorded and verified by
AGILENT. Following verification, AGILENT shall forward the bug report to
New Focus.
Bugs shall be categorized as follows:
A. Serious bugs
Bugs that result in system crashes (hangs or halts), loss of
data, destruction of data, corruption of data or cases of
unreasonable handling effort for which no "workaround" is
available (i.e. there is no method accepted by AGILENT or by the
customer for either avoiding the bug or using the developed
software).
Any medium bug as defined in B. of this schedule 4 which causes
a serious bug as defined above within the final optical
component platforms shall additionally be categorized as a
serious bug.
B. Medium bugs
Bugs as specified under A above, but for which a "workaround" is
available for bug avoidance.
C. Minor bugs
Any bugs not included in categories A and B above.
2. Any serious bugs in the developed software shall be immediately fixed by
New Focus. New Focus will begin to fix the bug 24 hours after the
respective report by AGILENT the latest. New Focus shall fix the bug
during 3 days or during a longer period agreed by AGILENT. If New Focus
is unable to reproduce or to fix any bug immediately on its own computer
system, it shall fix the bug - if decided by AGILENT - on-site in
customer's place.
3. Any medium bug in the developed software shall be fixed in a reasonable
period of time. New Focus shall begin fixing the bug during 48 hours
after the respective report by AGILENT. New Focus shall fix the bug
during two weeks or during a longer period agreed by AGILENT.
4. Any other bugs shall be fixed as soon as possible within the scope of
the maintenance of the developed software.
5. New Focus shall update the documentation in accordance with the bug fix.
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Final Version - 10.12.1999
6. New Focus shall ensure that any serious and medium bugs shall be fixed
for both the current and the previous operating system release.
7. New Focus will maintain a telephone number with a designated
knowledgeable contact to AGILENT to call during normal business hours to
report problems and receive assistance.
8. The Bugfixing according to this schedule 5 shall be free of charge
during the warranty period.
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Final Version - 10.12.1999
SCHEDULE 6 - RESOURCES PROVIDED BY AGILENT
1. HARDWARE RELATED DOCUMENTS (see separate Documentation Package)
a) Drawings of all mechanical parts of the Module Chassis
- Module Bottom Cover
- Module Top Cover
- Module Sub Panel
- Plastic Front Panel
- Module Extractor
- Fiber Connector Bushing at Front Panel
- Module Fiber Interface
b) Description of Module Interface and digital Hardware
- Printed Circuit Board Outline
- Interface Connector to Module/Mainframe Positioning Dwg.
c) Schematics of digital parts including part list
d) Documentation and File of FPGA Communication Part
2. SOFTWARE RELATED DOCUMENTS (see separate Documentation Package)
a) Description of Communication between Mainframe and Module
b) AGILENT Coding Standards
c) Documentation and Source Code Template for Operating System, Start-up
and Communication of Module
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Final Version - 10.12.1999
SCHEDULE 7 - DEFINITION OF ANNUALIZED FAILURE RATE(AFR) AND DEFECT ON
ARRIVAL(DOA)
AFR(% YR), PER MONTH:
=(SUM OF 'ONE YEAR' WARRANTY FAILS IN THIS MONTH)/(SUM OF UNITS IN
WARRANTY THIS MONTH) *12 * 100
DOA = MODULE IS EITHER INCOMPLETE, DEFECT, OR DOES NOT MEET SPECIFICATIONS.
11
<PAGE> 1
EXHIBIT 10.14
[ALCATEL LOGO]
MEMORANDUM OF AGREEMENT
This Agreement is dated and effective as of January 7, 2000, by and between
Alcatel USA Sourcing, L.P. ("Buyer"), having a place of business at 1000 Coit
Road, Plano, Texas 75075 and New Focus, Inc. ("Seller"), having its principle
place of business at 2630 Walsh Avenue, Santa Clara, California 95051-0905.
Whereas, Seller commits to support and manufacture the optoelectronic component
("Product") as noted below for purchase by Customer.
Whereas, Buyer commits to purchase at least [*] of Buyer's total demand,
equating to approximately [*] units, based on acceptable levels of service and
quality from Seller, of the Product noted below from Seller for deliveries
during calendar year 2000 based on Buyer's current usage projections.
Product and Commercial Issues
-----------------------------
- [*]
- Establishment of safety stock for lead time reduction program as
mutually agreed upon by both Buyer and Seller.
This Memorandum of Agreement supersedes all previous understandings or
representations made prior to or simultaneous with the execution of this
document, by any party, with respect to the subject matter contained herein.
It is understood that issuance of a purchase order(s) is subject to receipt of
final approval by internal management of Alcatel USA Sourcing, L.P. and mutually
agreed to terms and conditions. It is further understood that should
the-required management approval be withheld, Alcatel USA will not place a
purchase order(s) and will not be subject to penalties, costs or other liability
of any nature.
/s/ DAVE STARK /s/ BOB MACDONALD
- ----------------------------------- ------------------------------------
Dave Stark Bob MacDonald
Purchasing Team Leader Product Marketing Manager
Alcatel USA Sourcing, L.P. New Focus, Inc.
/s/ GREG BROCKMANN /s/ PAUL SMITH
- ----------------------------------- ------------------------------------
Greg Brockmann Paul Smith
Manager - Advanced Purchasing Vice President, GM of
Alcatel USA Sourcing, L.P. Telecommunications
New Focus, Inc.
[*] Certain information on this page has been omitted and
filed separately with the Commission. Confidential treatment
has been requested with respect to the omitted portions.
<PAGE> 1
EXHIBIT 10.15
LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
DATED AS OF FEBRUARY 9, 1999
BETWEEN
NEW FOCUS, INC.,
A CALIFORNIA CORPORATION
AS "BORROWER",
AND
VENTURE LENDING & LEASING II, INC.,
A MARYLAND CORPORATION
AS "LENDER"
<PAGE> 2
LOAN AND SECURITY AGREEMENT
(EQUIPMENT)
The Borrower and Lender identified on the cover page of this document have
entered or anticipate entering into one or more transactions pursuant to which
Lender agrees to make available to Borrower an equipment loan facility governed
by the terms and conditions set forth in this document and one or more
Supplements executed by Borrower and Lender which incorporate this document by
reference. Each Supplement constitutes a supplement to and forms part of this
document, and will be read and construed as one with this document, so that
this document and the Supplement constitute a single agreement between the
parties (collectively referred to as this "Agreement").
Accordingly, the parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 DEFINITIONS. The terms defined in Article 10 and in the Supplement
will have the meanings therein specified for purposes of this Agreement.
1.2 INCONSISTENCY. In the event of any inconsistency between the
provisions of any Supplement and this document, the provisions of the
Supplement will be controlling for the purpose of all relevant transactions.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 THE COMMITMENT. Subject to the terms and conditions of this
Agreement, Lender agrees to make term loans to Borrower from time to time from
the Closing Date and to, but not including, the Termination Date in an
aggregate principal amount not exceeding the Commitment, for the purpose of
financing the acquisition or carrying of certain Equipment. The Commitment is
not a revolving credit commitment, and Borrower does not have the right to
repay and reborrow hereunder. Each Loan requested by Borrower to be made on a
single Business Day shall be for a minimum principal amount set forth in the
Supplement, except to the extent the remaining Commitment is a lesser amount.
2.2 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by
a separate Note payable to the order of Lender, in the total principal amount
of the Loan. Principal and interest of each Loan shall be payable at the times
and in the manner set forth in the Note.
2.3 PROCEDURES FOR BORROWING.
(a) Borrower shall give Lender, at least five (5) Business Days'
prior to a proposed Borrowing Date, written notice of any request for borrowing
hereunder (a "Borrowing Request"). Each Borrowing Request shall be in
substantially the form of Exhibit "B" to the Supplement, shall be executed by
a responsible executive or financial officer of Borrower, and shall state how
much is requested, and shall be accompanied by such other information and
documentation as Lender may reasonably request.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing
Date, if Borrower has satisfied the conditions precedent in Article 4, Lender
shall make the Loan available to Borrower in immediately available funds.
2.4 INTEREST. Basic Interest on the outstanding principal balance of
the each Loan shall accrue daily at the Designated Rate from the Borrowing Date
until the Maturity Date.
2.5 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment with
respect to each Loan on the Maturity Date of such Loan.
2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and
fees under this Agreement and any Loan Document, shall be calculated for actual
days elapsed on the basis of a 360-day year, which results in higher interest,
charge or fee payments than if a 365-day year were used. In no event shall
Borrower be obligated to pay Lender interest, charges or fees at a rate in
excess of the highest rate permitted by applicable law from time to time in
effect.
2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest or
the Terminal Payment with respect to any Loan shall bear interest from their
respective maturities, whether scheduled or accelerated, at the Designated Rate
for such Loan plus five percent (5.00%) per annum, until paid in full, whether
before or
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after judgment (the "Default Rate"), Borrower shall pay such interest on
demand.
2.8 LATE CHARGES. If Borrower is late in making any payment of
principal or interest or Terminal Payment under this Agreement by more than
five (5) days, Borrower agrees to pay a late charge of five percent (5%) OF
the installment due, but not less than fifty dollars ($50.00) for any one
such delinquent payment. This late charge may be charged by Lender for the
purpose of defraying the expenses incidental to the handling of such
delinquent amounts. Borrower acknowledges that such late charge represents a
reasonable sum considering all of the circumstances existing on the date of
this Agreement and represents a fair and reasonable estimate of the costs
that will be sustained by Lender due to the failure of Borrower to make
timely payments. Borrower further agrees that proof of actual damages would
be costly and inconvenient. Such late charge shall be paid without prejudice
to the right of Lender to collect any other amounts provided to be paid or
to declare a default under this Agreement or any of the other Loan Documents
or from exercising any other rights and remedies of Lender.
2.9 LENDER'S RECORDS. Principal, Basic interest, Terminal Payments and
all other sums owed under any Loan Document shall be evidenced by entries in
records maintained by Lender for such purpose. Each payment on and any other
credits with respect to principal, Basic Interest, Terminal Payments and all
other sums outstanding under any Loan Document shall be evidenced by entries in
such records. Absent manifest error, Lender's records shall be conclusive
evidence thereof.
2.10 GRANT OF SECURITY INTERESTS. To secure the timely payment and
performance of all of Borrower's Obligations to Lender, Borrower hereby grants
to Lender continuing security interests in all of the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that, except as set forth in the
Supplement or any schedule of exceptions executed by the parties, as the
Closing Date and each Borrowing Date:
3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and
validly existing in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to conduct business and is in good
sanding in each other jurisdiction in which its business is conducted or its
properties are located, except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery
and performance of all Loan Documents executed by Borrower are within
Borrower's powers, have been duly authorized, and are not in conflict with
Borrower's articles or certificate of incorporation or by-laws, or the terms
of any charter or other organizational document of Borrower, as amended from
time to time; and all such Loan Documents constitute valid and binding
Obligations of Borrower, enforceable in accordance with their terms (except as
may be limited by bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights in general, and subject to general principles
of equity).
3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully
conduct the business in which it is engaged, and to any sales, leases or the
furnishing of services by Borrower, including without limitation those
requiring consumer or other disclosures, the noncompliance with which would
have a material Adverse Effect.
3.4 NO CONFLICT. To its knowledge the execution, delivery, and
performance by Borrower of all Loan Documents are not in conflict with any law,
rule, regulation, order or directive, or any indenture, agreement, or
undertaking to which Borrower is a party or by which Borrower may be bound or
affected.
3.5 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax
claim, proceeding or dispute pending, or, to the knowledge of Borrower,
threatened against or affecting Borrower or its property, which may have a
Material Adverse Effect.
3.6 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of the latest date of such financial statements; and,
since that date there has been no Material Adverse Change.
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<PAGE> 4
3.7 SUBSIDIARIES. Borrower has one wholly-owned subsidiary, Focused
Research, a California corporation, engaged in advanced research and
development, but otherwise is not a majority owner of or in a control
relationship with any other business entity.
3.8 ENVIRONMENTAL MATTERS. Borrower has reviewed, or caused to be reviewed
on its behalf, all Environmental Laws applicable to its business operations and
materials handled therein, and as a result thereof has reasonably concluded
that Borrower is in compliance with such Environmental Laws, except to the
extent a failure to be in such compliance could not reasonably be expected to
have a Material Adverse Effect on Borrower's operations, properties or
financial condition.
3.9 NO EVENT OF DEFAULT. No Default or Event of Default currently exists.
3.10 FULL DISCLOSURE. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of
the circumstances under which they are made, not misleading as of the time when
made or delivered.
3.11 SPECIFIC REPRESENTATIONS REGARDING COLLATERAL.
(a) TITLE. Except for the security interests created by this Agreement
and Permitted Liens, (i) Borrower is and will be the unconditional legal and
beneficial owner of the Collateral, and (ii) the Collateral is genuine and
subject to no Liens (other than Permitted Liens), rights or defenses of others.
(b) LOCATION OF COLLATERAL. Other than mobile goods as defined in Division
9 of the California Uniform Commercial Code, as amended, Borrower's chief
executive office, Records, Equipment, and any other offices or places of
business are located at the address(es) shown on the Supplement as amended in
writing by Borrower from time to time.
