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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SKYSTREAM NETWORKS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<TABLE>
<S> <C> <C>
DELAWARE 3576 77-0433769
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) NUMBER)
</TABLE>
555 CLYDE AVE.
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 390-8800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES D. OLSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SKYSTREAM NETWORKS INC.
555 CLYDE AVE.
MOUNTAIN VIEW, CALIFORNIA 94043
(650) 390-8800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT P. LATTA, ESQ. ROBERT V. GUNDERSON, JR., ESQ.
TED S. HOLLIFIELD, ESQ. ANDREW BAW, ESQ.
G. SCOTT GIESLER, ESQ. BRETT A. NISSENBERG, ESQ.
WILSON SONSINI GOODRICH & ROSATI MATTHEW C. BONNER, ESQ.
PROFESSIONAL CORPORATION GUNDERSON DETTMER STOUGH VILLENEUVE
650 PAGE MILL ROAD FRANKLIN & HACHIGIAN, LLP
PALO ALTO, CA 94304 155 CONSTITUTION DRIVE
(650) 493-9300 MENLO PARK, CA 94025
(650) 321-2400
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
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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, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO AGGREGATE OFFERING REGISTRATION
BE REGISTERED PRICE(1) FEE
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Common Stock ($0.001 par value)............... $93,150,000 $24,592
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES
IT SEEK AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED.
Subject to Completion. Dated , 2000.
Shares
[SkyStream Logo]
Common Stock
----------------------
This is an initial public offering of shares of common stock of SkyStream
Networks Inc. All of the shares of common stock are being sold by
SkyStream Networks.
Prior to this offering, there has been no public market for our common
stock. It is currently estimated that the initial public offering price will be
between $ and $ per share. Application has been made for quotation of
our common stock on the Nasdaq National Market under the symbol "SSNW".
See "Risk Factors" beginning on page 5 to read about factors you should
consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
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<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to SkyStream Networks............ $ $
</TABLE>
To the extent the underwriters sell more than shares of common
stock, the underwriters have the option to purchase up to an additional
shares from SkyStream Networks at the initial public offering price
less the underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
GOLDMAN, SACHS & CO.
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
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Prospectus dated , 2000.
<PAGE> 3
SUMMARY
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, especially "Risk Factors" beginning on page 5. Unless
otherwise indicated, this prospectus assumes that the underwriters do not
exercise their option to purchase additional shares in this offering. In
addition, unless otherwise indicated, this prospectus gives effect to the
automatic conversion of our outstanding preferred stock into common stock upon
the closing of the offering and a three-for-two stock split of all outstanding
shares of our Common Stock and Preferred Stock effected in March 2000.
SKYSTREAM NETWORKS INC.
We develop and sell a new category of networking products that enable the
Internet to connect with broadcast networks, such as cable, satellite and
digital television networks. This converged network, called the Broadcast
Internet, enhances the delivery of multimedia-rich and other data intensive
content. Our products enable service providers to combine the quality,
scalability and efficiency of broadcast networks with the interactivity and
personalization of the Internet to deliver multimedia-rich content
simultaneously to a large number of users.
We enable the Broadcast Internet through our source media routers, which
aggregate and distribute content across broadcast networks, and edge media
routers, which receive content from broadcast networks and redistribute this
content over the existing Internet infrastructure. We also develop Broadcast
Internet management software that manages content delivery across the converged
network. We produce our source media routers and we currently procure our edge
media routers from an original equipment manufacturer.
Our source media routers enable broadcasters to combine Internet content
with their existing video programming through standards based interoperable
interfaces. These media routers also connect to a broad range of proprietary
legacy broadcast equipment as well as non-proprietary standards based equipment.
With our fully interoperable platform, broadcast service providers can quickly
add new revenue generating data services. At the same time, they can lower their
infrastructure costs by purchasing non-proprietary best-of-breed standards based
equipment and connecting it to their network by using our source media router.
Our products are used by broadcast service providers, Internet service
providers, telecommunication service providers and content distribution
providers around the world. With our products, cable, satellite and digital
television broadcasters can use the Broadcast Internet to offer multicast high
speed Internet services, such as live webcasts, streaming audio/video and web
caching, or interactive Internet applications, such as video enhanced commerce
and online learning. Internet service providers, telecommunication service
providers and content distribution providers can use our products to leverage
the Broadcast Internet as an additional high speed backbone to deliver
multimedia content closer to the user. Our products have been sold to over 60
service providers around the world as of December 31, 1999. Direct and indirect
customers of our products include Cablecom Engineering AG, EchoStar
Communications, iBEAM Broadcasting, Intel, International Datacasting
Corporation, Loral-CyberStar, NAGRA-Kudelski and Pacific Century CyberWorks. We
sell our products through a direct sales force as well as through system
integrators and resellers. For the year ended December 31, 1999, our revenues
were $8.5 million.
We believe that the Internet will experience substantial growth in content
that incorporates rich graphics and audio/video streams, requiring a significant
increase in the bandwidth required to deliver this content. Historically, the
Internet has been used for e-mail and basic information retrieval, which are
point-to-point exchanges between a user and a host server. Increasingly, new
applications are emerging, such as online learning and live webcasts, that
require content to simultaneously reach up to millions of users. The current
Internet infrastructure is not designed to efficiently handle the delivery of
this new richer content or to support the multicasting needs of emerging
applications. Broadcast
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networks have been built to optimize the transmission of rich content to large
numbers of users in a predictable, reliable and scalable manner and present the
opportunity to create the Broadcast Internet. The Yankee Group, a global market
research firm, has forecast that the market opportunity for equipment that can
enable this combined network will grow to approximately $3.7 billion by 2003,
from virtually nothing in 1998.
Our solutions optimize broadcasters' available bandwidth and seamlessly
interoperate with existing equipment. We believe that web site owners will
quickly adapt to the availability of significant additional network capacity and
quality by enhancing their web sites and services through the inclusion of new
levels of full motion video, high quality sound and photo quality graphics. In
addition, our solutions make it possible for the broadcaster and the Internet
service provider to offer new interactive and personalized services and thereby
profit from incremental revenues without making fundamental changes to their
infrastructure.
Our objective is to become the leading global provider of hardware and
software that delivers traditional Internet and broadcast media content over the
Broadcast Internet in an efficient, predictable and scalable manner. The key
elements of our strategy are to:
- extend our leadership in enabling the Broadcast Internet;
- create and enhance an open platform for the Broadcast Internet;
- drive Broadcast Internet adoption across a broad range of industry
segments;
- leverage and expand our industry and customer relationships; and
- optimize our customers' economic models for delivery of content and value
added services.
We were incorporated in California in February 1996 and reincorporated in
Delaware as SkyStream Networks Corporation in January 2000. In March 2000, we
changed our name to SkyStream Networks Inc. Our principal executive offices are
located at 555 Clyde Avenue, Mountain View, California 94043, and our telephone
number is (650) 390-8800.
2
<PAGE> 5
THE OFFERING
Shares offered...................... shares
Shares to be outstanding after the
offering............................ shares
Proposed Nasdaq National Market
symbol.............................. "SSNW"
Use of proceeds..................... For general corporate purposes,
including working capital, repayment of
indebtedness and capital expenditures
and potential acquisitions of, or
investments in, complementary
businesses, technologies or products.
- ---------------
The calculation of the number of shares outstanding after this offering is based
on information as of December 31, 1999 and excludes:
- 2,572,449 shares of common stock issuable upon exercise of options
outstanding, of which 743,640 shares were exercisable as of December 31,
1999 under our 1996 Stock Option Plan at a weighted average exercise
price of $0.33 per share;
- 1,674,283 shares available for future issuance under our 1996 Stock
Option Plan as of December 31, 1999;
- 400,000 shares available for issuance under our 2000 Director Stock
Option Plan;
- 500,000 shares available for issuance under our 2000 Employee Stock
Purchase Plan; and
- 68,078 shares of common stock issuable upon exercise of outstanding
warrants at a weighted average exercise price of $2.75 per share.