(c) BUSINESS NAMES. Other than its full corporate name, Borrower has not
conducted business using any trade names or fictitious business names except as
shown on the Supplement.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Section
4.2, subject to the fulfillment of the following conditions and to the receipt
by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
(a) RESOLUTIONS. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) INCUMBENCY AND SIGNATURES. A certificate of the secretary of Borrower
certifying the names of the officer or officers of Borrower authorized to sign
the Loan Documents, together with a sample of the true signature of each such
officer.
(c) LEGAL OPINION. The opinion of legal counsel for Borrower as to such
matters as Lender may reasonably request, including the matters covered by
Sections 3.1, 3.2 and 3.4 hereof.
(d) ARTICLES AND BY-LAWS. Certified copies of the Articles or Certificate
of Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) THIS AGREEMENT. A counterpart of this Agreement and an initial
Supplement, with all schedules completed and attached thereto, and disclosing
such information as is acceptable to Lender.
(f) FINANCING STATEMENTS. Filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination statements, with
respect to the Collateral as Lender shall request.
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<PAGE> 5
(g) LIEN SEARCHES. Uniform Commercial Code lien, judgment, bankruptcy and
tax lien searches of Borrower from such jurisdictions or offices as Lender may
reasonably request, all as of a date reasonably satisfactory to Lender and its
counsel.
(h) GOOD STANDING CERTIFICATE. A Certificate of status or good standing of
Borrower as of a date acceptable to Lender from the jurisdiction of Borrower's
organization and any foreign jurisdictions where Borrower is or should be
qualified to do business.
(i) WARRANT. A warrant issued by Borrower to Lender exercisable for such
number, type and class of shares of Borrower's capital stock, and for an initial
exercise price as is specified in the Supplement.
4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its initial
Loan and each subsequent Loan is subject to the following further conditions
precedent that:
(a) NO DEFAULT. No Default or Event of Default has occurred and is
continuing or will result from the making of such Loan, and the
representations and warranties of Borrower contained in Article 3 of this
Agreement and in any Supplement are true and correct as of the Borrowing Date
of such Loan.
(b) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have
occurred since the date of the most recent financial statements submitted to
Lender.
(c) BORROWING REQUEST. Borrower shall have delivered to Lender a Borrowing
Request for such Loan.
(d) NOTE. Borrower shall have delivered an executed Note evidencing such
Loan, in form and substance satisfactory to Lender.
(e) SUPPLEMENTAL LIEN FILINGS. Borrower shall have executed and delivered
such amendments or supplements to this Agreement and such financing statements
as Lender may reasonably request in connection with the proposed Loan, in order
to create or perfect or to maintain the perfection of Lender's Liens on the
Collateral.
(f) VCOC LIMITATION. Lender shall not be obligated to make any Loan under
its Commitment if at the time of or after giving effect to the proposed Loan
Lender would no longer qualify as: (A) a "venture capital operating company"
under U.S. Department of Labor Regulations Section 2510.3-101(d), Title 29 of
the Code of Federal Regulations, as amended; and (B) a "business development
company" under the provisions of federal Investment Company Act of 1940, as
amended; and (C) a "regulated investment company" under the provisions of the
Internal Revenue Code of 1986, as amended.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all
obligations to Lender, Borrower will:
5.1 NOTICE TO LENDER. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding affecting
Borrower where the amount claimed against Borrower is at the Threshold Amount or
more, or where the granting of the relief requested could have a Material
Adverse Effect.
(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority and which could have a Material Adverse
Effect.
(c) The occurrence of any Default or any Event of Default.
(d) Any change in the location of any of Borrower's places of business or
Collateral other than mobile goods as defined in Division 9 of the California
Uniform Commercial Code, as amended, at least thirty (30) days in advance of
such change, or of the establishment of any new, or the discontinuance of any
existing, place of business.
(e) Any dispute or default by Borrower or any other party under any joint
venture, partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement which
could reasonably be expected to have a Material Adverse Effect.
(f) Any other matter which has resulted or might reasonably result in a
Material Adverse Change.
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5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to be delivered
to Lender, in form and detail satisfactory to Lender and Lender agrees to
protect the confidentiality of the following financial information, which
Borrower warrants shall be accurate and complete in all material respects:
(a) MONTHLY FINANCIAL STATEMENTS. As soon as available but no later than
thirty (30) days after the end of each month, Borrower's balance sheet as of the
end of such period, and Borrower's income statement for such period and for that
portion of Borrower's financial reporting year ending with such period, prepared
and attested by a responsible financial officer of Borrower as being complete
and correct and fairly presenting Borrower's financial condition and the results
of Borrower's operations; provided, however, that after the effective date of
the initial Qualified Public Offering Borrower's obligations hereunder to
deliver financial statements shall apply only to those statements required to be
filed by the Securities and Exchange Commission, to be provided no less
frequently than quarterly.
(b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no later than
ninety (90) days after and as of the end of each financial reporting year, a
complete copy of Borrower's audit report, which shall include balance sheet,
income statement, statement of changes in equity and statement of cash flows for
such year, prepared and certified by an independent certified public accountant
selected by Borrower and satisfactory to Lender (the "Accountant"); provided,
however, that after the effective date of the initial Qualified Public Offering
Borrower's obligations hereunder to deliver financial statements shall apply
only to those statements required to be filed by the Securities and Exchange
Commission, to be provided no less frequently than quarterly. The Accountant's
certification shall not be qualified or limited due to a restricted or limited
examination by the Accountant of any material portion of Borrower's records or
otherwise.
(c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of each set
of financial statements referred to in paragraphs (a) and (b) above, a
certificate of the chief financial officer of Borrower substantially in the form
of Exhibit "C" to the Supplement (i) setting forth in reasonable detail any
calculations required to establish whether Borrower is in compliance with any
financial covenants or tests set forth in the Supplement, and (ii) stating
whether any Default or Event of Default exists on the date of such certificate,
and if so, setting forth the details thereof and the action which Borrower is
taking or proposes to take with respect thereto.
(d) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES. Promptly after sending,
issuing, making available, or filing, copies of all statements released to any
news media for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders, and, not
later than five (5) days after actual filing or the date such filing was first
due, all registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission, or any other governmental
or regulatory authority.
(e) OTHER INFORMATION. Such other statements, lists of property and
accounts, budgets, forecasts, reports, or other information as Lender may from
time to time reasonably request.
5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a "venture
capital operating company" to participate in, and influence the conduct of
management of Borrower through the exercise of "management rights," as such
terms are defined in 29 C.F.R. Sections 2610.3-101(d), and;
(a) Permit Lender to make available to Borrower, at no cost to Borrower,
"significant managerial assistance", as defined in Section 2(a)(47) of the
Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors, employees
or affiliates, (ii) Borrower's allowing Lender to provide recommendations of
prospective candidates for election to Borrower's Board of Directors, or (iii)
Lender, at Borrower's request, seeking the services of third-party consultants
to aid Borrower with respect to its management and operations;
(b) Permit Lender to make available consulting and advisory services to
officers of Borrower regarding Borrower's equipment acquisition and financing
plans, and such other matters affecting the business, financial condition and
prospects of Borrower as Lender shall reasonably deem relevant; and
(c) If Lender reasonably believes that financial or other developments
affecting Borrower have impaired or are likely to impair Borrower's ability to
perform its obligations under this Agreement, permit Lender reasonable access to
Borrower's management and/or
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Board of Directors and opportunity to present Lender's views with respect to
such developments.
5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form
of business, and all rights and privileges necessary or desirable in the normal
course of its business; and keep all Borrower's property in good working order
and condition, ordinary wear and tear excepted.
5.5 INSURANCE. Obtain and keep in force insurance in such amounts and
types as is usual in the type of business conducted by Borrower, with insurance
carriers having a policyholder rating of not less than "A" and financial
category rating of Class VII in "Best's Insurance Guide," unless otherwise
approved by Lender. Such insurance policies must be in form and substance
satisfactory to Lender, and shall list Lender as an additional insured or loss
payee, as applicable, on endorsement(s) in form reasonably acceptable to
Lender. Borrower shall furnish to Lender such endorsements, and upon Lender's
request, copies of any or all such policies.
5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and records,
and prepare all financial statements in accordance with GAAP, and in compliance
with the regulations of any governmental or regulatory authority having
jurisdiction over Borrower or Borrower's business; and permit employees or
agents of Lender at such reasonable times as Lender may request, at Borrower's
expense, to inspect Borrower's properties, and to examine, and make copies and
memoranda of Borrower's books, accounts and records. Such inspections shall
occur no more frequently than once a year except after a Default.
5.7 COMPLIANCE WITH LAWS. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party, except where the failure to so comply would not have a Material Adverse
Effect.
5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's obligations when due;
pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.9 SPECIAL COLLATERAL COVENANTS.
(a) MAINTENANCE OF COLLATERAL; INSPECTION. Do all things reasonably
necessary to maintain, preserve, protect and keep all Collateral in good
working order and salable condition, ordinary wear and tear excepted, deal with
the Collateral in all ways as are considered good practice by owners of like
property, and use the Collateral lawfully and, to the extent applicable, only
as permitted by Borrower's insurance policies. Maintain, or cause to be
maintained, complete and accurate Records relating to the Collateral. Upon
reasonable prior notice at reasonable times during normal business hours,
Borrower hereby authorizes Lender's officers, employees, representatives and
agents, at Lender's expense, to inspect the Collateral and to discuss the
Collateral and the Records relating thereto with Borrower's officers and
employees.
(b) FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to Lender
all financing statements, notices and other documents from time to time
reasonably requested by Lender to maintain a first perfected security interest
in the Collateral in favor of Lender; perform such other acts, and execute and
deliver to Lender such additional conveyances, assignments, agreements and
instruments, as Lender may at any time request in connection with the
administration and enforcement of this Agreement or Lender's rights, powers and
remedies hereunder.
(c) LIENS. Not create, incur, assume or permit to exist any Lien or grant
any other Person a negative pledge on any Collateral, except Permitted Liens.
(d) DOCUMENTS OF TITLE. Not sign or authorize the signing of any
financing statement or other document naming Borrower as debtor or obligor, or
acquiesce or cooperate in the issuance of any bill of lading, warehouse receipt
or other document or instrument of title with respect to any Collateral, except
those negotiated to Lender, or those naming Lender as secured party.
(e) DISPOSITION OF COLLATERAL. Not sell, transfer, lease or otherwise
dispose of any Collateral. Unless Borrower grants to Lender a perfected first
security interest in replacement collateral, acceptable to Lender, with a value
equal to or greater than the Collateral being disposed of.
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(f) CHANGE IN LOCATION OR NAME. Without at least 30 days' prior written
notice to Lender: (a) not relocate any Collateral except as provided in Section
3.11(b) or Records, its chief executive office, or establish a place of
business at a location other than as specified in the Supplement; and (b) not
change its name, mailing address, location of Collateral except as provided in
Section 3.11(b), or its legal structure.
(g) DECALS, MARKINGS. At the request of Lender, firmly affix a decal,
stencil or other marking to designated items of Equipment, indicating thereon
the security interest of Lender.
(h) AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. Obtain and maintain such
acknowledgments, consents, waivers and agreements from the owner, lienholder,
mortgagee and landlord with respect to any real property on which Equipment is
located as Lender may require, all in form and substance satisfactory to Lender.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all obligations
to Lender, Borrower will not (without Lender's prior written consent which
shall not be unreasonably withheld):
6.1 DIVIDENDS. Except after a Qualified Public Offering, pay any
dividends or purchase, redeem or otherwise acquire or make any other
distribution with respect to any of Borrower's capital stock, except (a)
dividends or other distributions solely of capital stock of Borrower, (b)
conversions of its securities into other securities pursuant to the terms of
such convertible securities or otherwise in exchange therefore, and (c)
repurchases of stock from employees upon termination of employment under
reverse vesting or similar repurchase plans.
6.2 CHANGES/MERGERS. Liquidate or dissolve, or enter into any
consolidation, merger, partnership, joint venture or other combination except:
(a) joint ventures, strategic alliances, licensing and similar arrangements
customary in Borrower's industry, or
(b) mergers or consolidations in which the surviving entity:
(i) succeeds to all or substantially all of Borrower's business and
assets to which this Agreement pertains; and
(ii) agrees in writing to be bound by the Agreement, including all of the
terms, rights and obligations thereto; and
(iii) has a net worth balances and cash balances, each after giving effect
to the merger or consolidation, greater than the net worth and cash of Borrower
immediately prior to such merger or consolidation; or (c) the creation of
additional direct or indirect subsidiaries of Borrower.
6.3 SALES OF ASSETS. Except for in connection with mergers or
consolidations permitted under Section 6.2(b), sell, transfer, lease or
otherwise dispose of any of Borrower's assets except for fair consideration and
in the ordinary course of its business.
6.4 LOANS/INVESTMENTS. Make or suffer to exist any loans, guaranties,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of Borrower's business;
(b) Investments in domestic certificates of deposit issued by, and other
domestic investments with financial institutions organized under the laws of
the United States or a state thereof, having One Hundred Million Dollars
($100,000,000) in capital and a rating of at least "investment grade" or "A" by
Moody's or any successor rating agency."
(c) Investments in marketable obligations of the Untitled States of
America and in open market commercial paper given the highest credit rating by
a national credit agency and maturing not more than one year from the creation
thereof, and
(d) Temporary advances to cover incidental expenses to be incurred in the
ordinary course of business.
6.5 TRANSACTION WITH RELATED PERSONS. Directly or indirectly enter into
any transaction with any Affiliate except for transactions that are in the
ordinary course of Borrower's business, upon fair and reasonable terms that are
no less favorable to Borrower that would be obtained in an arm's length
transaction with a non-Affiliate party and except for transactions with a
Subsidiary that are upon fair and reasonable terms and transactions constituting
permitted investments under Section 6.4.
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6.6 OTHER BUSINESS. Engage in any material line of business other than
the business Borrower conducts as of the Closing Date.
6.7 FINANCIAL COVENANTS. Fail to comply with any financial covenants or
tests set forth in the Supplement.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following (each, as "Event
of Default") shall terminate any obligation of Lender to make any additional
Loan; and shall, at the option of Lender (1) make all sums of Basic Interest
and principal, all Terminal Payments, and any Obligations and other amounts
owing under any Loan Documents immediately due and payable without notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor or any other notices or demands, and (2) give Lender the right to
exercise any other right or remedy provided by contract or applicable law;
(a) Borrower shall fail to pay any principal, interest or Terminal
Payment under this Agreement, or fail to pay any fees or other charges when due
under any Loan Document, and such failure continues for five (5) Business Days
or more after the same first becomes due; or an Event of Default as defined in
any other Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement,
certificate or other document provided, by Borrower under any Loan Document
shall prove to have been false or misleading in any material respect when made
or deemed made herein.
(c) Borrower shall fail to pay its debts generally as they become due or
shall commence any Insolvency Proceeding with respect to itself; an involuntary
Insolvency Proceeding shall be filed against Borrower, or a custodian, receiver,
trustee, assignee for the benefit of creditors, or other similar official, shall
be appointed to take possession, custody or control of the properties of
Borrower, and such involuntary Insolvency Proceeding, petition or appointment is
acquiesced to by Borrower or is not dismissed within sixty (60) days; or the
dissolution or termination of the business of Borrower.
(d) Borrower shall be in default beyond any applicable period of grace or
cure under any other agreement involving the borrowing of money, the purchase
of property, the advance of credit or any other monetary liability of any kind
to Lender or to any Person, exceeding the Threshold Amount or aggregate
indebtedness exceeding the sum of One Hundred Thousand Dollars ($100,000),
which results in the acceleration of payment of such obligation in an amount in
excess of the Threshold Amount.
(e) Any governmental or regulatory authority shall take any judicial or
administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the reasonable
judgment of Lender, might have a Material Adverse Effect.
(f) Except for a merger pursuant to Section 6.2, any sale, transfer or
other disposition of all or a substantial or material part of the assets of
Borrower, including without limitation to any trust or similar entity, shall
occur.
(g) Any judgment(s) singly or in the aggregate in excess of the Threshold
Amount shall be entered against Borrower which remain unsatisfied, unvacated or
unstayed pending appeal for ten (10) or more days after entry thereof.
(h) Except as provided for in Section 6.2, any Person or two or more
Persons acting in concert shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission) of twenty-five
percent (25%) or more of the outstanding shares of voting stock of Borrower.
(i) Borrower shall fail to perform or observe any covenant
contained in Article 6 of this Agreement.
(j) Borrower shall fail to perform or observe any covenant contained in
this Agreement or any other Loan Document (other than a covenant which is
dealt with specifically elsewhere in this Article 7) and the breach of such
covenant is not cured within 30 days after the sooner to occur of Borrower's
receipt of notice of such breach from Lender or the date on which such breach
first becomes known to any officer of Borrower, provided, however, that if such
breach is not capable of being cured within such 30-day period and Borrower
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timely notifies Lender of such fact and Borrower diligently pursues such cure,
then the cure period shall be extended to the date requested by Borrower's
notice but in no event more than 90 days from the initial breach; provided,
further, that such additional 60-day opportunity to cure shall not apply in the
case of any failure to perform or observe any covenant which has been the
subject of a prior failure within the preceding 180 days or which is a willful
and knowing breach by Borrower.
7.2 REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance
of an Event of Default, Lender shall be entitled to, at its option, exercise any
or all of the rights and remedies available to a secured party under the Uniform
Commercial Code or any other applicable law, and exercise any or all of its
rights and remedies provided for in this Agreement and in any other Loan
Document. The obligations of Borrower under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Obligations is rescinded or must otherwise be returned by Lender upon, on
account of, or in connection with, the insolvency, bankruptcy or reorganization
of Borrower or otherwise, all as though such payment had not been made.
7.3 SALE OF COLLATERAL. Upon the occurrence and during the continuance of
an Event of Default, Lender may sell all or any part of the Collateral, at
public or private sales, to itself, a wholesaler, retailer or investor, for
cash, upon credit or for future delivery, and at such price or prices as Lender
may deem commercially reasonable. To the extent permitted by law, Borrower
hereby specifically waives all rights of redemption and any rights of stay or
appraisal which it has or may have under any applicable law in effect from time
to time. Any such public or private sales shall be held at such times and at
such place(s) as Lender may determine. In case of the sale of all or any part
of the Collateral on credit or for future delivery, the Collateral so sold may
be retained by Lender until the selling price is paid by the purchaser, but
Lender shall not incur any liability in case of the failure of such purchaser
to pay for the Collateral and, in case of any such failure, such Collateral may
be resold. Lender may, instead of exercising its power of sale, proceed to
enforce its security interest in the Collateral by seeking a judgment or decree
of a court of competent jurisdiction.
7.4 BORROWER'S OBLIGATIONS UPON DEFAULT. Upon the request of Lender after
the occurrence and during the continuance of an event of Default, Borrower will:
(a) Assemble and make available to Lender the Collateral at such place(s)
as Lender shall reasonably designate, segregating all Collateral so that each
item is capable of identification; and
(b) Subject to the rights of any lessor, permit Lender, by Lender's
officers, employees, agents and representatives, to enter any premises where
any Collateral is located, to take possession of the Collateral, to complete
the processing, manufacture or repair of any Collateral, and to remove the
Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of Lender for rent or other compensation for the use of
Borrower's premises.
ARTICLE 8 - SPECIAL COLLATERAL PROVISIONS
8.1 PERFORMANCE OF BORROWER'S OBLIGATIONS. Without having any obligation
to do so, upon reasonable prior notice to Borrower, Lender may perform or pay
any obligation which Borrower has agreed to perform or pay under this
Agreement, including, without limitation, the payment or discharge of taxes or
Liens levied or placed on or threatened against the collateral. In so
performing or paying, Lender shall determine the action to be taken and the
amount necessary to discharge such obligations. Borrower shall reimburse Lender
on demand for any amounts paid by Lender pursuant to this Section, which
amounts shall constitute Obligations secured by the Collateral and shall bear
interest from the date of demand at the Default Rate.
8.2 POWER OF ATTORNEY. For the purpose of protecting and preserving the
Collateral and Lender's rights under this Agreement, Borrower hereby
irrevocably appoints Lender, with full power of substitution, as its
attorney-in-fact with full power and authority, after the occurrence and during
the continuance of an Event of Default, to do any act which Borrower is
obligated to do hereunder; to exercise such rights with respect to the
Collateral as Borrower might exercise; to use such Equipment, Fixtures or other
property as Borrower might use; to enter Borrower's premises; to give notice of
Lender's security interest in, and to collect the Collateral; and to execute
and file in Borrower's name any financing statements, amendments and
continuation statements necessary or desirable to perfect or continue the
perfection of
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Lender's security interests in the Collateral. Borrower hereby ratifies all
that Lender shall lawfully do or cause to be done by virtue of this appointment.
8.3 AUTHORIZATION FOR LENDER TO TAKE CERTAIN ACTION. The power of
attorney created in Section 8.2 is a power coupled with an interest and shall
be irrevocable. The powers conferred on Lender hereunder are solely to protect
its interests in the Collateral and shall not impose any duty upon Lender to
exercise such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and in no event
shall Lender or any of its directors, officers, employees, agents or
representatives be responsible to Borrower for any act or failure to act,
except for gross negligence or willful misconduct. After the occurrence and
during the continuance of an Event of Default, Lender may exercise this power
of attorney without notice to or assent of Borrower, in the name of Borrower,
or in Lender's own name, from time to time in Lender's sole discretion and at
Borrower's expense, provided that such expenses are reasonable and actually
incurred. To further carry out the terms of this Agreement, after the
occurrence and during the continuance of an Event of Default, Lender may:
(a) Sign and endorse any invoice, freight or express bills, bills of
loading, storage or warehouse receipts; drafts, certificates and statements
under any commercial or standby letter of credit relating to Collateral; or any
other documents relating to the Collateral, including without limitation the
Records.
(b) Use or operate Collateral or any other property of Borrower for the
purpose of preserving or liquidating Collateral.
(c) File any claim or take any other action or proceeding in any court of
law or equity or as otherwise deemed appropriate by Lender for the purpose of
collecting any and all monies due or securing any performance to be rendered
with respect to the Collateral.
(d) Commence, prosecute or defend any suits, actions or proceedings or as
otherwise deemed appropriate by Lender for the purpose of protecting or
collecting the Collateral.
(e) Prepare, adjust, execute, deliver and receive payment under insurance
claims, and collect and receive payment of and endorse any instrument in
payment of loss or returned premiums or any other insurance refunds or return,
and apply such amounts at Lender's sole discretion toward repayment of the
Obligation or replacement of the Collateral.
8.4 APPLICATION OF PROCEEDS. Any Proceeds and other monies or property
received by Lender pursuant to the terms of this Agreement or any Loan Document
may be applied by Lender first to the payment of expenses of collection,
including without limitation reasonable attorney's fees, and then to the
payment of the Obligations in such order of application as Lender may elect.
8.5 DEFICIENCY. If the Proceeds of any disposition of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all the Obligations, plus all other sums required to be expended or
distributed by Lender, then Borrower shall be liable for any such deficiency.
8.6 LENDER TRANSFER. Upon the transfer of all or any part of the
Obligations, Lender may transfer all or part of the Collateral and shall be
fully discharged thereafter from all liability and responsibility with respect
to such Collateral so transferred, and the transferee shall be vested with all
the rights and powers of Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender
shall retain all rights and powers hereby given.
8.7 LENDER'S DUTIES.
(a) Lender shall use reasonable care in the custody and preservation of
any Collateral in its possession. Without limitation on other conduct which may
be considered the exercise of reasonable care, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of such Collateral if
such Collateral is accorded treatment substantially equal to that which Lender
accords its own property, or taking any necessary steps to preserve any rights
against any Person with respect to any Collateral. Under no circumstances shall
Lender be responsible for any injury or loss to the Collateral, or any part
thereof, arising from any cause beyond the reasonable control of Lender.
(b) Neither Lender, nor any of its directors, officers, employees, agents,
attorneys or any other person affiliated with or representing Lender shall be
liable for any claims, demands, losses or damages, of
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any kind whatsoever, made, claimed, incurred or suffered by Borrower or any
other party through the ordinary negligence of Lender, or any of its directors,
officers, employees, agents, attorneys or any other person affiliated with or
representing Lender.
8.8 TERMINATION OF SECURITY INTERESTS. Upon the payment in full of the
Obligations and if Lender has no further obligations under its Commitment, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Borrower. Upon any such termination, the Lender
shall, at Borrower's expense, execute and deliver to Borrower such documents as
Borrower shall reasonably request to evidence such termination.
ARTICLE 9 - GENERAL PROVISIONS
9.1 NOTICES. Any notice given by any party under any Loan Document shall
be in writing and personally delivered, sent by overnight courier, or United
States mail, postage prepaid, or sent by facsimile, or other authenticated
message, charges prepaid, to the other party's or parties' addresses shown on
the Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written
notice of such change to each other party. Notice given by hand delivery shall
be deemed received on the date delivered; if sent by overnight courier, on the
next business day after delivery to the courier service; if by first class
mail, on the third business day after deposit in the U.S. Mail; and if by
facsimile, on the date of transmission.
9.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer Borrower's rights
or obligations under any Loan Document, except to a person or entity into which
it has merged or which has otherwise succeeded to all or substantially all of
its business and assets to which this Agreement pertains, by merger
reorganization or otherwise, in accordance with Section 6.2 without Lender's
prior written consent. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any interest in,
Lender's rights and obligations under the Loan Documents. In connection with
any of the foregoing, Lender may disclose all documents and information which
Lender now or hereafter may have relating to the Loans, Borrower, or its
business; provided that any person who receives such information shall have
agreed in writing in advance to maintain the confidentiality of such
information on terms reasonably acceptable to Borrower.
9.3 NO WAIVER. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan
Document. No failure or delay on the part of Lender in exercising any power,
right, or privilege under any Loan Document shall operate as a waiver thereof,
and no single or partial exercise of any such power, right, or privilege shall
preclude any further exercise thereof or the exercise of any other power, right
or privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
9.4 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
9.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document executed
by Borrower which is prohibited or unenforceable in any jurisdiction, shall be
so only as to such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of any such Loan Document
shall remain valid and enforceable.