3
<PAGE> 6
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
The consolidated balance sheet data displayed in the pro forma as adjusted
data reflects our sale of shares of common stock offered by this prospectus at
an assumed initial public offering price of $ per share and the application
of our net proceeds from the offering, after deducting the underwriting discount
and estimated offering expenses payable by us, as described in "Use of Proceeds"
and the conversion of all outstanding shares of our preferred stock into common
stock.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------------
1996 1997 1998 1999
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<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues.......................................... $ 34 $ 71 $ 1,256 $ 8,518
Gross profit (loss)............................... 30 (170) 597 5,872
Operating loss.................................... (355) (2,503) (5,020) (6,829)
Net loss.......................................... (362) (2,401) (5,022) (6,621)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents, and short-term investments.......... $ 14,443 $
Working capital............................................. 13,996
Total assets................................................ 19,399
Long-term obligations, less current portion................. 937
Stockholders' equity (deficit).............................. (11,989)
</TABLE>
4
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RISK FACTORS
This offering and an investment in our common stock involve a high degree
of risk. You should carefully consider the risks described below before making
an investment decision. If any of the following risks actually occurs, our
business, financial condition and results of operations could be seriously
harmed. In that case, the trading price of our common stock could decline, and
you could lose all or part of your investment.
WE HAVE LOST MONEY IN THE PAST AND MAY EXPERIENCE LOSSES IN THE FUTURE, WHICH
COULD PREVENT US FROM GROWING OR SUSTAINING OUR BUSINESS AND MAY CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE.
We have not achieved profitability in any previous quarter, and given our
planned level of expenses, we expect to continue to incur operating losses for
the foreseeable future. If we incur losses, the market price of our common stock
may decline substantially. We have incurred significant losses since inception
and expect to incur losses in the future. We lost $362,000 for the year ended
December 31, 1996, $2.4 million for the year ended December 31, 1997, $5.0
million for the year ended December 31, 1998 and $6.6 million for the year ended
December 31, 1999. We had an accumulated deficit of $14.4 million as of December
31, 1999. We expect to continue to incur significant product development, sales
and marketing and administrative expenses. In particular, we anticipate that our
expenses will increase substantially in the next 12 months as we:
- increase our sales and marketing activities, particularly by expanding
our direct sales force;
- develop our technology, expand our existing product lines and add new
features to penetrate the Broadcast Internet market; and
- develop additional infrastructure and hire additional management to keep
pace with our growth.
Our operating expenses are largely based on currently anticipated revenue
trends, which may not be realized, and a high percentage of our expenses are and
will continue to be fixed in the short term. We will need to generate
significant revenues to achieve profitability. If our revenue growth is slower
than we anticipate or our expenses exceed our expectations, our losses will
significantly increase. We may never achieve profitability. Even if we were to
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE MAY BE UNABLE TO ACCURATELY
EVALUATE OUR BUSINESS AND FORECAST OUR PROSPECTS, WHICH MAY PREVENT US FROM
ACHIEVING OUR EXPECTED OPERATING RESULTS.
As a result of our limited operating history, it is difficult to forecast
accurately our revenues, and we have limited meaningful historical financial
data upon which to base planned operating expenses. Specifically, we began
operations in July 1996, introduced our first source media router product in
February 1998 and began volume shipping in that quarter. The revenue and income
potential of our products and business is unproven and the market that we are
addressing is rapidly evolving. If we do not achieve our expected revenues, our
operating results will be below our expectations and the expectations of
investors and market analysts, which could cause the price of our common stock
to decline.
THE UNPREDICTABILITY OF OUR QUARTERLY RESULTS, EFFECTED IN PARTICULAR BY THE
TIMING OF CUSTOMER ORDERS, MAY ADVERSELY AFFECT THE TRADING PRICE OF OUR COMMON
STOCK.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. These include the timing of
customer orders for our source media router products, new product introductions
by our competitors and general economic conditions as well as those specific to
the Internet and related industries.
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<PAGE> 8
Our revenues and operating results depend upon the volume and timing of
customer orders and the date of product delivery. Historically, a substantial
portion of revenues in a given quarter have been recorded in the third month of
that quarter, with a concentration of these revenues in the last two weeks of
the third month. We expect this trend to continue and, therefore, any failure or
delay in the closing of orders would harm our quarterly operating results.
We plan to increase significantly our operating expenses to fund greater
levels of research and development, expand our sales and marketing operations,
broaden our customer support capabilities and develop new distribution channels.
We also plan to expand our general and administrative functions to address the
increased reporting and other administrative demands, that will result from
being a publicly traded company and the increasing size of our business. Our
operating expenses are largely based on anticipated revenue trends and a high
percentage of our expenses are, and will continue to be, fixed in the short
term. As a result, a delay in generating or recognizing revenue for the reasons
set forth above, or for any other reason, could cause significant variations in
our operating results from quarter to quarter and could result in substantial
operating losses.
Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock may fall.
THE BROADCAST INTERNET MARKET IS STILL EMERGING AND OUR BUSINESS WILL BE
SERIOUSLY HARMED IF IT DOES NOT DEVELOP AS WE EXPECT.
The Broadcast Internet market is new and rapidly evolving. If the Broadcast
Internet fails to gain widespread acceptance among broadcast service providers
for offering multicast high speed Internet services and interactive
multimedia-rich Internet applications or among Internet service providers,
telecommunication service providers and content distribution providers as an
additional high-speed backbone to deliver multimedia content, our business and
operating results will be seriously harmed. Acceptance of our products by
service providers is dependent upon consumer demand for new forms of interactive
multimedia content and for multimedia-rich and data intensive content over the
Internet. Market demand for these types of content is subject to a high level of
uncertainty and is dependent on a number of factors, including:
- the growth in consumer access to interactive technologies such as the
Internet;
- consumer acceptance of new interactive technologies;
- continued development of multimedia content that is desired by consumers;
- consumer willingness to pay for access to new interactive technologies;
and
- increases in user bandwidth.
If this market does not develop, develops more slowly than we expect, or
fails to achieve or sustain a significant level of sales, our business will be
seriously harmed. In addition, critical issues concerning the use of the
Internet, including security, reliability, cost, ease of access, quality of
service and regulatory initiatives, remain unresolved and are also likely to
affect the development of the market for our services.
OUR FUTURE GROWTH AND A SIGNIFICANT PORTION OF OUR FUTURE REVENUE DEPEND ON THE
SUCCESS OF OUR MEDIA ROUTER PRODUCTS, WHICH ARE THE ONLY VOLUME PRODUCTS THAT WE
CURRENTLY OFFER.
Our media router products are currently our only volume products, and if
they fail to gain market acceptance, our revenues will not increase and our
operating results will be seriously harmed. We only began shipping our first
source media router in February 1998, and the product line may never gain
widespread market acceptance. Our products are primarily used by broadcast
service providers, Internet service providers, telecommunications service
providers and content delivery service
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<PAGE> 9
providers. Our future success is substantially dependent upon whether our
solutions gains widespread market acceptance by such potential customers, of
which there are a limited number, and by end users of their services. The
acceptance of our products by service providers may also depend on their
acceptance and deployment in their networks of complementary digital subscriber
line, cable and wireless digital transmission technologies. Many potential
customers who have evaluated our media routers have not yet deployed the product
in production network environments and may choose not to deploy our current
product or any of our future products. Even when customers do purchase and
deploy our product, due to the variety and complexity of network environments in
which a media router is installed, it may not operate as expected. Failure of
our media routers to operate as expected could delay or prevent their volume
deployment, which could decrease our revenues and increase our expenses as we
devote additional development resources to improving product performance and
customer support and satisfaction. The success of our media routers will also
depend on:
- the realization of network infrastructure cost efficiencies for our
customers when our media router products are deployed;
- our successful development of systems and software that address customer
infrastructure requirements; and
- our customers' ability to integrate value added services into their
networks.
WE DERIVE OUR REVENUES FROM A SMALL NUMBER OF CUSTOMERS, AND ANY DECREASE IN
REVENUES FROM A MAJOR CUSTOMER COULD SERIOUSLY HARM OUR BUSINESS.
Our revenues to date have been recognized from a small number of customers.
Purchases by large customers and, therefore, our revenues, may vary
significantly from quarter to quarter. The loss of any one of our major
customers or a reduction or delay in purchases of our products from any one of
these customers would cause our revenues to decline and could seriously harm our
business. Revenues from our five largest and ten largest customers accounted for
66% and 77% of our total revenues for the year ended December 31, 1999. Revenues
from significant customers as a percentage of our total revenues for the year
ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
<S> <C>
EchoStar Communications................................ 38%
International Datacasting Corporation.................. 12%
Cablecom............................................... 10%
</TABLE>
We expect that the majority of our revenues will continue to depend on
sales to a small number of customers, and these customers may change from
quarter to quarter. We have no long-term contracts with any customers for the
purchase of our products, and customers may reduce or discontinue purchases at
any time. Customers may also delay or cancel purchase orders without penalty.