9.6 ACCOUNTING TERMS. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined
and prepared in accordance with GAAP.
9.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend
and indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys' fees and costs) and other amounts
incurred by Lender and each such Agent, arising from (i) the
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matters contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has filed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; PROVIDED, HOWEVER, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This indemnification shall survive the payment and satisfaction of all of
Borrower's Obligations to Lender.
9.8 REIMBURSEMENT. Borrower shall reimburse Lender for all reasonable
costs and expenses actually incurred, including without limitation reasonable
attorneys' fees and disbursements expended or incurred by Lender in any
arbitration, mediation, judicial reference, legal action or otherwise in which
Lender obtains a favorable judgement, award or other similar favorable outcome
and in connection with (a) the preparation and negotiation of the Loan
Documents, (b) the amendment and enforcement of the Loan Documents, including
without limitation during any workout, attempted workout, and/or in connection
with the rendering or legal advice as to Lender's rights, remedies and
obligations under the loan Documents, (c) collecting any sum which becomes due
Lender under any Loan Document, (d) any proceeding for declaratory relief, any
counterclaim to any proceeding, or any appeal or (e) the protection,
preservation or enforcement of any rights of Lender. For the purposes of this
section, attorney's fees shall include, without limitation, fees incurred in
connection with the following; (1) contempt proceedings; (12) discovery; (3)
any motion, proceeding or other activity of any kind in connection with an
Insolvency Proceeding; (4) garnishment, levy, and debtor and third party
examinations; and (5) postjudgment motions and proceedings of any kind,
including without limitation any activity taken to collect or enforce any
judgment. All of the foregoing costs and expenses shall be payable upon demand
by Lender, and if not paid within forty-five (45) days of presentation of
invoices shall bear interest at the highest applicable Default Rate.
9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts which, when taken together, shall constitute but one
agreement.
9.10 ENTIRE AGREEMENT. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
9.11 GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR
OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION
AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
9.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OTHERWISE. BORROWER AND
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LENDER EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY, WITHOUT LIMITING THE FOREGOING, THE PARTIES
FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY
OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
ARTICLE 10 - DEFINITIONS
The definitions appearing in this Agreement or any Supplement shall be
applicable to both the singular and plural forms of the defined terms:
"AFFILIATE" means any Person which directly or indirectly controls, is
controlled by, or is under common control with Borrower. "Control," "controlled
by" and "under common control with" mean direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract or otherwise);
provided, that control shall be conclusively presumed when any Person or
affiliated group directly or indirectly owns five percent (5%) or more of the
securities having ordinary voting power for the election of directors of a
corporation.
"AGREEMENT" means this Loan and Security Agreement and each Supplement
thereto, as each may be amended or supplemented from time to time.
"BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
Section 191, et seq.), as amended.
"BASIC INTEREST" means the fixed rate of interest payable on the outstanding
balance of each Loan at the applicable Designated Rate.
"BORROWING DATE" means the Business Day on which the proceeds of a Loan are
disbursed by Lender.
"BORROWING REQUEST" means a written request from Borrower in substantially the
form of Exhibit "B" to the Supplement, requesting the funding of one or more
Loans on a particular Business Date.
"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City or San Francisco are authorized or
required by law to close.
"CLOSING DATE" means the date of this Agreement.
"COLLATERAL" means all Borrower's Equipment now owned or hereafter acquired or
arising, wherever located, and whether held by Borrower or any third party, and
all proceeds and products thereof, including all insurance and condemnation
proceeds ("Proceeds"), and all monies now or at any time hereafter in the
possession or under the control of Lender or a bailee or affiliate of Lender,
including any cash collateral in any cash collateral or other account, and all
Records.
"COMMITMENT" means the obligation of Lender to make Loans to Borrower up to the
aggregate principal amount set forth in the Supplement.
"DEFAULT" means an event which with the giving of notice, passage of time, or
both would constitute an Event of Default.
"DEFAULT RATE" is defined in Section 2.7.
"DESIGNATED RATE" means the rate of interest per annum described in the
Supplement as being applicable to an outstanding Loan from time to time.
"ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all
administrative orders, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authorities, each case
relating to environmental, health, or safety matters.
"EQUIPMENT" means all of Borrower's specific items of equipment described on
Schedule 1 attached to this Agreement and incorporated herein by this
reference (as such Schedule 1 may be amended or supplemented from time to
time), and all such property which is or is to become fixtures on real
property, and all improvements, replacements, accessions and additions thereto,
wherever located, and all proceeds thereof arising from the sale, lease, rental
or other use or
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disposition of any such property, including all rights to payment with respect
to insurance or condemnation, returned premiums, or any cause of action
relating to any of the foregoing.
"EVENT OF DEFAULT" means any event described in Section 7.1.
"FIXTURES" means all items of Equipment that are so related to the real
property upon which they are located that an interest in them arises under real
property law, and improvements, replacements, parts, accessions and additions
thereto, and substitutions therefor.
"GAAP" means generally accepted accounting principles and practices consistent
with those principles and practices promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of Certified
Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
"INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors, undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"LIEN" means any voluntary or involuntary security interest, mortgage, pledge,
claim, charge, encumbrance, title retention agreement, or third party interest,
covering all or any part of the property of Borrower or any other Person.
"LOAN" means an extension of credit by Lender under this Agreement.
"LOAN DOCUMENTS" means individually and collectively, this Loan and Security
Agreement, each Supplement, each Note, and any other security or pledge
agreement(s), any Warrants issued by Borrower in connection with this Agreement,
and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the extensions of credit which are the subject
of this Agreement.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a material
adverse change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of Borrower; (b) a material
impairment of the ability of Borrower to perform under any Loan Document; or
(c) a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.
"MATURITY DATE" means, with regard to a Loan, the earlier of (i) its maturity
by reason of acceleration, or (ii) its stated maturity date; and is the date on
which payment of all outstanding principal, accrued interest, and the Terminal
Payment with respect to such Loan is due.
"NOTE" means a promissory note substantially in the form attached to the
Supplement as Exhibit "A", executed by Borrower evidencing each Loan.
"OBLIGATIONS" means all debts, obligations and liabilities of Borrower to
Lender currently existing or now or hereafter made, incurred or created under,
pursuant to or in connection with this Agreement, whether voluntary or
involuntary and however arising or evidenced, whether direct or acquired by
Lender by assignment or succession, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Borrower may be liable individually or jointly, or whether recovery upon such
debt may be or become barred by any statute of limitations or otherwise
unenforceable; and all renewals, extensions and modifications thereof; and all
attorneys' fees and costs incurred by Lender in connection with the collection
and enforcement thereof as provided for in any Loan Document.
"PERMITTED LIEN" means
(a) Involuntary Liens which, in the aggregate, would not have a Material
Adverse Effect and which in any event would not exceed the Threshold Amount;
(b) Liens for current taxes or other governmental or regulatory
assessments which are not delinquent, or which are contested in good faith by
the appropriate procedures and for which appropriate reserves are maintained;
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(c) Liens in favor of Lender;
(d) materialmen's, mechanics', repairmen's, employees' or other like
Liens arising in the ordinary course of business and which are not delinquent
for more than 45 days or are being contested in good faith by appropriate
proceedings;
(e) any judgment, attachment or similar Lien, unless the judgment it
secures has not been discharged or execution thereof effectively stayed and
bonded against pending appeal within 30 days of the entry thereof; and
(f) Any Liens existing on the Closing Date and disclosed in the Schedule
or arising under this Agreement or the other Loan Documents.
"PERSON" means any individual or entity.
"QUALIFIED PUBLIC OFFERING" means the closing of a firmly underwritten public
offering of Borrower's common stock with aggregate proceeds of not less than
$20,000,000 (prior to underwriting expenses and commissions).
"RECORDS" means all Borrower's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Equipment.
"RELATED PERSON" means any Affiliate of Borrower, or any officer, employee,
director or equity security holder of Borrower or any Affiliate.
"TERMINAL PAYMENT" means, with respect to each Loan, an amount payable on the
Maturity Date of such Loan in an amount equal to that percentage of the
original principal amount of such Loan specified in the Supplement.
"TERMINAL DATE" has the meaning specified in the Supplement.
"THRESHOLD AMOUNT" has the meaning specified in the Supplement.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
15
<PAGE> 17
SUPPLEMENT
TO THE
LOAN AND SECURITY AGREEMENT (EQUIPMENT)
DATED AS OF FEBRUARY 9, 1999
BETWEEN
NEW FOCUS, INC. ("BORROWER")
AND
VENTURE LENDING & LEASING II, INC. ("LENDER")
________________________________________________________________________________
This is a Supplement identified in the document entitled Loan
and Security Agreement (Equipment) dated as of February 9, 1999 between Borrower
and Lender. All capitalized terms used in this Supplement and not otherwise
defined in this Supplement have the meanings ascribed to them in Section 10 of
the Loan and Security Agreement, which is incorporated in its entirety into
this Supplement. In the event of any inconsistency between the provisions of
that document and this Supplement, this Supplement is controlling. Execution of
this Supplement by the Lender and Borrower shall constitute execution of the
Loan and Security Agreement.
In addition to the provisions of the Loan and Security
Agreement, the parties agree as follows:
1. - ADDITIONAL DEFINITIONS:
"COMMITMENT": Lender commits to make Loans to Borrower up to the
aggregate, original principal amount of Two Million Dollars ($2,000,000.00).
"DESIGNATED RATE": The Designated Rate is eight and 40/100
percent (8.40%) per annum.
"TERMINAL PAYMENT": Each Terminal Payment shall be an amount
equal to ten percent (10%) of the original principal amount of the associated
Loan.
"TERMINATION DATE": The Termination Date is the earlier of (a)
the date Lender may terminate making Loans or extending other credit pursuant
to the rights of Lender under Article 7 of the Agreement, or (b) December 31,
1999.
"THRESHOLD AMOUNT": Fifty Thousand Dollars ($50,000.00).
2. - Additional Terms and Conditions:
A. ISSUANCE OF WARRANT TO LENDER. As additional consideration for
the making of the Loans under the Agreement, upon the making of, and as a
condition to, the initial Loan, Lender shall be entitled to receive a warrant to
purchase 35,000 shares of Series D Preferred Stock of Borrower ("Warrant
Shares") with an aggregate initial exercise price of $140,000 and a per share
exercise price of $4.00 which is determined on the basis of the per share price
of the preferred stock issued in the most recent round of venture capital equity
financing prior to the Closing Date. The warrant under this Agreement shall be
in substantially the form attached hereto as Exhibit "D"; shall be transferable
by Lender, subject to compliance with applicable securities laws; shall expire
not earlier than December 31, 2004; and shall include piggy-back registration
rights, "net issuance" provisions, and anti-dilution protections reasonably
satisfactory to Lender and its counsel.
Page 1
<PAGE> 18
B. LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Notwithstanding
anything to the contrary in Section 9.8 of the Loan and Security Agreement,
Borrower's obligation to reimburse Lender its attorneys' fees and costs of
documenting this transaction shall not exceed $1,000.00.
C. LIMITATION ON EQUIPMENT LOANS. Each Loan shall be in an amount not to
exceed one hundred percent (100%) of the amount paid or payable by Borrower to
a non-affiliated manufacturer, vendor or dealer for an item of equipment as
shown on an invoice therefor (excluding any commissions and any portion of the
payment which relates to the servicing of the equipment and sales taxes payable
by Borrower upon acquisition, and delivery charges). Used equipment purchased
by Borrower may be financed at the depreciated value of the equipment purchase
price (excluding any commissions and any portion of the payment which relates
to the servicing of the equipment and sales taxes payable by Borrower upon
acquisition, and delivery charges). Lender has the right to approve individual
items of Equipment for funding. Each Loan requested by Borrower to be made on a
single Business Day shall be for a minimum principal amount equal to $50,000
except to the extent the remaining Commitment is a lesser amount.
3. - ADDITIONAL REPRESENTATIONS:
Borrower represents and warrants that as of the Closing Date:
Its chief executive office is located at: 2630 Walsh Avenue, Santa Clara,
CA 95051-0905
Its Equipment is located at: Same
Its Records are located at: Same
In addition to its chief executive office, Borrower maintains offices or
operates its business at the following locations: Madison, WI (Fab
Facility)
Other than its full corporate name and the name of its fully-owed
subsidiary Focused Research, Borrower has conducted business using the
following trade names or fictitious business names: None
4. - ADDITIONAL LOAN DOCUMENTS:
Schedule 1 to the Loan and Security Agreement
Form of Note Exhibit "A"
Form of Borrowing Request Exhibit "B"
Form of Compliance Certificate Exhibit "C"
Form of Warrant Exhibit "D"
Page 2
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Supplement as of the date
first above written.
BORROWER: LENDER:
NEW FOCUS, INC. VENTURE LENDING & LEASING II, INC.