In addition, because we are dependent on a limited number of customers, we
expect to experience volatility relating to the budgeting cycles of our
customers and the communications industry in general. Adverse changes in our
revenues or operating results as a result of these budgeting cycles or any other
reduction in capital expenditures by our large customers could substantially
reduce the trading price of our common stock.
Increasingly, our customers tend to be significantly larger than us and are
able to exert a high degree of influence over us. They have sufficient
bargaining power to demand low prices and other terms and conditions that may
negatively affect our business and results of operations.
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<PAGE> 10
THE LONG SALES CYCLE FOR OUR PRODUCTS MAY CAUSE OUR REVENUES AND OPERATING
RESULTS TO VARY SIGNIFICANTLY FROM QUARTER TO QUARTER.
The sales cycle for our media router products is typically between one and
six months. If we experience delays in customer orders as a result of the long
sales cycle for our products, our revenues in a given quarter may not meet
market expectations. In addition, we may have incurred substantial sales and
marketing expenses during that quarter, without the anticipated offsetting
revenues. As a result, delays resulting from our lengthy sales cycle could
reduce our revenues and decrease our profits, or result in a loss. Throughout
the sales cycle, we often spend considerable time and resources educating and
providing information to prospective customers regarding the use and benefits of
our products. Even after making the decision to purchase our products, our
customers may delay or cancel the deployment of our products. Timing of
deployment is unpredictable, can vary widely and depends on a number of factors,
many of which are beyond our control, including:
- a customer's current network deployment procedures;
- a customer's level of expertise;
- the degree of hardware and software integration necessary for a customer
to deploy our products; and
- a customer's financial and administrative resources.
IF OUR PRODUCTS DO NOT INTEROPERATE WITH OUR CUSTOMERS' NETWORKS, INSTALLATIONS
COULD BE DELAYED OR CANCELLED, WHICH WOULD SERIOUSLY HARM OUR BUSINESS.
Our products are designed to interface with our customers' existing
networks, each of which has different specifications and utilizes multiple
protocol standards. Many of our customers' networks contain multiple generations
of products that have been added over time as these networks have grown and
evolved. Our products must interoperate with all of the products within these
networks as well as future products in order to meet our customers'
requirements. If we find errors in the existing software used in our customers'
networks, we must modify our software to fix or overcome these errors so that
our products will interoperate and scale with the existing software and
hardware. Due to the complexity and variety of equipment that comprise the
networks of our current and potential customers, it may be difficult or
impossible to identify the source of incompatabilities. If our products do not
interoperate with those of our customers' networks, installations could be
delayed or orders for our products could be cancelled. In addition, equipment in
the network other than our products may encounter compatability problems as a
result of the introduction of our products into a network. In that case, we
could incur additional expenses or lose potential revenue as a result of latent
incompatabilities in the equipment of other vendors. This could also seriously
harm our reputation, which would seriously harm our business and prospects.
IF WE FAIL TO DEVELOP NEW PRODUCTS AND PRODUCT ENHANCEMENTS THAT WILL ACHIEVE
MARKET ACCEPTANCE, OUR SALES WILL SUFFER AND OUR BUSINESS MAY FAIL.
We cannot assure you that we will be able to develop new products or
product enhancements in a timely manner, or at all. Any failure to develop new
products or product enhancements will substantially decrease market acceptance
and sales of our present and future products which will significantly reduce our
revenues and harm our operating results. Even if we are able to develop and
commercially introduce new products and enhancements, we cannot assure you that
the new products or enhancements will achieve widespread market acceptance. Any
failure of our future products to achieve market acceptance would reduce our
revenues and seriously harm our operating results.
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OUR PRODUCTS ARE NEW AND FACE RAPID TECHNOLOGICAL CHANGES AND EVOLVING
STANDARDS, AND IF WE DO NOT RESPOND IN A TIMELY MANNER, OUR BUSINESS COULD BE
SERIOUSLY HARMED.
The Internet infrastructure market is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving industry standards. In developing our products, we have made, and will
continue to make, assumptions with respect to which standards will be adopted by
our customers and competitors. If the standards adopted are different from those
which we have chosen to support, including the Moving Picture Experts Group, or
MPEG, standard and the digital video broadcast standard, market acceptance of
our products may be significantly reduced or delayed and our business will be
seriously harmed. In addition, the introduction of products embodying new
technologies and the emergence of new industry standards could render our
existing products obsolete.
WE MAY EXPERIENCE INCREASED COMPETITION FROM COMPANIES IN THE COMMUNICATIONS
NETWORKING MARKET AND IN THE BROADCAST NETWORK EQUIPMENT INDUSTRY, WHICH COULD
CAUSE REDUCED SALES LEVELS AND RESULT IN PRICE REDUCTIONS, REDUCED GROSS MARGINS
OR LOSS OF MARKET SHARE.
The Broadcast Internet is new and rapidly evolving, and we expect this
market to become highly competitive in the future. We anticipate that other
companies will expand into our market in the future and introduce competitive
products. We also face indirect competition from public and private companies
providing products that attempt to solve similar broadcast and Internet network
problems to those that our products address. The development of alternative
solutions to broadcast and Internet network problems by competitors,
particularly systems companies who also manufacture components, could
significantly limit our growth.
The Internet infrastructure market has historically been dominated by
companies such as Cisco Systems, Lucent Technologies and Nortel Networks. The
broadcast network equipment market has historically been dominated by companies
such as General Instrument, Harmonic and Scientific-Atlanta. These are large
public companies that have longer operating histories and significantly greater
financial, technical, marketing and other resources than we have. As a result,
these companies are able to devote greater resources to the development,
promotion, sale and support of their products. In addition, our competitors that
have large market capitalizations or cash reserves are much better positioned
than we are to acquire other companies that may have new technologies or
products that may displace our product lines. Any of these acquisitions could
give our competitors a strategic advantage. In addition, we believe that the
Broadcast Internet industry is likely to encounter consolidation in the future.
Such consolidation could lead to the formation of more formidable competitors.
Many of our potential competitors have significantly more established sales
and customer support organizations than we do. In addition, many of our
competitors have much greater name recognition and have more extensive customer
bases, better developed distribution channels and broader product offerings than
our company. These companies can use their customer bases and broader product
offerings and adopt aggressive pricing policies to gain market share. We expect
to encounter potential customers that, due to existing relationships with our
competitors, are committed to the products offered by these competitors. As a
result, these potential customers may not consider purchasing our products.
In addition, a number of private companies have developed products to
address problems similar to those our products address. With respect to our
source media router products, our competitors include Harmonic, Logic
Innovations and Thomcast. We currently procure our edge media routers from
BroadLogic, an original equipment manufacturer, on a purchase order basis.
BroadLogic also sells a similar product under their own name, which could result
in our competing with BroadLogic for the same customers. With respect to our
edge media router products, our competitors include Harmonic and ViaCast
Networks, Inc. With respect to our Broadcast Internet management software, we
believe
9
<PAGE> 12
that we may encounter competition from The Fantastic Corporation, KenCast, NDS
Group plc and Starburst Software.
Existing and potential customers are also our potential competitors. These
customers may develop or acquire additional competitive products or technologies
in the future, which may cause them to reduce or cease their purchases from us.
As a result of these factors, we expect that competitive pressures may
result in lower prices, reduced margins and loss of market share. See
"Business -- Competition" for detailed information about our competition.
WE EXPECT AVERAGE SELLING PRICES AND GROSS MARGINS OF OUR PRODUCTS TO DECREASE,
WHICH COULD HARM OUR OPERATING RESULTS.
The market for communications equipment is characterized by declining
prices due to increased competition, new products and increasing unit volumes.
Due to competition and potential pricing pressures from large customers in the
future, we expect that the average selling price and gross margins for our
products will decline over time. If we fail to reduce our production costs, our
gross margins will decline rapidly. We may not be successful in redesigning our
products or achieving cost reductions in a timely manner, particularly as we
introduce new products. In addition, redesign may not provide sufficient cost
reductions to allow us to remain competitive.
BECAUSE OUR PRODUCTS ARE DEPLOYED IN COMPLEX NETWORKS, THEY MAY HAVE ERRORS OR
DEFECTS THAT ARE FOUND ONLY AFTER FULL DEPLOYMENT, WHICH COULD SERIOUSLY HARM
OUR BUSINESS, AND COULD EXPOSE US TO LIABILITY CLAIMS.
Errors or other problems in our products could result in:
- loss of or delay in revenues and loss of customers or market share;
- failure to achieve market acceptance;
- diversion of development resources;
- increased service and warranty costs; and
- increased insurance costs.
Our products are designed for large and complex networks. They were only
recently introduced and, to date, have been deployed on a limited basis. Because
our media routers enable point-to-multipoint broadcast of multimedia-rich
content, our customers may not be able to adequately test our products in the
network environment prior to an actual transmission. Consequently, our customers
may discover errors or defects in our hardware or software only after it has
been fully deployed and operated as part of their network infrastructure.
Because our products are designed to provide critical services, if errors,
defects or failures are discovered in our current or future products, or as new
versions are released, we may be exposed to significant legal claims. Any
claims, whether or not successful, could damage our reputation and our business,
increase our expenses and impair our operating results. Although we maintain
product liability insurance covering some damages arising from implementation
and use of our products, our insurance may not fully cover claims sought against
us. Liability claims could require us to spend significant time and money in
litigation or to pay significant damages.
PROBLEMS ARISING FROM THE USE OF OUR PRODUCTS IN CONJUNCTION WITH OTHER VENDORS'
PRODUCTS COULD DISRUPT OUR BUSINESS AND INCREASE OUR OPERATING COSTS.
Service providers typically use our products in conjunction with products
from other vendors. As a result, when problems occur, it may be difficult to
identify the source of the problem. These problems
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<PAGE> 13
may cause us to incur significant warranty and repair costs, divert the
attention of our engineering personnel from our product development efforts and
cause significant customer relations problems.
WE MUST SUBSTANTIALLY EXPAND OUR DIRECT SALES OPERATIONS IN ORDER TO INCREASE
MARKET AWARENESS AND SALES OF OUR PRODUCTS.
Our products and services require a sophisticated sales effort targeted at
key people within each of our prospective customers' organizations. This sales
effort requires the efforts of select personnel as well as specialized system
and consulting engineers. Direct sales accounted for 82% of our revenues for the
year ended December 31, 1999. We have recently expanded our direct sales force
and plan to hire additional qualified sales personnel and system and consulting
engineers. Competition for these individuals is intense, and we might not be
able to hire the kind and number of sales personnel and system and consulting
engineers we need.
OUR BUSINESS MAY BE SERIOUSLY HARMED IF WE ARE UNABLE TO DEVELOP AND MAINTAIN
RELATIONSHIPS WITH THIRD PARTIES TO MARKET AND SELL OUR PRODUCTS.
Our growth will largely be dependent upon relationships with third parties
who market and sell our products. To date, we have entered into agreements with
only a small number of distribution partners including one original equipment
manufacturing arrangement with Harris Corporation, who has agreed to co-brand
and sell our products to television stations. If Harris Corporation reduces its
purchases of our products or breaches or terminates the agreement, our business
will be harmed. In addition, some of our distribution partners may also sell
products that could compete with our media router products. We cannot be certain
that we will be able to reach agreement with additional distribution partners on
a timely basis or at all, or that our distribution partners will devote adequate
resources to selling our products.
WE FACE RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS THAT COULD HARM OUR
BUSINESS.
To be successful, we believe we must expand our international operations.
Therefore, we expect to commit significant resources to expand our international
sales and marketing activities, including the hiring of an international sales
force. If we are unable to maintain or increase international market demand for
our products, our business would be harmed. International sales accounted for
38% of our revenues for the year ended December 31, 1999 and are expected to
increase in the future. We are increasingly subject to a number of risks
associated with international business activities which may increase our costs,
lengthen our sales cycle and require significant management attention. These
risks include:
- increased expenses associated with marketing services in foreign
countries;
- general economic conditions in international markets;
- unexpected changes in regulatory requirements resulting in unanticipated
costs and delays;
- tariffs, export controls and other trade barriers;
- longer accounts receivable payment cycles and difficulties in collecting
accounts receivable; and
- potentially adverse tax consequences, including restrictions on the
repatriation of earnings.
While we expect our international revenues and expenses to be denominated
predominantly in U.S. dollars, a portion of our international revenues and
expenses may be denominated in foreign currencies in the future. Accordingly, we
could experience the risks of fluctuating currencies and could choose to engage
in currency hedging activities, which may be unsuccessful and expensive.
11
<PAGE> 14
WE DEPEND ON A SINGLE CONTRACT MANUFACTURER THAT HAS NO OBLIGATION TO PROVIDE US
WITH FIXED PRICING OR QUANTITIES.
We rely on a single contract manufacturer, Pemstar, to build our products.
We do not have a written agreement with Pemstar, except on a purchase order
basis. If Pemstar terminates its arrangement with us, our relationships with our
customers could suffer and our financial condition and results of operations
could be harmed. Because we do not have a long-term supply contract with
Pemstar, they are not obligated to supply products to us for any specific
period, in any specific quantity or at any certain price, except as may be
specified in a particular purchase order. If the arrangement is terminated, we
could be required to purchase any excess inventory held by Pemstar, they would
no longer be obligated to manufacture products for us and our ability to supply
products to our customers could be seriously harmed. We may be unable to develop
alternative manufacturing arrangements on a timely basis, or at all. In
addition, Pemstar may not meet our future requirements for product quality or
timely delivery. Our production would be delayed by at least one month if we
were required to identify and arrange for alternative manufacturing services.
IF WE FAIL TO ACCURATELY PREDICT OUR MANUFACTURING REQUIREMENTS, WE COULD INCUR
ADDITIONAL COSTS OR EXPERIENCE MANUFACTURING DELAYS.
We provide product demand forecasts to Pemstar approximately three months
prior to scheduled delivery of products to our customers. If we overestimate our
requirements, Pemstar may have excess inventory, which we could be obligated to
purchase and which could be obsolete. If we underestimate our requirements,
Pemstar may have inadequate inventory, which could interrupt manufacturing of
our products and result in delays in shipments and revenues, or add additional
costs to our products to expedite delivery of certain long lead time components.
If we or Pemstar fail to carry a sufficient inventory of necessary items, if
lead times increase or if demand for our products increases unexpectedly, we may
have insufficient access to components necessary to meet demand for our products
on a timely basis. If a necessary component becomes unavailable, we would need
to identify and locate alternative components, which could also interrupt
manufacturing of our products and result in delays in shipments and revenues, or
add additional costs to our products to expedite delivery of such components.
IF WE ARE UNABLE TO OBTAIN SUFFICIENT PRODUCTS FROM OUR CONTRACT MANUFACTURER ON
ECONOMICAL TERMS, OUR BUSINESS COULD BE SEVERELY HARMED.
We obtain our products from Pemstar's facility located in San Jose,
California. If Pemstar's manufacturing capacity becomes constrained and they are
unable to provide us with adequate supplies of high-quality products, we may be
unable to fulfill customer orders. As a result, our relationships with our
customers could suffer and our financial condition and results of operations
could be harmed. Because we sell a large percentage of our source media router
products at the end of each fiscal quarter, Pemstar's manufacturing capacity
could become constrained by our placing a large volume of orders at one time.
Although Pemstar has other manufacturing facilities in Minnesota, the
Netherlands, Mexico, China, Singapore and Thailand, transitioning production to
any of those facilities on a rush basis could cause a significant delay in our
production schedule. In addition, if our business grows, Pemstar may lack the
ability to scale its operations to accommodate our future needs.
Pemstar's San Jose facility is also vulnerable to damage or interruption
from a number of sources, including fire, flood, power loss, telecommunications
failure, physical and electronic break-ins, earthquakes and other similar
events. For example, the San Jose area is a seismically active region. Any
substantial disruption of this sort could completely impair our ability to meet
customer orders for our products. We do not presently have a formal disaster
recovery plan in effect and may not carry business interruption insurance
sufficient to compensate us for losses that could occur.
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<PAGE> 15
WE DEPEND UPON OUR CONTRACT MANUFACTURER TO PROVIDE OUR PRODUCTS ON A TIMELY
BASIS.
As we introduce new products and product enhancements, we must coordinate
our efforts with those of our suppliers and Pemstar to rapidly achieve volume
production. If we should fail to effectively manage our relationship with
Pemstar, or if Pemstar experiences delays, disruptions or quality control
problems in its manufacturing operations, our ability to ship products to our
customers could be delayed.