By: /s/ KENNETH E. WESTRICK By: /s/ SALVADOR O. GUTIERREZ
--------------------------- ---------------------------
Name: KENNETH E. WESTRICK Name: SALVADOR O. GUTIERREZ
--------------------------- ---------------------------
Title: President & CEO Title: President
-------------------------- --------------------------
Address for Notices:
Attn: Chief Financial Officer Attn: Chief Financial Officer
2630 Walsh Avenue 2010 North First Street, Suite 310
Santa Clara, Ca 95051 San Jose, CA 95131
Fax # 408-980-8883 Fax # (408) 436-8625
Page 3
<PAGE> 20
EXHIBIT A
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$[Face Amount of Note] [Note Date]
San Jose, California
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at
2010 North First Street, Suite 310, San Jose, California 95131, or at such
other place as Lender may designate in writing, in lawful money of the United
States of America, the principal sum of _____________________ Dollars ($______),
with Basic Interest thereon from the date until maturity, whether scheduled or
accelerated, at a fixed rate per annum of eight and 40/100 percent (8.40%), and
a Terminal Payment in the sum of [10% of face amount] Dollars ($_______)
payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan and Security Agreement dated [Agreement Date], between
Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement contains provisions for the acceleration of the maturity of this Note
upon the happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for
the period from the Borrowing Date through [THE LAST DAY OF THE SAME MONTH];
and (ii) a first (1st) amortization installment of principal and Basic Interest
in the amount of _______________, in advance for the month of [first full month
after Borrowing Date] and (iii) a 36th [last] amortization installment of
principal and Basic Interest in the amount of $________________, in advance for
the month [date of last regular amortization payment].
Commencing of the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in [thirty-three
(33) equal consecutive installments of ___________________ Dollars ($________)
each, with a [thirty-fourth (34th)] installment equal to the entire unpaid
principal balance and accrued Basic Interest on ___________, 2000_. The
Terminal Payment amount shall be payable on [ONE MONTH LATER], 200_.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
If Borrower is late in making any payment under this Note by more than
five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of
the installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose
of defraying the expenses
<PAGE> 21
incidental to the handling of such delinquent amounts. Borrower acknowledges
that such late charge represents a reasonable sum considering all of the
circumstances existing on the date of this Note and represents a fair and
reasonable estimate of the costs that will be sustained by Lender due to the
failure of Borrower to make timely payments. Borrower further agrees that proof
of actual damages would be costly and inconvenient. Such late charge shall be
paid without prejudice to the right of Lender to collect any other amounts
provided to be paid or to declare a default under this Note or any of the other
Loan Documents or from exercising any other rights and remedies of Lender.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
NEW FOCUS, INC.
By: ___________________________________
Name: _________________________________
Its: __________________________________
<PAGE> 22
EXHIBIT B
BORROWING REQUEST
_______________, ___
Venture Lending & Leasing II, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: NEW FOCUS, INC.
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
_________ (as the same have been and may be amended from time to time, the
"Loan Agreement", the capitalized terms used herein as defined therein),
between Venture Lending & Leasing II, Inc. on one hand and New Focus, Inc. (the
"Company") on the other.
The undersigned is an Officer of the Company, authorized to borrow under
The Loan Agreement, and hereby requests Loan under the Loan Agreement, and in
that connection certifies as follows:
1. The aggregate amount of the proposed Loan is $________. The Business
Day of the proposed Loan is ________, 199X.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in the Loan Agreement
are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
By: ___________________________________
Name: _________________________________
Its: __________________________________
<PAGE> 23
EXHIBIT C
COMPLIANCE CERTIFICATE
Venture Lending & Leasing II, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re:_________________
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
______ (as the same have been and may be amended from time to time, the "Loan
Agreement", the capitalized terms used herein as defined therein), between
Venture Lending & Leasing II, Inc. on one hand and __________ (the "Company")
on the other.
The undersigned authorized representative of the Company hereby certifies that
in accordance with the terms and conditions of the Loan Agreement, the Company
is in complete compliance for the period ending _____ of all required
conditions and terms except as noted below. Attached herewith are the required
documents supporting the above certification. The representative further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles and are consistent from one period to the next except as
explained below.
Indicate compliance status by circling Yes/No under "Complies"
<TABLE>
<CAPTION>
REPORTING REQUIREMENT REQUIRED COMPLIES
- --------------------- -------- --------
<S> <C> <C>
Interim Financial Statements Monthly within 45 days YES/NO
Audited Financial Statements FYE within 90 days YES/NO
FINANCIAL COVENANTS REQUIRED COMPLIES
- ------------------- -------- --------
</TABLE>
REQUIRED EXPLANATIONS:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Very Truly Yours,
By: ____________________
Name: ____________________
Its: ____________________
<PAGE> 24
EXHIBIT D
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT TO PURCHASE
35,000 SHARES OF SERIES D PREFERRED STOCK OF
NEW FOCUS, INC.
(Void after December 31, 2004)
This certifies that VENTURE LENDING & LEASING II, INC., a Maryland corporation,
or assigns (the "Holder"), for value received, is entitled to purchase from NEW
FOCUS, INC., a California corporation (the "Company"), 35,000 fully paid and
nonassessable shares of the Company's Series D Preferred Stock ("Preferred
Stock") for cash at a price of $4.00 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
December 31, 2004 (the "Expiration Date"), upon surrender to the Company at its
principal office at 2630 Walsh Avenue, Santa Clara, CA 95051-0905, (or at such
other location as the Company may advise Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and 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 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payments for Shares.
(a) Unless an election is made pursuant to clause (b) of this
Section 1, this Warrant shall be exercisable at the option of the Holder, at
any time or from time to time, on or before the Expiration Date for all or any
portion of the shares of Preferred Stock (but not for a fraction of a share)
which may be purchased hereunder for the Stock Purchase Price multiplied by the
number of shares to be purchased. In the event, however, that pursuant to the
Company's Articles of Incorporation, as amended, an event causing automatic
conversion of the Company's Preferred Stock shall have occurred prior to the
exercise of this Warrant, in whole or in part, then this Warrant shall be
exercisable for the number of shares of Common Stock of the Company into which
the Preferred Stock not purchased upon any prior exercise of the Warrant would
have been so converted (and, where the context requires, reference to
"Preferred Stock" shall be deemed to include such Common Stock). The Company
agrees that the shares of 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 the form of
subscription shall have been delivered and payment made for such shares.
Subject to the provisions of Section 2, certificates for the shares of
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.
Except as provided in clause (b) of this Section 1, 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 within a reasonable time.
Each stock certificate so delivered shall be in such denominations of
<PAGE> 25
Preferred Stock as may be requested by the Holder hereof and shall be
registered in the name of such Holder or such other name as shall be designated
by such Holder, subject to the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the
payment of the Stock Purchase Price pursuant to clause (a) of this Section 1,
may elect, at any time on or before the Expiration Date, to receive that
number of shares of Preferred Stock equal to the quotient of: (i) the
difference between (A) the Per Share Price (as hereinafter defined) of the
Preferred Stock, less (B) the Stock Purchase Price then in effect, multiplied
by the number of shares of Preferred Stock the Holder would otherwise have
been entitled to purchase hereunder pursuant to clause (a) of this Section 1
(or such lesser number of shares as the Holder may designate in the case of a
partial exercise of this Warrant); over (ii) the Per Share Price. Election to
exercise under this section (b) may be made by delivering a signed form of
subscription to the Company via facsimile, to be followed by delivery of the
warrant.
(c) For purposes of clause (b) of this Section 1, "Per Share
Price" means the product of: (i) the greater of (A) the closing price of the
Company's Common Stock as quoted by NASDAQ or listed on any exchange,
whichever is applicable, as published in the Western Edition of the Wall
Street Journal for the trading day immediately prior to the date of the
Holder's election hereunder or, (B) if applicable at the time of or in
connection with the exercise under clause (b) of this Section 1, the gross
sales price of one share of the Company's Common Stock pursuant to a
registered public offering or that amount which shareholders of the Company
will receive for each share of Common Stock pursuant to a merger,
reorganization or sale of assets; and (ii) that number of shares of Common
Stock into which each share of Preferred Stock is convertible. If the
Company's Common Stock is not quoted by NASDAQ or listed on an exchange, the
Per Share Price of the Preferred Stock (or the equivalent number of shares of
Common Stock into which such Preferred Stock is convertible) shall be the
price per share which the Company would obtain from a willing buyer for
shares sold by the Company from authorized but unissued shares as such price
shall be agreed upon by the Holder and the Company or, if agreement cannot be
reached within ten (10) business days of the Holder's election hereunder, as
such price shall be determined by a panel of three (3) appraisers, one (1) to
be chosen by the Company, one (1) to be chosen by the Holder and the third to
be chosen by the first two (2) appraisers. If the appraisers cannot reach
agreement within 30 days of the Holder's election hereunder, then each
appraiser shall deliver its appraisal and the appraisal which is neither the
highest nor the lowest shall constitute the Per Share Price. In the event
either party fails to choose an appraiser within 30 days of the Holder's
election hereunder, then the appraisal of the sole appraiser shall constitute
the Per Share Price. Each party shall bear the cost of the appraiser selected
by such party and the cost of the third appraiser shall be borne one-half by
each party. In the event either party fails to choose an appraiser, the cost
of the sole appraiser shall be borne one-half by each party.
2. Limitation on Transfer.
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act"). Each holder of this Warrant or the
Preferred Stock issuable hereunder will cause any proposed transferee of the
Warrant or Preferred Stock to agree to take and hold such securities subject to
the provisions and upon the conditions specified in this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the
Preferred Stock, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Stock and (iv) any other securities issued in
respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of this Section 2 or unless such securities have been registered
under the Securities Act or sold under Rule 144) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
2
<PAGE> 26
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(c) The Holder of this Warrant and each person to whom this Warrant
is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement under
the Securities Act was in effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an effective registration statement
under the Securities Act, (ii) Rule 144 under the Securities Act (or any other
rule under the Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, reasonably satisfactory to counsel for the
Company, that an exemption from such registration is available.
3. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of 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 (other than taxes in respect of transfer
occurring contemporaneously or as otherwise specified herein). 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 share of authorized but unissued 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 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 Preferred
Stock may be listed. The Company will not take any action which would result in
any adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i)
if the total number of shares of Preferred Stock issuable after such action
upon exercise of all outstanding warrants, together with all shares of Preferred
Stock then outstanding and all shares of 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 Preferred Stock
then authorized by the Company's Articles 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 Preferred Stock together with all shares of
Common Stock then outstanding and 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 Articles of Incorporation.
4. Adjustment of Stock Purchase Price 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 4. 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.
4.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of 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 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.
4.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of 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) Preferred Stock, or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or
3
<PAGE> 27
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend, or
(c) Preferred Stock or other 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
Preferred Stock issued as a stock split, adjustments in respect of which shall
be covered by the terms of Section 4.1 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
Preferred Stock receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If
any capital 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 to another corporation shall be effected
in such a way that holders of Preferred Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Preferred Stock
(Corporate Event), then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such 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, in the event that 1) the effective
price of such Corporate Event is in excess of the exercise price hereof
effective at the time of the Corporate Event, 2) the consideration received in
such Corporate Event is cash or shares that are of a publicly traded company
listed on a national market or exchange, without restrictions within 90 days of
the close of such Corporate Event, except for those of Rule 144 or 145, and 3)
the Company's shareholders own less than 50% of the voting securities of the
surviving entity, then this Warrant shall be deemed exercised in accordance with
the provisions of section 1(b) upon the closing of the Corporate Event. In any
such case, appropriate provision shall be made 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, as nearly as may be possible,
in relation to any share of stock, securities or assets thereafter deliverable
upon the exercise hereof.
4.4 Sale or Issuance Below Purchase Price. If the Company shall at any
time or from time to time issue or sell any of its Common Stock, Preferred
Stock, options to acquire (or rights to acquire such options), or any other
securities convertible into or exercisable for Common Stock, for a
consideration per share less than the Stock Purchase Price in effect
immediately prior to the time of such issue or sale, the Conversion ratio shall
be adjusted in accordance with the Company's Articles of Incorporation.
4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice, which may be substantially in the form of Exhibit "A" attached hereto,
shall be signed by the Company's chief financial officer and shall state the
Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which calculation is based.
4
<PAGE> 28
4.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to
the holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its Preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its assets
to, another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, addressed to the holder of this Warrant at the address of
such holder as shown on the books of the Company, (i) at least 20 day's prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.
4.7 Certain Events. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with the essential intent and principles of 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 and/or the
application of such provisions, in accordance with such essential intent and
principles, 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 he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for shares of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax 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. Provided that the Holder shall be in compliance
with the terms of this Agreement, including but not limited to, Section 2, the
Company will at no time close its transfer books against the transfer of any
Warrant or of any shares of Preferred Stock issued or issuable upon the
exercise of any warrant.
5
<PAGE> 29
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 as a shareholder in respect of meetings
of shareholders for the election of directors 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 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. Intentionally Omitted.
9. Registration Rights. The Holder hereof shall be entitled, with
respect to the shares of Preferred Stock issued upon exercise hereof or the
shares of Common Stock or other securities issued upon conversion of such
Preferred Stock as the case may be, to, and bound by, all of the registration
rights and obligations set forth in the First Amended and Restated Registration
Rights Agreement dated as of July 31, 1998 to the same extent and on the same
terms and conditions as possessed by the Investors thereunder. The Company
shall take such action as may be reasonably necessary to assure that the
granting of such registration rights to the Holder does not violate the
provisions of such agreement or any of the Company's charter documents or rights
of prior Grantees of registration rights.