BECAUSE WE DEPEND ON SINGLE OR LIMITED SOURCES OF SUPPLY WITH LONG LEAD TIMES
FOR OUR EDGE MEDIA ROUTERS AND SOME OF THE COMPONENTS IN OUR PRODUCTS, WE COULD
ENCOUNTER DIFFICULTIES IN MEETING SCHEDULED PRODUCT DELIVERIES TO OUR CUSTOMERS,
WHICH COULD CAUSE CUSTOMERS TO CANCEL ORDERS.
We purchase our edge media router and several key components used in our
products from single or limited sources of supply. We procure our edge media
router from BroadLogic and our Quality of Service product from Packeteer. We
procure other components from Mitec and Radyne Comstream. We have no guaranteed
supply arrangement with any of these suppliers and we typically purchase these
items through purchase orders. We may fail to obtain these items in a timely
manner in the future. Any interruption or delay in the supply of any of these
products or components, or the inability to obtain these products or components
from alternate sources at acceptable prices and within a reasonable amount of
time, would impair our ability to meet scheduled product deliveries to our
customers and could cause customers to cancel orders. Lead times for these items
vary significantly and depend on numerous factors, including the specific
supplier, the size of the order, contract terms and market demand for a product
or component at a given time. For substantial increases in production levels,
suppliers may need longer than normal lead times and some may need at least six
months.
Furthermore, financial or other difficulties faced by these suppliers, or
significant changes in demand for these items, could limit their availability.
In addition, a third party could acquire control of one or more of our suppliers
and cut off our access to these products or components. Obtaining these products
or components from alternate suppliers is difficult because we must qualify each
new supplier, and this process is time consuming and expensive.
WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET. IF WE ARE UNABLE TO RETAIN OUR KEY PERSONNEL OR HIRE ADDITIONAL
PERSONNEL OR INTEGRATE NEW KEY PERSONNEL INTO OUR MANAGEMENT, OUR ABILITY TO
EXECUTE OUR BUSINESS STRATEGY OR GENERATE SALES COULD BE SERIOUSLY HARMED.
The loss of the services of any of our key employees or the inability to
attract or retain qualified personnel in the future or delays in hiring required
personnel could impair our ability to develop, introduce and sell our products.
Our future success depends upon the continued services of our executive officers
and other key engineering, sales and marketing personnel. In particular, James
D. Olson, President and Chief Executive Officer, possesses industry and
technical knowledge and is especially critical to our future success. None of
our officers or key employees is bound by an employment agreement for any
specific term, nor do we have key person life insurance policies covering any of
our employees.
Our products and services require a sophisticated selling effort targeted
at key people within our prospective customers' organizations. This process
requires the efforts of experienced sales personnel as well as specialized
systems and consulting engineers. In addition, the complexity of our products
requires highly trained customer support personnel. We intend to hire a
significant number of engineering, sales, marketing and customer support
personnel in the future. We believe our success depends, in large part, upon our
ability to attract and retain these key employees. Competition for these
personnel is intense, especially in the San Francisco Bay area. We may not be
successful in attracting and retaining these individuals.
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<PAGE> 16
Many members of our management team have only been with us for a relatively
short period of time. For example, our Vice President of Marketing joined us in
May 1998, and four of our eight current executive officers have joined us since
then. We expect to add other key members to our management team in the next
three to six months. Failure of the new management team to work effectively
together could seriously harm our business.
IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, OUR BUSINESS, FINANCIAL CONDITION
AND PROSPECTS COULD BE SERIOUSLY HARMED.
Our ability to successfully offer our products and implement our business
plan in a rapidly evolving market requires an effective planning and management
process. We continue to increase the scope of our operations domestically and
internationally and have grown our headcount substantially. At December 31,
1998, we had a total of 33 employees and at December 31, 1999, we had a total of
75 employees. In addition, we plan to continue to hire a significant number of
employees this year. This growth has placed, and our anticipated growth in
future operations will continue to place, a significant strain on our management
systems and resources. We expect that we will need to continue to improve our
financial and managerial controls, reporting systems and procedures, and will
need to continue to expand, train and manage our work force worldwide.
Furthermore, we expect that we will be required to manage multiple relationships
with various customers and other third parties.
We have located additional office space necessary for our expansion over
the next 12 to 18 months. This space must be completely renovated prior to our
taking possession. The landlord may not be able to complete such renovation on
commercially reasonable terms or in a timely manner. Failure to do so would
disrupt our business and could harm our operating results and financial
condition.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY.
If we fail to adequately protect our proprietary rights, our competitors
could offer similar products relying on technologies developed by us,
potentially harming our competitive position and decreasing our revenues. We
have filed eleven patent applications to date. Our existing and future patent
applications, if any, may not be approved, any issued patents may not protect
our intellectual property and any issued patents could be challenged by third
parties. Furthermore, other parties may independently develop similar or
competing technology or design around any patents that may be issued to us. We
currently license certain MPEG-related patented technology. These licenses can
be terminated at any time. If any of these licenses are terminated, we may be
unable to enter into alternative licenses on a timely basis and on acceptable
terms. Attempts may be made to copy aspects of our products or to obtain and use
information that we regard as proprietary. We attempt to protect our
intellectual property rights by limiting access to the distribution of our
software, documentation and other proprietary information and by relying on a
combination of copyright, trademark and trade secret laws. In addition, we enter
into confidentiality agreements with our employees and certain customers,
vendors and strategic partners. These steps may fail to prevent the
misappropriation of our intellectual property, particularly in foreign countries
where the laws may not protect our proprietary rights as fully as in the United
States.
IF WE BECOME INVOLVED IN A PROTRACTED INTELLECTUAL PROPERTY DISPUTE, OR ONE WITH
A SIGNIFICANT DAMAGES AWARD, OR ONE WHICH REQUIRES US TO CEASE SELLING OUR
PRODUCTS, OUR OPERATING RESULTS WOULD BE SERIOUSLY HARMED.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights, including among
companies in communications and Internet industries. Intellectual property
claims against us and any resulting lawsuit, if successful, could subject us to
significant liability for damages and invalidate our proprietary rights. These
lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert
14
<PAGE> 17
management time and attention. Any potential intellectual property litigation
also could force us to do one or more of the following:
- cease selling, incorporating or using products or services that
incorporate the infringed intellectual property;
- obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on acceptable terms, if at all; or
- redesign those products or services that incorporate the disputed
technology.
If we are subject to a successful claim of infringement against us and fail
to develop non-infringing technology or license the infringed technology on
acceptable terms and on a timely basis, our revenues may decline or our expenses
may increase.
We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights or to determine the scope and
validity of our proprietary rights or the proprietary rights of competitors.
These claims could result in costly litigation and the diversion of our
technical and management personnel. As a result, our operating results could
suffer and our financial condition could be seriously harmed.
WE MAY ENGAGE IN ACQUISITIONS, AND WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE
ANY NEW OPERATIONS, TECHNOLOGIES, PRODUCTS OR PERSONNEL.
Recently, the Internet infrastructure, broadcasting and communications
industries have experienced substantial mergers and acquisitions activity. We
may in the future engage in acquisitions of product lines, technologies and
businesses. We currently have no commitments or agreements with respect to any
such acquisition. In the event that such an acquisition does occur, because of
the small size of our management team, we may be particularly vulnerable if we
are unable to effectively assimilate operations, technologies, products or
personnel or if our management's attention is diverted from other business
concerns.
MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE
OUR PROFITS OR MARKET VALUE.
Our management will have considerable discretion in the application of the
net proceeds from this offering, and you will not have the opportunity, as part
of your investment decision, to assess whether the proceeds are being used
appropriately. The net proceeds may be used for corporate purposes that do not
increase our profitability or our market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value. See "Use of Proceeds."
LAWS REGULATING OR AFFECTING THE INTERNET COULD IMPOSE ADDITIONAL BURDENS ON OUR
CURRENT AND POTENTIAL CUSTOMERS, WHICH COULD HARM OUR SALES.