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 Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 9 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
deemed to have been given (i) upon receipt if delivered personally or by
courier (ii) upon confirmation of receipt if by telecopy or (iii) three business
days after deposit in the US mail, with postage prepaid and certified or
registered, 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.
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 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 or assign of the holder hereof. The Company will, at the time of the
exercise 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 Common Stock) to which
the holder hereof shall continue to be entitled after such exercise 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 to such rights.
14. Descriptive Headings and Governing Law. The descriptive 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 California.
6
<PAGE> 30
15. Lost Warrants or Stock Certificates. 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
any Warrant or 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 at its expense 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. 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.
17. Representations of Holder. With respect to this Warrant, Holder
represents and warrants to the Company as follows:
17.1 Experience. It is experienced in evaluating and investing in
companies engaged in businesses similar to that of the Company; it understands
that investment in the Warrant involves substantial risks; it has made detailed
inquiries concerning the Company, its business and services, its officers and
its personnel; the officers of the Company have made available to Holder any
and all written information it has requested; the officers of the Company have
answered to Holder's satisfaction all inquiries made by it; in making this
investment it has relied upon information made available to it by the Company;
and it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of investment in the Company
and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for investment for
its own account and not with a view to, or for resale in connection with, any
distribution thereof. It understands that the Warrant, the shares of
Preferred Stock issuable upon exercise thereof and the shares of Common Stock
issuable upon conversion of the Preferred Stock, have not been registered
under the Securities Act of 1933, as amended, nor qualified under applicable
state securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the Preferred
Stock and the Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional Representations and Covenants of the Company. The
Company hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite corporate
power and corporate authority to issue this Warrant and to carry out and
perform its obligations hereunder.
18.2 Authorization. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this has been taken. This
Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.
18.3 Offering. Subject in part to the truth and accuracy of
Holder's representations set forth in Section 17 hereof, the offer, issuance
and sale of the Warrant is, and the issuance of Preferred Stock upon exercise
of the Warrant and the issuance of Common Stock upon conversion of the
Preferred Stock will be exempt from the registration requirements of the
Securities Act, and are exempt from the qualification requirements of any
applicable state securities laws; and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemptions.
7
<PAGE> 31
18.4 Stock Issuance. Upon exercise of the Warrant, the Company will
use its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has provided Holder with true
and complete copies of the Company's Articles or Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each share
of the Preferred Stock is convertible into one share of the Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this 1st day of February, 1999.
NEW FOCUS, INC.
By:
----------------------------
Title:
------------------------
8
<PAGE> 32
FORM OF SUBSCRIPTION
(To be signed only upon 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, (1) See Below ______________________ (________)
shares (the "Shares") of Stock of _______ and herewith makes payment of
______________ Dollars ($_____) therefor, and requests that the
certificates for such shares be issued in the name of, and delivered to,
____________, whose address is ________________________.
The undersigned hereby elects to convert ___ percent (___%) of the value of
the Warrant pursuant to the provisions of Section 1(b) of the Warrant.
The undersigned represents that it is acquiring such Common Stock for its own
account for investment and not with a view to or for sale in connection with any
distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control.
Dated ______________________
Holder: ______________________
By: ______________________
Its: ______________________
(Address)
______________________________
______________________________
(1) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Preferred Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
9
<PAGE> 33
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby
sells, assigns and transfers all of the rights of the undersigned under the
within Warrant, with respect to the number of shares of Preferred Stock covered
thereby set forth hereinbelow, unto:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
- --------------------------------------------------------------------------------
<S> <C> <C>
</TABLE>
Dated:
-----------------------------------
Holder:
-----------------------------------
By:
-----------------------------------
Its:
-----------------------------------
10
<PAGE> 34
EXHIBIT "A"
[On letterhead of the Company]
Reference is hereby made to that certain Warrant dated
________________________, 199__, issued by ____________________________________,
a ______________________________ corporation (the "Company"), to VENTURE
LENDING & LEASING II, INC., a Maryland corporation (the "Holder").
[IF APPLICABLE] The Warrant provides that the actual number of shares
of the Company's capital stock issuable upon exercise of the Warrant and the
initial exercise price per share are to be determined by reference to one or
more events or conditions subsequent to the issuance of the Warrant. Such
events or conditions have now occurred or lapsed, and the Company wishes to
confirm the actual number of shares issuable and the initial exercise price.
The provisions of this Supplement to Warrant are incorporated into the Warrant
by this reference, and shall control the interpretation and exercise of the
Warrant.
[IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the
Warrant that the following adjustment(s) have been made to the Warrant:
[describe adjustments, setting forth details regarding method of calculation
and facts upon which calculation is based].
This certifies that the Holder is entitled to purchase from the Company
______________________________ (__________________________) fully paid and
nonassessable shares of the Company's ___________ Stock at a price of
______________________________ Dollars ($________________) per share (the
"Stock Purchase Price"). The Stock Purchase Price and the number of shares
purchasable under the Warrant remain subject to adjustment as provided in
Section 4 of the Warrant.
Executed this ___ day of ________________________, 199___.
[COMPANY]
By: _______________________________
Name: _____________________________
Title: ____________________________
11
<PAGE> 35
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
WARRANT TO PURCHASE
35,000 SHARES OF SERIES D PREFERRED STOCK OF
NEW FOCUS, INC.
(Void after December 31, 2004)
This certifies that VENTURE LENDING & LEASING II, INC., a Maryland corporation,
or assigns (the "Holder"), for value received, is entitled to purchase from NEW
FOCUS, INC., a California corporation (the "Company"), 35,000 fully paid and
nonassessable shares of the Company's Series D Preferred Stock ("Preferred
Stock") for cash at a price of $4.00 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
December 31, 2004 (the "Expiration Date"), upon surrender to the Company at its
principal office at 2630 Walsh Avenue, Santa Clara, CA 95051-0905, (or at such
other location as the Company may advise Holder in writing) of this Warrant
properly endorsed with the Form of Subscription attached hereto duly filled in
and signed and 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 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares.
(a) Unless an election is made pursuant to clause (b) of
this Section 1, this Warrant shall be exercisable at the option of the Holder,
at any time or from time to time, on or before the Expiration Date for all or
any portion of the shares of Preferred Stock (but not for a fraction of a
share) which may be purchased hereunder for the Stock Purchase Price multiplied
by the number of shares to be purchased. In the event, however, that pursuant
to the Company's Articles of Incorporation, as amended, an event causing
automatic conversion of the Company's Preferred Stock shall have occurred prior
to the exercise of this Warrant, in whole or in part, then this Warrant shall
be exercisable for the number of shares of Common Stock of the Company into
which the Preferred Stock not purchased upon any prior exercise of the Warrant
would have been so converted (and, where the context requires, reference to
"Preferred Stock" shall be deemed to include such Common Stock). The Company
agrees that the shares of 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 the form of
subscription shall have been delivered and payment made for such shares.
Subject to the provisions of Section 2, certificates for the shares of
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.
Except as provided in clause (b) of this Section 1, 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 within a reasonable time.
Each stock certificate so delivered shall be in such denominations of
<PAGE> 36
Preferred Stock as may be requested by the Holder hereof and shall be
registered in the name of such Holder or such other name as shall be designated
by such Holder, subject to the limitations contained in Section 2.
(b) The Holder, in lieu of exercising this Warrant by the payment of
the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect,
at any time on or before the Expiration Date, to receive that number of shares
of Preferred Stock equal to the quotient of: (i) the difference between (A) the
Per Share Price (as hereinafter defined) of the Preferred Stock, less (B) the
Stock Purchase Price then in effect, multiplied by the number of shares of
Preferred Stock the Holder would otherwise have been entitled to purchase
hereunder pursuant to clause (a) of this Section 1 (or such lesser number of
shares as the Holder may designate in the case of a partial exercise of this
Warrant); over (ii) the Per Share Price. Election to exercise under this
section (b) may be made by delivering a signed form of subscription to the
Company via facsimile, to be followed by delivery of the warrant.
(c) For purposes of clause (b) of this Section 1, "Per Share Price"
means the product of: (i) the greater of (A) the closing price of the Company's
Common Stock as quoted by NASDAQ or listed on any exchange, whichever is
applicable, as published in the Western Edition of The Wall Street Journal for
the trading day immediately prior to the date of the Holder's election hereunder
or, (B) if applicable at the time of or in connection with the exercise under
clause (b) of this Section 1, the gross sales price of one share of the
Company's Common Stock pursuant to a registered public offering or that amount
which shareholders of the Company will receive for each share of Common Stock
pursuant to a merger, reorganization or sale of assets; and (ii) that number of
shares of Common Stock into which each share of Preferred Stock is convertible.
If the Company's Common Stock is not quoted by NASDAQ or listed on an exchange,
the Per Share Price of the Preferred Stock (or the equivalent number of shares
of Common Stock into which such Preferred Stock is convertible) shall be the
price per share which the Company would obtain from a willing buyer for shares
sold by the Company from authorized but unissued shares as such price shall be
agreed upon by the Holder and the Company or, if agreement cannot be reached
within ten (10) business days of the Holder's election hereunder, as such price
shall be determined by a panel of three (3) appraisers, one (1) to be chosen by
the Company, one (1) to be chosen by the Holder and the third to be chosen by
the first two (2) appraisers. If the appraisers cannot reach agreement within 30
days of the Holder's election hereunder, then each appraiser shall deliver its
appraisal and the appraisal which is neither the highest nor the lowest shall
constitute the Per Share Price. In the event either party fails to choose an
appraiser within 30 days of the Holder's election hereunder, then the appraisal
of the sole appraiser shall constitute the Per Share Price. Each party shall
bear the cost of the appraiser selected by such party and the cost of the third
appraiser shall be borne one-half by each party. In the event either party fails
to choose an appraiser, the cost of the sole appraiser shall be borne one-half
by each party.
2. Limitation on Transfer.
(a) The Warrant and the Preferred Stock shall not be transferable
except upon the conditions specified in this Section 2, which conditions are
intended to insure compliance with the provisions of the Securities Act of
1933, as amended (the "Securities Act"). Each holder of this Warrant or the
Preferred Stock issuable hereunder will cause any proposed transferee of the
Warrant or Preferred Stock to agree to take and hold such securities to the
provisions and upon the conditions specified in this Section 2.
(b) Each certificate representing (i) this Warrant, (ii) the
Preferred Stock, (iii) shares of the Company's Common Stock issued upon
conversion of the Preferred Stock and (iv) any other securities issued in
respect to the Preferred Stock or Common Stock issued upon conversion of the
Preferred Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted by the
provisions of this Section 2 or unless such securities have been registered
under the Securities Act or sold under Rule 144) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED
OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT COVERING SUCH SECURITIES. THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144
PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR
2
<PAGE> 37
THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(c) The Holder of this Warrant and each person to whom this Warrant
is subsequently transferred represents and warrants to the Company (by
acceptance of such transfer) that it will not transfer the Warrant (or
securities issuable upon exercise hereof unless a registration statement under
the Securities Act was in effect with respect to such securities at the time of
issuance thereof) except pursuant to (i) an effective registration statement
under the Securities Act, (ii) Rule 144 under the Securities Act (or any other
rule under the Securities Act relating to the disposition of securities), or
(iii) an opinion of counsel, reasonably satisfactory to counsel for the Company,
that an exemption from such registration is available.
3. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all shares of 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 (other than taxes in respect of transfer
occurring contemporaneously or as otherwise specified herein). 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 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 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 Preferred Stock may be listed.
The Company will not take any action which would result in any adjustment of the
Stock Purchase Price (as defined in Section 4 hereof) (i) if the total number of
shares of Preferred Stock issuable after such action upon exercise of all
outstanding warrants, together with all shares of Preferred Stock then
outstanding and all shares of 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 Preferred Stock then authorized by
the Company's Articles 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 Preferred Stock together with all shares of Common Stock then
outstanding and 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 Articles of
Incorporation.
4. Adjustment of Stock Purchase Price Number of Shares. The Stock
Purchase Price and the number of shares purchaseable 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 4. 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 purchaseable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of 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 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.
4.2 Dividends in Preferred Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the holders of 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) Preferred Stock or any shares of stock or other securities
whether or not such securities are at any time directly or indirectly
convertible into or exchangeable for Preferred Stock, or any rights or
3
<PAGE> 38
options to subscribe for, purchase or otherwise acquire any of the foregoing by
way of dividend or other distribution, or
(b) any cash paid or payable otherwise than as a cash dividend,
or
(c) Preferred Stock or other 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 Preferred Stock issued as a stock split, adjustments in
respect of which shall be covered by the terms of Section 4.1 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
Preferred stock receivable thereupon, and without payment of any additional
consideration therefore, the amount of stock and other securities and property
(including cash in the cases referred to in clauses (b) and (c) above) which
such Holder would hold on the date of such exercise had he been the holder of
record of such Preferred Stock as of the date on which holders of Preferred
Stock received or became entitled to receive such shares and/or all other
additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
If any capital 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 to another corporation shall be
effected in such a way that holders of Preferred Stock shall be entitled to
receive stock, securities or assets with respect to or in exchange for
Preferred Stock (Corporate Event), then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive (in lieu of the shares of the Preferred Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such 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, in the event that 1) the
effective price of such Corporate Event is in excess of the exercise price
hereof effective at the time of the Corporate Event, 2) the consideration
received in such Corporate Event is cash or shares that are of a publicly
traded company listed on a national market or exchange, without restrictions
within 90 days of the close of such Corporate Event, except for those of Rule
144 or 145, and 3) the Company's shareholders own less than 50% of the voting
securities of the surviving entity, then this Warrant shall be deemed exercised
in accordance with the provisions of section 1(b) upon the closing of the
Corporate Event. In any such case, appropriate provision shall be made 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, as nearly as may be possible, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof.