Laws and regulations that apply to communications and commerce over the
Internet are becoming more prevalent. The U.S. Congress has enacted Internet
laws regarding children's privacy, copyrights, taxation and the transmission of
sexually explicit material. The European Union has enacted its own privacy
regulations, and is currently considering copyright legislation that may extend
the right of reproduction held by copyright holders to control the right to make
temporary copies for any reason. The laws regulating or affecting the Internet,
however, remain largely unsettled, even in areas where there has been some
legislative action. It may take years to determine whether and how existing laws
such as those governing intellectual property, privacy, libel and taxation apply
to the Internet. In addition, the growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad, that may impose additional financial and
administrative burdens on companies conducting business online. The adoption,
implementation or modification of laws and regulations relating to the Internet,
or
15
<PAGE> 18
interpretations of existing law, could adversely affect the businesses of our
customers and cause our sales growth to slow or our sales to fall.
CONTROL BY OUR EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE MATTERS
REQUIRING STOCKHOLDER APPROVAL AND COULD DELAY OR PREVENT A CHANGE IN CONTROL,
WHICH COULD PREVENT YOU FROM REALIZING A PREMIUM IN THE MARKET PRICE OF OUR
COMMON STOCK.
The concentration of ownership of our common stock by existing stockholders
could have the effect of delaying or preventing a change in our control or
discouraging a potential acquirer from attempting to obtain control of us, which
could cause the market price of our common stock to fall or prevent our
stockholders from realizing a premium in the market price associated with an
acquisition. Upon completion of this offering, our executive officers, directors
and principal stockholders and their affiliates will own 18,906,111 shares or
approximately % of the outstanding shares of common stock. These stockholders,
if acting together, would be able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions. For
information about the ownership of common stock by our executive officers,
directors and principal stockholders, see "Principal Stockholders".
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE WHICH COULD NEGATIVELY
AFFECT YOUR INVESTMENT.
Prior to this offering, you could not buy or sell our common stock
publicly. An active public market for our common stock may not develop or be
sustained after this offering. The market for technology stocks has been
extremely volatile. The following factors could cause the market price of our
common stock to fluctuate significantly from the price paid by investors in this
offering:
- the loss of a major customer;
- the addition or the departure of key personnel;
- actual or anticipated variations in our quarterly operating results;
- announcements by us or our competitors of significant contracts, new
products or technological innovations, acquisitions, strategic
relationships, joint ventures or capital commitments;
- changes in financial estimates by securities analysts;
- sales by us or our current stockholders of common stock or other
securities;
- changes in market valuations of networking and communications companies;
and
- fluctuations in general stock market conditions.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN OUR CONTROL.
Provisions of our certificate of incorporation, bylaws and Delaware law
could make it more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. See "Description of Capital Stock".
SHOULD OUR STOCKHOLDERS SELL A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK
IN THE PUBLIC MARKET, THE PRICE OF OUR COMMON STOCK COULD FALL.
Our current stockholders hold a substantial number of shares, which they
will be able to sell in the public market in the near future. Sales of a
substantial number of shares of our common stock after this offering could
reduce the market price of our common stock. In addition, the sale of these
shares could impair our ability to raise capital through the sale of additional
equity securities. See "Management -- Stock Plans" and "Shares Eligible for
Future Sale".
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<PAGE> 19
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth of Internet use. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us and
described in the preceding pages and elsewhere in this prospectus.
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the
shares of common stock we are offering will be approximately $ million, or
$ million if the underwriters exercise in full their option to purchase
additional shares in the offering, at an assumed initial public offering price
of $ per share and after deducting the underwriting discount and estimated
offering expenses of $1.5 million payable by us.
We expect to use the net proceeds from this offering for general corporate
purposes, including working capital, repayment of indebtedness and capital
expenditures. A portion of the net proceeds may also be used to acquire or
invest in complementary businesses, technologies, product lines or products. We
have no current plans, agreements or commitments with respect to any
acquisitions or investments, and are not engaged in any negotiations with
respect to any acquisitions or investments. Our management will have broad
discretion concerning the use of the net proceeds of this offering. We intend to
invest the net proceeds of this offering in short-term, investment grade
securities pending their use.
DIVIDEND POLICY
We have never declared or paid cash dividends on our common stock or other
securities and do not currently anticipate paying cash dividends in the future.
Any future determination to pay cash dividends will be at the discretion of the
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business conditions and other
factors that the board of directors may deem relevant.
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<PAGE> 20
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis; and
- on a pro forma basis to reflect the conversion of all outstanding shares
of our preferred stock into common stock.
- on a pro forma as adjusted basis to reflect the sale of the
shares of common stock offered in this offering at the
initial public offering price of $ per share after deducting the
underwriting discount and estimated offering expenses payable by us and
the conversion of all outstanding shares of our preferred stock into
common stock.
The outstanding share information excludes:
- 2,572,449 shares of common stock issuable upon exercise of options
outstanding, of which 743,640 shares were exercisable as of December 31,
1999 under our 1996 Stock Option Plan at a weighted average exercise
price of $0.33 per share;
- 1,674,283 shares available for future issuance under our 1996 Stock
Option Plan as of December 31, 1999;
- 400,000 shares available for issuance under our 2000 Director Stock
Option Plan;
- 500,000 shares available for issuance under our 2000 Employee Stock
Purchase Plan; and
- 68,078 shares issuable upon exercise of outstanding warrants exercisable
at a weighted average exercise price of $2.75.
You should read this information together with our financial statements and
the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Long-term obligations, net of current portion....... $ 937 $ 937 $ 937
Redeemable convertible preferred stock, $0.001 par
value, 15,313,248 shares authorized; 15,260,170
shares issued and outstanding actual; no shares
issued and outstanding pro forma and pro forma as
adjusted.......................................... 26,603 -- --
Stockholders' equity (deficit):
Common stock, $0.001 par value, 350,000,000 shares
authorized; 7,978,876 shares issued and
outstanding actual; 23,239,046 shares issued
and outstanding pro forma and shares
issued and outstanding pro forma as adjusted... 8 23
Additional paid-in capital.......................... 11,066 37,654
Notes receivable from stockholders.................. (809) (809) (809)
Deferred stock compensation......................... (7,849) (7,849) (7,849)
Accumulated deficit................................. (14,405) (14,405) (14,405)
-------- -------- -------
Stockholders' equity (deficit)................. (11,989) 14,614
-------- -------- -------
Total capitalization........................... $ 15,551 $ 15,551 $
======== ======== =======
</TABLE>
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<PAGE> 21
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. We calculate net tangible book value per
share by dividing the net tangible book value (total assets less tangible assets
and total liabilities) by the number of outstanding shares of common stock.
Our pro forma net tangible book value at December 31, 1999, after giving
effect to the automatic conversion of all outstanding shares of our preferred
stock into 15,260,170 shares of common stock upon the closing of this offering,
was $14,451, or $0.60 per share of common stock. After giving effect to the sale
of the shares of common stock at an assumed initial public
offering price of $ per share, less the underwriting discount and estimated
offering expenses payable by us, our pro forma net tangible book value at
December 31, 1999 would be , or $
per share. This represents an immediate increase in the pro forma net tangible
book value of $
per share to existing stockholders and an immediate dilution of $ per share
to new investors, or approximately % of the assumed offering price of
per share.
The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $
Pro forma net tangible book value per share at December
31, 1999............................................... $
Increase per share attributable to new investors.......... $
Pro forma net tangible book value per share after the
offering.................................................. $
Dilution per share to new investors......................... $
=======
</TABLE>
The following table shows on a pro forma basis at December 31, 1999, after
giving effect to the automatic conversion of all outstanding shares of our
preferred stock into an aggregate of 15,260,170 shares of common stock upon the
closing of this offering, the number of shares of common stock purchased from
us, the total consideration paid to us and the average price paid per share by
existing stockholders and by new investors purchasing common stock in this
offering:
<TABLE>
<CAPTION>
SHARES PURCHASED(1) TOTAL CONSIDERATION
------------------------ ---------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
---------- ---------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing
stockholders....... % $ % $
New investors........
---------- --- -------- ---
Total.............. 100% $ 100%
========== === ======== ===
</TABLE>
- ---------------
(1) Excludes (A) 2,572,449 shares of common stock issuable upon exercise of
options outstanding, of which 743,640 shares were exercisable as of December
31, 1999, under our 1996 Stock Option Plan at a weighted average exercise
price of $0.33 per share, (B) 1,674,283 shares available for future issuance
under our 1996 Stock Plan as of December 31, 1999, (C) 400,000 shares
available for issuance under 2000 Director Stock Option Plan, (D) 500,000
shares available for issuance under our 2000 Employee Stock Purchase Plan,
and (E) 68,078 shares issuable upon exercise of outstanding warrants
exercisable at a weighted average exercise price of $2.75.
19
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data set forth below for the years
ended December 31, 1997, 1998 and 1999, have been derived from our financial
statements, which have been audited by PricewaterhouseCoopers LLP, independent
accountants, and are included elsewhere in this prospectus. The statement of
operations data for the period from inception to December 31, 1996 are derived
from our financial statements which have been audited by PricewaterhouseCoopers
LLP, independent accountants, and are not included elsewhere in this prospectus.
The historical results are not necessarily indicative of results to be expected
for any future period. You should read the data presented below in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes to those statements appearing
elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1997 1998 1999
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues............................................... $ 34 $ 71 $ 1,256 $ 8,518
Cost of revenues....................................... 4 241 659 2,646
-------- -------- -------- --------
Gross profit (loss).................................... 30 (170) 597 5,872
-------- -------- -------- --------
Operating expenses:
Research and development............................. 374 1,407 2,677 5,403
In-process research and development.................. 101
Sales and marketing.................................. -- 191 1,839 3,799
General and administrative........................... 11 735 1,101 1,698
Stock-based compensation............................. -- -- -- 1,700
-------- -------- -------- --------
Total operating expenses............................... 385 2,333 5,617 12,701
-------- -------- -------- --------
Loss from operations................................... (355) (2,503) (5,020) (6,829)
Interest and other income (expense), net............... (7) 102 (2) 208
-------- -------- -------- --------
Net loss............................................... $ (362) $ (2,401) $ (5,022) $ (6,621)
======== ======== ======== ========
Basic and diluted net loss per share(1)(2)............. $ -- $ (6.52) $ (2.05) $ (1.37)
======== ======== ======== ========
Shares used in computing basic and diluted net loss per
share(2)............................................. -- 369 2,449 4,844
======== ======== ======== ========
Pro forma basic and diluted net loss per share
(unaudited)....................................... $ (0.35)
========
Shares used in computing pro forma basic and diluted
net loss per share (unaudited).................... 18,896
========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
1996 1997 1998 1999
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 35 $ 267 $ 2,965 $ 14,443
Working capital........................................ (361) 1,245 2,803 13,996
Total assets........................................... 78 2,014 4,654 19,399
Long-term obligations.................................. 0 269 2,168 937
Redeemable convertible preferred stock................. 0 4,099 9,137 26,603
Stockholder's deficit.................................. (322) (2,655) (7,643) (11,989)
</TABLE>
- ---------------
(1) See Note 1 to our Consolidated Financial Statements for an explanation of
the determination of the shares used to compute net loss per share.
(2) All shares outstanding as of December 31, 1996 were subject to repurchase.
20
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and our financial statements and the related notes
included elsewhere in this prospectus. This discussion contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of certain factors including the risks discussed in "Risk Factors" and elsewhere
in this prospectus.
OVERVIEW
SkyStream Networks develops and sells a new category of networking products
that enable the Internet to connect with broadcast networks, such as cable,
satellite and digital television networks. This converged network, called the
Broadcast Internet, enhances the delivery of multimedia-rich and other data
intensive content. Our products enable service providers to combine the quality,
scalability and efficiency of broadcast networks with the interactivity and
personalization of the Internet, to deliver multimedia-rich content
simultaneously to a large number of users.
Our products consist of our source media routers, which aggregate and
distribute content across broadcast networks, and edge media routers, which
receive content from broadcast networks and redistribute this content over the
existing Internet infrastructure. We also develop Broadcast Internet management
software that manages content delivery across the converged network. We produce
our source media routers and we currently procure our edge media routers from an
original equipment manufacturer.
From our inception in February 1996 through January 1998, our operating
activities were primarily devoted to increasing our research and development
capabilities and developing our source media router and related software
products. We also staffed our administrative, marketing and sales organizations.
Revenues during this period were immaterial.
In February 1998, we began shipping our first product, the source media
router. We currently sell through our direct sales force to service providers
worldwide. In addition, we distribute through value added resellers and an
original equipment manufacturer relationship. For 1999, direct sales accounted
for approximately 82% of our revenues. To date, we have derived substantially
all of our revenues from sales of our source media router family of products. We
derive additional revenues from support contracts and installation and training
services which were approximately 5% of year ended December 31, 1999 revenues.
We have recently launched an initiative to increase our sales and marketing
efforts internationally, initially focusing on Europe and Asia. International
sales accounted for 38% of our revenues for the year ended December 31, 1999 and
are expected to increase as a percentage of our revenues in the future.
We recognize product revenues at the time of shipment, unless we have
future obligations for installation or unless customer acceptance is required,
in which case revenues are deferred until these conditions are satisfied. To
date, a small portion of our revenues have been deferred until installation
obligations are met or customer acceptance is obtained. Revenues from support
contracts are deferred and recognized ratably over the term of the contract.
Currently all of our product sales and service arrangements provide for pricing
and payment in U.S. dollars. Amounts billed in excess of revenues recognized are
included as deferred revenues in the accompanying consolidated balance sheets.
At December 31, 1999, a total of $600,000 of revenues were deferred. We
currently expect that these deferred revenues will be recognized in the year
2000. We provide a reserve for warranty expenses based on our warranty history.
Currently, selling prices in the Broadcast Internet market are relatively
stable. However, as competitors emerge and launch new products, we expect the
average selling prices and gross margins of our products to decline.
21
<PAGE> 24
Our gross margins will primarily be affected by changes in our pricing
policies and those of our competitors, the mix of products and services sold,
the mix of sales channels through which our products and services are sold, the
mix of domestic and international sales, new products introduced by us and our
competitors, and the volume pricing we are able to attain from our third party
manufacturing vendor.
The majority of our cost of revenues consists of payments to Pemstar, our
sole contract manufacturer. Pemstar manufactures our products in San Jose,
California, using quality assurance programs and standards which we established.
Manufacturing engineering and documentation control are conducted at our
facility in Mountain View, California. In addition, our cost of goods sold
includes costs related to customer support and royalty payments.
Research and development expenses consist primarily of salaries and related
personnel costs, fees paid to consultants and outside service providers, and
prototype costs related to the design and development of our products and
software. We expense our research and development costs as they are incurred. We
are devoting substantial resources to the continued development of new products.
We believe that research and development is critical to our strategic product
development objectives and that to leverage our leading technology and meet the
changing requirements of our customers, we will need to fund investments in
several development projects in parallel. As a result, we expect our research
and development expenses to increase in absolute dollars in the future.
Selling and marketing expenses consist primarily of salaries, commissions
and related expenses for personnel engaged in marketing, sales and customer
support functions, as well as costs associated with promotional and other
marketing expenses. We intend to expand our direct and indirect sales operations
substantially, both domestically and internationally, in order to increase
market awareness of our products. We expect that sales and marketing expenses
will increase substantially in absolute dollars over the next year as we hire
additional sales and marketing personnel, initiate additional marketing programs
to support our source media router family of products and establish sales
offices in additional domestic and international locations. In addition, we
believe our future success is dependent upon establishing successful
relationships with a variety of distribution partners. To date, we have entered
into agreements with only a small number of distribution partners. The
complexity of installing our media routers requires highly trained customer
service and support personnel. We expect to expand our customer service and
support organization to meet these requirements.
General and administrative expenses consist primarily of salaries and
related expenses for executive, finance, accounting, facilities, and human
resources personnel, professional fees and other corporate expenses. We expect
general and administrative expenses to increase in absolute dollars as we add
personnel and incur additional costs related to the growth of our business and
our operation as a public company.
Since inception we have recorded total deferred stock-based compensation of
approximately $9.1 million in connection with stock options granted during 1999
at prices subsequently deemed to be below fair value on the date of grant. We
expect to record additional deferred stock-based compensation expenses for
options granted in the quarter ending March 31, 2000. Options granted are
typically subject to a four year vesting period. Some stock options issued prior
to this offering have been exercised immediately by payment of the exercise
price either in cash or by promissory note. Option shares that are exercised
before they are fully vested are subject to our right to repurchase the stock at
the original exercise price. Our repurchase right lapses ratably over the four
year vesting period. We are amortizing the deferred stock-based compensation
over the vesting periods of the applicable options and the repurchase periods
for restricted stock purchases. The service period over which deferred
stock-based compensation is amortized is determined separately for each portion
of the total award, in accordance with Financial Accounting Standards Board
Interpretation No. 28. The result of this accounting treatment is that
approximately $1.7 million of the deferred stock-based compensation was
amortized in 1999, and $4.5 million will be amortized in
22
<PAGE> 25
2000, $1.9 million will be amortized in 2001, $800,000 will be amortized in 2002
and $200,000 will be amortized in 2003.