4.4 Sale or Issuance Below Purchase Price. If the Company shall at
any time or from time to time issue or sell any of its Common stock, Preferred
Stock, options to acquire (or rights to acquire such options), or any other
securities convertible into or exercisable for Common Stock, for a
consideration per share less than the Stock Purchase Price in effect
immediately prior to the time of such issue or sale, the Conversion ratio shall
be adjusted in accordance with the Company's Articles of Incorporation.
4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase
Price, and/or any increase or decrease in the number of shares purchasable upon
the exercise of this Warrant the Company shall give written notice thereof, by
first class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company. The
notice, which may be substantially in the form of Exhibit "A" attached hereto,
shall be signed by the Company's chief financial officer and shall state the
Stock Purchase Price resulting from such adjustment and the increase or
decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4
<PAGE> 39
4.6 Other Notices. If at any time:
(a) the Company shall declare any cash dividend upon its
Preferred Stock;
(b) the Company shall declare any dividend upon its Preferred
Stock payable in stock or make any special dividend or other distribution to
the holders of its Preferred Stock;
(c) the Company shall offer for subscription pro rata to the
holders of its preferred Stock any additional shares of stock of any class or
other rights;
(d) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation;
(e) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(f) the Company shall take or propose to take any other action,
notice of which is actually provided to holders of the Preferred Stock;
then, in any one or more of said cases, the Company shall give,
by first class mail, postage prepaid, addressed to the holder of this Warrant at
the address of such holder as shown on the books of the Company, (i) at least 20
day's prior written notice of the date on which the books of the Company shall
close or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, or other action, at least 20 day's written notice of the date when
the same shall take place. Any notice given in accordance with the foregoing
clause (i) shall also specify, in the case of any such dividend, distribution or
subscription rights, the date on which the holders of Preferred Stock shall be
entitled thereto. Any notice given in accordance with the foregoing clause (ii)
shall also specify the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding-up, or other action as the case may
be.
4.7 Certain Events. If any change in the outstanding Preferred Stock
of the Company or any other event occurs as to which the other provisions of
this Section 4 are not strictly applicable or if strictly applicable would not
fairly protect the purchase rights of the Holder of the Warrant in accordance
with the essential intent and principles of 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 and/or the
application of such provisions, in accordance with such essential intent and
principles, 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 he
would have owned had the Warrant been exercised prior to the event and had he
continued to hold such shares until after the event requiring adjustment.
5. Issue Tax. The issuance of certificates for share of Preferred Stock
upon the exercise of the Warrant shall be made without charge to the Holder of
the Warrant for any issue tax 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. Provided that the Holder shall be in compliance
with the terms of this Agreement, including but not limited to, Section 2, the
Company will at no time close its transfer books against the transfer of any
Warrant or of any shares of Preferred Stock issued or issuable upon the
exercise of any warrant.
5
<PAGE> 40
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 as a shareholder in respect of meetings
of shareholders for the election of directors 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
Preferred Stock, and no more 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. Intentionally Omitted.
9. Registration Rights. The Holder hereof shall be entitled, with respect
to the shares of Preferred Stock issued upon exercise hereof or the shares of
Common Stock or other securities upon conversion of such Preferred Stock as the
case may be, to, and bound by, all of the registration rights and obligations
set forth in the First Amended and Restated Registration Rights Agreement dated
as of July 31, 1998 to the same extent and on the same terms and conditions as
possessed by the Investors thereunder. The Company shall take such action as may
be reasonably necessary to assure that the granting of such registration rights
to the Holder does not violate the provision of such agreement or any of the
Company's charter documents or rights of prior Grantees of registration rights.
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 Preferred Stock issued upon exercise of this Warrant, contained in
Sections 6 and 9 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 deemed to
have been given (i) upon receipt if delivered personally or by courier (ii)
upon confirmation of receipt if by telecopy or (iii) three business days after
deposit in the US mail, with postage prepaid and certified or registered, 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.
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 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. The Company will, at the time of
the exercise 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 Common Stock) to which
the holder hereof shall continue to be entitled after such exercise 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.
14. Descriptive Headings and Governing Law. The descriptive 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 California.
6
<PAGE> 41
15. Lost Warrants or Stock Certificates. 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
any Warrant or 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 at its expense 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. 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.
17. Representations of Holder. With respect to this Warrant,
Holder represents and warrants to the Company as follows:
17.1 Experience. It is experienced in evaluating and
investing in companies engaged in businesses similar to that of the Company; it
understands that investment in the Warrant involves substantial risks; it has
made detailed inquiries concerning the Company, its business and services, its
officers and its personnel; the officers of the Company have made available to
Holder any and all written information it has requested; the officers of the
Company have answered to Holder's satisfaction all inquiries made by it; in
making this investment it has relied upon information made available to it by
the Company; and it has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of investment in
the Company and it is able to bear the economic risk of that investment.
17.2 Investment. It is acquiring the Warrant for
investment for its own account and not with a view to, or for resale in
connection with, any distribution thereof. It understands that the Warrant, the
shares of Preferred Stock issuable upon exercise thereof and the shares of
Common Stock issuable upon conversion of the Preferred Stock, have not been
registered under the Securities Act of 1933, as amended, nor qualified under
applicable state securities laws.
17.3 Rule 144. It acknowledges that the Warrant, the
Preferred Stock and the Common Stock must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the provisions of
Rule 144 promulgated under the Securities Act.
17.4 Access to Data. It has had an opportunity to discuss
the Company's business, management and financial affairs with the Company's
management and has had the opportunity to inspect the Company's facilities.
18. Additional Representations and Covenants of the Company. The
Company hereby represents, warrants and agrees as follows:
18.1 Corporate Power. The Company has all requisite
corporate power and corporate authority to issue this Warrant and to carry out
and perform its obligations hereunder.
18.2 Authorization. All corporate action on the part of
the Company, its directors and shareholders necessary for the authorization,
execution, delivery and performance by the Company of this has been taken. This
Warrant is a valid and binding obligation of the Company, enforceable in
accordance with its terms.
18.3 Offering. Subject in part to the truth and accuracy
of Holder's representations set forth in Section 17 hereof, the offer, issuance
and sale of the Warrant is, and the issuance of Preferred Stock upon exercise
of the Warrant and the issuance of Common Stock upon conversion of the
Preferred Stock will be exempt from the registration requirements of the
Securities Act, and are exempt from the qualification requirements of any
applicable state securities laws; and neither the Company nor anyone acting on
its behalf will take any action hereafter that would cause the loss of such
exemptions.
7
<PAGE> 42
18.4 Stock Issuance. Upon exercise of the Warrant, the Company will use
its best efforts to cause stock certificates representing the shares of
Preferred Stock purchased pursuant to the exercise to be issued in the
individual names of Holder, its nominees or assignees, as appropriate at the
time of such exercise. Upon conversion of the shares of Preferred Stock to
shares of Common Stock, the Company will issue the Common Stock in the
individual names of Holder, its nominees or assignees, as appropriate.
18.5 Articles and By-Laws. The Company has provided Holder with true and
complete copies of the Company's Articles or Certificate of Incorporation,
By-Laws, and each Certificate of Determination or other charter document
setting, forth any rights, preferences and privileges of Company's capital
stock, each as amended and in effect on the date of issuance of this Warrant.
18.6 Conversion of Preferred Stock. As of the date hereof, each share of
the Preferred Stock is convertible into one share of the Common Stock.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by
its officers, thereunto duly authorized this 1st day of February, 1999.
NEW FOCUS, INC.
By: /s/ KENNETH E. WESTRICK
-------------------------
Title: President & CEO
-------------------------
8
<PAGE> 43
FORM OF SUBSCRIPTION
(To be signed only upon 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, (1) See Below _________ (____) shares (the
"Shares") of Stock of ________ and herewith makes payment of _________
Dollars ($______) therefor, and requests that the certificates for such
shares be issued in the name of, and delivered to, ________, whose address
is _________.
The undersigned hereby elects to convert _____ percent (__%) of the value
of the Warrant pursuant to the provisions of Section 1(b) of the Warrant.
The undersigned represents that it is acquiring such Common Stock for its own
account for investment and not with a view to or for sale in connection with
any distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control.
Dated __________________
Holder: __________________
By: __________________
Its:
__________________
(Address)
__________________________
__________________________
(1) Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the
Warrant is being exercised), in either case without making any adjustment
for additional Preferred Stock or any other stock or other securities or
property or cash which, pursuant to the adjustment provisions of the
Warrant, may be deliverable upon exercise.
9
<PAGE> 44
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby
sells, assigns and transfers all of the rights of the undersigned under the
within Warrant, with respect to the number of shares of Preferred Stock covered
thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares
- --------------------------------------------------------------------------------
Dated ______________________
Holder: ____________________
By: ________________________
Its: _______________________
10
<PAGE> 45
EXHIBIT "A"
[On letterhead of the Company]
Reference is hereby made to that certain Warrant dated ________, 199__,
issued by ____________, a __________ corporation (the "Company"), to VENTURE
LENDING & LEASING II, INC., a Maryland corporation (the "Holder").
[IF APPLICABLE] The Warrant provides that the actual number of shares of
the Company's capital stock issuable upon exercise of the Warrant and the
initial exercise price per share are to be determined by reference to one or
more events or conditions subsequent to the issuance of the Warrant. Such
events or conditions have now occurred or lapsed, and the Company wishes to
confirm the actual number of shares issuable and the initial exercise price.
The provisions of this Supplement to Warrant are incorporated in the Warrant by
this reference, and shall control the interpretation and exercise of the
Warrant.
[IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the
Warrant that the following adjustment(s) have been made to the Warrant:
[describe adjustments, setting forth details regarding method of calculation
and facts upon which calculation is based].
This certifies that the Holder is entitled to purchase from the Company
____________ (________) fully paid and nonassessable shares of the Company's
________ Stock at a price of _________________ Dollars ($______) per share (the
"Stock Purchase Price"). The Stock Purchase Price and the number of shares
purchasable under the Warrant remain subject to adjustment as provided in
Section 4 of the Warrant.
Executed this ___ day of ________, 199__.
[COMPANY]
By: ______________________________
Name: ____________________________
Title: ___________________________
11
<PAGE> 46
SECRETARY'S CERTIFICATE AS TO INCUMBENCY AND RESOLUTIONS
The undersigned certifies that he is the duly elected Secretary of New Focus,
Inc., a California corporation (the "Company"), and that, as such, he is
authorized to execute this Certificate on behalf of the Company, and further
certifies that:
(a) Attached hereto is a true and correct copy of the resolutions duly
adopted by the Board of Directors of the Company on February 9, 1999 by
proceedings in accordance with the Articles or Certificate of Incorporation and
bylaws of the Company, and that said resolutions have not been amended and are
in full force and effect on the date hereof:
(b) Each of the offices of the Company listed below is held by the person
whose name is indicated opposite such office, each such person has been duly
elected to such office, and the signatures opposite their respective names are
their authentic signatures:
<TABLE>
<CAPTION>
Office Name Signature
- ------ ---- ---------
<S> <C> <C>
President Kenneth E. Westrick /s/ KENNETH E. WESTRICK
----------------------- -------------------------
Vice President
Controller DAVID A. SHOQUIST /s/ DAVID A. SHOQUIST
----------------------- -------------------------
Secretary Judith M. O'Brien
----------------------- -------------------------
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company as of the 9th day of February, 1999
/s/ JUDITH M. O'BRIEN
------------------------- Secretary
<PAGE> 47
RESOLUTIONS
OF
THE BOARD OF DIRECTORS OF
NEW FOCUS, INC.
WHEREAS, it is in the best interest of the Corporation to enter into like Loan
Agreements (the "Agreements") with VENTURE LENDING & LEASING II, INC., as
Lender ("Lender") providing for equipment or other financing, and as partial
consideration therefor, to grant to Lender warrants to purchase shares of the
Corporation's Series D Preferred Stock.
WHEREAS, it is also in the interests of the Corporation to avail itself from
time to time during the Agreement of managerial assistance offered by Lenders
or its agents or affiliates, in areas such as advice on equipment financing,
cash flow management, and general financing opportunities.
NOW, THEREFORE, BE IT RESOLVED that the President, any Vice President or Chief
Financial Officer be, and they each hereby are, acting singly, authorized,
empowered and directed, on the Corporation's behalf, to:
1) execute, deliver and perform the Agreement and Promissory Notes and other
documents related, and
2) execute and deliver Warrants for 35,000 shares of the Corporation's Series
D Preferred Stock thereto,
under the terms contemplated in the Commitment letter dated November 13, 1998
and to enter into any arrangement with Lenders or other third parties for
consulting services relating to the Corporation's management, operations or
business objectives, on such terms and conditions as any such officer may deem
necessary or appropriate.
FURTHER RESOLVED, that the officers of the Corporation be, and they each hereby
are, authorized, empowered and directed to do and perform any and all other
acts and deeds that they (or any one of them) may deem necessary or appropriate
to carry out and give effect to the foregoing resolution, including (but not
limited to) pledging such cash collateral or other security as may be required
from time to time under the Agreement and from time to time entering into,
executing and delivering, on behalf of the Corporation, any Promissory Notes
and/or other documents now or hereafter required by Lender in connection with
the Agreement, providing for the authorization and reservation for issuance of
shares of Preferred Stock issuable upon exercise of the Warrants and shares of
its Common Stock issuable upon conversion of such Preferred Stock.
FURTHER RESOLVED, that Lender is authorized to rely upon the foregoing
resolutions until receipt by it of written notice of any change, which changes
of whatever nature shall not be effective as to such Lender to the extent that
it has theretofore relied upon the foregoing resolutions as set forth above.
<PAGE> 48
RESOLVED: That the officers of the Company are authorized and directed to enter
into a Loan and Security Agreement (the "Agreement") with Venture Lending &
Leasing II, Inc. (the "Lender") on substantially the terms presented to this
Board of Directors with such changes as the officers of the Company may deem
necessary or appropriate;
RESOLVED FURTHER: That pursuant to the Agreement, the officers of the Company
are authorized and directed to issue a warrant (the "Warrant") to the Lender to
purchase 35,000 shares of the Company's Series D Preferred Stock with an
exercise price of $4.00 per share.
RESOLVED FURTHER: That the Company hereby reserves an aggregate of 35,000
shares of Series D Preferred Stock for issuance upon exercise of the Warrant.
RESOLVED FURTHER: That the Company hereby reserves an aggregate of 35,000
shares of Common Stock to provide for the issuance of such shares upon the
conversion of the Series D Preferred Stock.
RESOLVED FURTHER: That, subject to obtaining all applicable consents, at the
time of the Company's next round of financing, the shares of Common Stock
issuable upon conversion of the shares shall be included as "Registrable
Securities" under an amendment to the Company's First Amended and Restated
Registration Rights Agreement, and the officers of the Company are hereby
authorized and directed to obtain such consents to such amendment.
RESOLVED FURTHER: That the resolutions attached hereto as Exhibit __ and
incorporated herein by this reference are hereby approved.
RESOLVED FURTHER: That the officers of the Company are hereby authorized and
directed to take whatever other actions they deem necessary or appropriate,
including the filing of all applications, exhibits, fees, notices and other
documents and amendments as may be required by federal and state securities
laws, to fulfill the intent of the foregoing resolutions and whatever actions
the officers have previously taken are hereby ratified and approved.
<PAGE> 49
CERTIFICATE CONCERNING CAPITALIZATION
As Chief Financial Officer or other authorized officer of New Focus, Inc.
("Borrower"), I hereby certify that as of the date hereof the following shares
of the Borrower's securities (listed by common and preferred by series) were
issued and outstanding:
<TABLE>
Number of Shares*
-----------------
<S> <C>
PREFERRED STOCK SERIES A 3,790,000
PREFERRED STOCK SERIES B 250,000
PREFERRED STOCK SERIES C 150,000
PREFERRED STOCK SERIES D 994,250
Options Outstanding 1,995,897
COMMON STOCK 573,813
---------
TOTAL 7,753,960
=========
</TABLE>
Signature: /s/ KENNETH E. WESTRICK
------------------------
Title: President & CEO
----------------------------
As of Date: 3 Feb 99
-----------------------
- --------------------------------------------------------------------------------
* Number of shares of Preferred Stock are stated in terms of number of shares
of Common Stock into which each series is convertible.
<PAGE> 50
INSURANCE AUTHORIZATION LETTER
In accordance with the insurance coverage requirements of the Loan and Security
Agreement dated February 1, 1999 (the "Agreement") between VENTURE LENDING &
LEASING II, INC. ("Lender"), and NEW FOCUS, INC. ("Borrower"), coverage is to
be provided as set forth below:
COVERAGE: All risk including liability and property damage covering
equipment financed under the Agreement.
INSURED: NEW FOCUS, INC.
2630 Walsh Avenue
Santa Clara, CA 95051
LOCATION(s) OF
EQUIPMENT: Madison, WI (Fab Facility)
Insuring Agent: PAT STROUD, TANNER INS. BROKERS
---------------------------------
Address: 4670 WILLOW RD, SUITE 250
---------------------------------
PLEASANTON, CA 94588
---------------------------------
Phone Number: (925) 463-9672
---------------------------------
ADDITIONAL INSURED AND LOSS PAYEE:
Lenders and their Assignees, as their respective interests may
appear.
LENDERS: VENTURE LENDING & LEASING II, INC.
2010 North First Street, Suite 310
San Jose, CA 95131
ASSIGNEE: FLEET BANK N.A. AS AGENT
(if any) 1185 Avenue of the Americas, 16th Floor
New York, NY 10036
Attn: John Topolovec
The above coverage is to be provided prior to funding the Agreement. Borrower
hereby agrees to pay for the coverage above and by signing below acknowledges
its obligation to do so.
Signature: /s/ KENNETH E. WESTRICK
---------------------------------
Title: Kenneth E. Westrick
---------------------------------
Date: 3 Feb '99
---------------------------------
<PAGE> 51
Note No. 2060-001
PROMISSORY NOTE
$800,000.00 February 26, 1999
San Jose, California
The undersigned ("Borrower") promises to pay to the order of VENTURE
LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at
2010 North First Street, Suite 310, San Jose, California 95131, or at such
other place as Lender may designate in writing, in lawful money of the United
States of America, the principal sum of Eight Hundred Thousand Dollars
($800,000.00), with Basic Interest thereon from the date hereof until maturity,
whether scheduled or accelerated, at a fixed rate per annum of eight and 40/100
percent (8.40%), and a Terminal Payment in the sum of Eighty Thousand Dollars
($80,000.00) payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan and Security Agreement dated February 9, 1999, between
Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement contains provisions for the acceleration of the maturity of this Note
upon the happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance,
on the outstanding principal balance of this Note at the Designated Rate for
the period from the Borrowing Date through February 28, 1999; and (ii) a first
(1st) amortization installment of principal and Basic Interest in the amount of
$25,040.00, in advance for the month of March, 1999 and (iii) a 36th last
amortization installment of principal and Basic Interest in the amount of
$25,040.00, in advance for the month of February, 2002.
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
principal and Basic Interest shall be payable, in advance, in thirty-three (33)
equal consecutive installments of Twenty Five Thousand Forty Dollars
($25,040.00) each, with a thirty-fourth (34th) installment equal to the entire
unpaid principal balance and accrued Basic Interest on January 1, 2002. The
Terminal Payment amount shall be payable on March 1, 2002.
Any unpaid payments of principal or interest on this Note shall bear
interest from their respective maturities, whether scheduled or accelerated, at
a rate per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
Interest, charges and fees shall be calculated for actual days elapsed on
the basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
If Borrower is late in making any payment under this Note by more than
five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of
the installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose
of defraying the expenses incidental to the handling of such delinquent
amounts. Borrower acknowledges that such late charge represents a reasonable
sum considering all of the circumstances existing on the date of this Note and
represents a fair and reasonable estimate of the costs that will be sustained
by Lender due
<PAGE> 52
to failure of Borrower to make timely payments. Borrower further agrees that
proof of actual damages would be costly and inconvenient. Such late charge
shall be paid without prejudice to the right of Lender to collect any other
amounts provided to be paid or to declare a default under this Note or any of
the other Loan Documents or from exercising any other rights and remedies of
Lender.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
NEW FOCUS, INC.
By: /s/ DAVID A. SHOQUIST
Name: David A. Shoquist
Its: Controller
<PAGE> 53
BORROWING REQUEST
February 23, 1999
Venture Lending & Leasing II, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: NEW FOCUS, INC.
Gentlemen:
Reference is made to the two Loan and Security Agreement dated as of
February 9, 1999 (as the same have been and may be amended from time to time,
the "Loan Agreement", the capitalized terms used herein as defined therein),
between Venture Lending & Leasing II, Inc. on one hand and New Focus, Inc. (the
"Company") on the other.
The undersigned is an Officer of the Company, authorized to borrow under
The Loan Agreement, and hereby requests Loan under the Loan Agreement, and in
that connection certifies as follows:
1. The aggregate amount of the proposed Loan is $800,000.00. The Business
Day of the proposed Loan is February 26, 1999.
2. As of this date, no Default or Event of Default has occurred and is
continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in the Loan Agreement
are true and correct.
3. No Material Adverse Change has occurred since the date of the most
recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the Loan
if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
By: /s/ DAVID A. SHOQUIST
Name: David A. Shoquist
Its: Controller
<PAGE> 54
CERTIFICATE OF CHIEF FINANCIAL OFFICER
As Chief Financial Officer of New Focus, Inc. ("Borrower") hereby certify
that all financial statements heretofore and hereafter delivered to VENTURE
LENDING & LEASING II, INC. ("LENDER"), by or upon behalf of Borrower, and any
statements and data submitted in writing to Lender in connection with a Loan and
Security Agreement dated February 9, 1999 (the "Agreement"), are true and
correct and fairly present the financial condition of Borrower for the periods
involved, and have been prepared in accordance with generally accepted
accounting principles consistently applied. Furthermore, since the date of the
financial statements dated December 31, 1998, I am certifying that there has
been no material adverse change in the condition, financial or otherwise, of the
Borrower.
Signature: /s/ DAVID A. SHOQUIST
----------------------------
Title: Controller
----------------------------
Date: 2/24/99
----------------------------
<PAGE> 55
[WESTERN TECHNOLOGY INVESTMENT LETTERHEAD]
February 23, 1999
Mr. David Shoquist
Controller
New Focus, Inc.
2630 Walsh Avenue
Santa Clara, CA 95051-0905
RE: Loan and Security Agreement dated February 9, 1999 between New Focus, Inc.,
as Borrower, and VENTURE LENDING & LEASING II, INC., as Lender and related
Note No. 2060-001 dated February 26, 1999 for $800,000.00 ("Note")
Dear David:
Pursuant to the above referenced Note, Principal and Basic Interest and
Terminal payments are due as follows:
Advance Payments - Due at Funding:
<TABLE>
<CAPTION>
Description Payments Payment Date
- ----------- -------- ------------
<S> <C> <C>
Partial Interim Payment 560.00 Due in Advance
Principal and Basic Interest 50,080.00 Due in Advance
First and Last
Expenses Collected 1,000.00 Due at First Funding
----------
$51,640.00
</TABLE>
For a term of thirty-six (36) months followed by 1 final payment, commencing on
March 1, 1999 through March 1, 2002, thirty-seven (37) consecutive installments
of principal and Basic Interest payments and Terminal Payment payable on the
first day of the month as indicated for Loan No. 2060-001 on the attached
Payment Summaries which will be amended with each additional funding.
Commencing on April 1, 1999, please send your remittance to the following
addresses using the loan transaction Numbers indicated below on each remittance.
Your checks should be made payable to Venture Lending & Leasing II, Inc. If you
prefer to make paymentS by wire transfer in the future, please let us know so it
can be arranged.
<PAGE> 56
VENTURE LENDING AND LEASING II, INC.
NEW FOCUS, INC.
PAYMENT SUMMARY AS OF 03/01/99
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
LOAN TOTAL TOTAL PAYMENT TOTAL TOTAL
NUMBER PAYMENT DUE PAYMENT PAYMENT
# TO REFERENCE DUE 04/01/99 THRU DUE DUE
ON CHECK 3/1/99 1/1/02 2/1/02 3/1/02
- -----------------------------------------------------------------------
2060-001 $ - $25,040.00 $ - $80,000.00
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
REGULAR MAIL: OVERNIGHT DELIVERY ADDRESS:
- --------------------------------------------------------------------------------
<S> <C>
BANK OF BOSTON BANK OF BOSTON
LOCKBOX 414334 LOCK BOX DEPARTMENT
BOSTON, MA 02241-4334 2 MORRISEY BLVD.
DORCHESTER, MA 02125
REF: LOCKBOX#414334
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
*PAYMENT IS DUE ON THE FIRST OF EACH MONTH
- --------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT 408-436-8577 EXT 12
Page 1
<PAGE> 57
Mr. David Shoquist
2/23/99
Page 2
Loan Payment Remittance Address:
Bank of Boston
Lockbox 414334
Boston, MA 02241-4334
Loan Transaction No. 2060-001
PLEASE BE ADVISED THAT THIS IS THE ONLY PAYMENT NOTICE YOU WILL RECEIVE. WE DO
NOT PROCESS MONTHLY INVOICES.
Please acknowledge your receipt of this letter by signing the enclosed
counterpart of this letter where indicated below.
Sincerely,
/s/ Linda White
- -----------------
Linda White
Acknowledged and agreed to:
NEW FOCUS, INC.
/s/ DAVID A. SHOQUIST
By: ____________________________________
CONTROLLER
Title: _________________________________
2/24/99
Date: __________________________________