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, the percentage of
net revenues represented by the line items reflected in our audited consolidated
statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
-------- ------ ------
<S> <C> <C> <C>
AS A PERCENTAGE OF REVENUES:
Revenues.............................................. 100.0% 100.0% 100.0%
Cost of revenues...................................... 339.4 52.5 31.0
-------- ------ ------
Gross profit (loss)................................... (239.4) 47.5 69.0
-------- ------ ------
Operating expenses:
Research and development............................ 1,981.7 213.2 63.4
In-process research and development................. -- -- 1.2
Sales and marketing................................. 269.0 146.5 44.6
General and administrative.......................... 1,035.2 87.7 19.9
Stock-based compensation............................ -- -- 19.9
-------- ------ ------
Total operating expenses......................... 3,285.9 447.4 149.0
-------- ------ ------
Loss from operations.................................. (3,525.3) (399.9) (80.0)
Interest and other income (expense), net.............. 143.6 (0.1) 2.4
-------- ------ ------
Net loss.............................................. (3,381.7)% (400.0)% (77.6)%
======== ====== ======
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUES
Revenues for 1997 were $71,000. Revenues increased from $1.3 million in
1998, our first year of volume shipments, to $8.5 million in 1999. Four
customers accounted for approximately 75% of the revenues in the year ended
December 31, 1998, and four customers accounted for approximately 64% of
revenues in the year ended December 31, 1999. The significant increase in
revenues year over year can be attributed mainly to an increase in our customer
base as well as increased unit purchases by our four largest customers.
COST OF REVENUES
Cost of revenues for 1997 was $241,000. Cost of revenues for 1998 was
$659,000 as compared to $2.6 million for 1999. The increase was due primarily to
the increase in unit volume from 1998 to 1999. As a percentage of revenues,
gross profit increased from 48% in 1998 to 69% in 1999 due to fixed overhead
representing a lower percentage of revenues.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased from $1.4 million in 1997 to
$2.7 million in 1998 and to $5.4 million in 1999. The increase in each year was
due primarily to the increase in personnel and related costs as well as
consulting, recruiting and professional services. The primary purpose of the
increase in research and development expenses was to support the expansion and
completion of the media router product family. Development is essential to our
future success and we expect that research and development expenses will
increase in absolute dollars in future periods.
In September 1999, we acquired substantially all of the assets of Varuna
Software, Inc., including its Broadcast Internet management software product
line, for cash consideration of $313,000. The results of operations for Varuna
Software are included in our statement of operations from the date of
23
<PAGE> 26
acquisition. We allocated the purchase price to the tangible and intangible
assets acquired on the basis of their respective fair values on the acquisition
date. We determined the fair value of intangible assets using a combination of
methods, including estimates based on risk adjusted income approach for acquired
research and development, developed technology, core technology and trade name,
and on the cost replacement approach for acquired work force. Developed
technology is technology that is being used in existing products of the business
and is distinguished from in-process technology because it has achieved
technological feasibility. Core technology represents fundamental technology and
advances that are the basis for our developed and in-process products. New and
in-process products may leverage core technology to different degrees depending
on the extent of incorporation of new, previously undeveloped technologies.
We recorded a charge of $101,000 in 1999 to write off in-process research
and development which had not reached technological feasibility and had no
alternative future use. The in-process project was acquired as part of the
acquisition and related to a special application, designed to manage the
collection, preparation and broadcast delivery of Web content. At the date of
acquisition, the detailed product design and development up to the stage prior
to the first prototype had been completed on the project. We anticipate spending
approximately $200,000 to complete the project and we anticipate the development
will be completed and benefits will begin in the year 2000.
The value of the in-process research and development project was determined
by estimating the net cash flows resulting from the completion of the project
reduced to the percentage of completion of the project. We estimate that the
project was 50% complete. We estimated revenues, margins and operating costs
based upon historical information about similar product developments combined
with projections of future revenue and cost patterns, including projections used
when initially evaluating the acquisition of Varuna Software. Net cash flows
were tax affected and then discounted back to their present value at a discount
rate based on a risk adjusted weighted average rate of return.
The nature of the efforts to develop all purchased in-process technology
into commercially viable products principally relates to the completion of all
planning, designing, prototyping, verification and testing activities that are
necessary to establish that the resulting products can meet their design
specification, including function, features and technical performance
requirements. Due to the fact that the project is in-process there is
uncertainty whether it can be successfully finished and result in the net cash
flows that we originally estimated at acquisition. We cannot guarantee that we
will realize revenue from this in-process project in the amount estimated or
that the costs incurred will be materially consistent with estimates made. It is
reasonably possible that the development of this technology could fail because
of either prohibitive cost, our inability to perform the required efforts to
complete the technology or other factors outside of our control such as a change
in the market for the resulting developed products. In addition, at such time
that the project is completed it is reasonably possible that the completed
product does not receive market acceptance or that we are unable to produce and
market the product cost effectively.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased from $191,000 in 1997 to $1.8
million in 1998 and to $3.8 million in 1999. The increase each year was due
primarily to the increase in the number of sales and marketing personnel and
related costs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased from $735,000 in 1997 to $1.1
million in 1998 and to $1.7 million in 1999. The increase each year was due in
large part to the increased costs associated with an increase in the number of
general and administrative personnel. The increase from 1998 to 1999 was also
due to increased costs associated with facilities and professional services. The
primary purpose of the increase each year was to support our growing business
activities.
24
<PAGE> 27
STOCK-BASED COMPENSATION
Stock-based compensation expense for 1999 was $1.7 million. There was no
stock-based compensation expense for 1997 or 1998. In 1999 the company incurred
deferred stock-based compensation charges as stock option grants were granted at
prices subsequently deemed to be below fair value on the date of grant.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net includes income on cash
investments partially offset by expenses related to financing obligations.
Interest and other income (expense), net totaled $102,000 of income in 1997,
$2,000 of expense in 1998 and $208,000 of income in 1999. We recognized interest
income in 1997 due to cash balances generated from the proceeds from selling
preferred stock. The recognition of interest expense in 1998 was due to the
incurrence of long-term indebtedness in excess of the interest income earned on
our cash balances. The recognition of interest income in 1999 was due to the
cash balances resulting from our issuance of preferred stock in 1999.
PROVISION FOR INCOME TAX
At December 31, 1999 we had federal and state net operating loss
carry-forwards of approximately $11.4 million and $9.6 million, respectively,
and federal and state credits of approximately $501,000 and $393,000,
respectively, available to offset future regular and alternative minimum taxable
income. The operating loss carry-forwards and credits will expire between 2004
and 2019 if not utilized.
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. If SkyStream should have an ownership change, as defined
by the tax law, utilization of the carryforwards could be restricted.
25
<PAGE> 28
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each of the last six
quarters. The information for each of these quarters is unaudited and has been
prepared on the same basis as the audited financial statements appearing
elsewhere in this prospectus. In the opinion of management, all necessary
adjustments, consisting only of normal recurring adjustments, have been included
to present fairly the unaudited quarterly results when read in conjunction with
our audited consolidated financial statements and the related notes appearing
elsewhere in this prospectus. These operating results are not necessarily
indicative of the results of any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1999 1999 1999 1999
--------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................... $ 335 $ 720 $ 1,030 $ 1,625 $ 2,384 $ 3,479
Cost of revenues............................ 155 257 289 501 774 1,082
------- ------- ------- ------- ------- -------
Gross profit................................ 180 463 741 1,124 1,610 2,397
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.................. 737 865 953 1,048 1,426 1,976
In-process research and development....... -- -- -- -- 101 --
Sales and marketing....................... 467 607 688 809 1,042 1,260
General and administrative................ 270 315 339 419 314 626
Stock-based compensation.................. -- -- 27 90 321 1,262
------- ------- ------- ------- ------- -------
Total operating expenses................ 1,474 1,787 2,007 2,366 3,204 5,124
------- ------- ------- ------- ------- -------
Loss from operations........................ (1,294) (1,324) (1,266) (1,242) (1,594) (2,727)
Interest and other income (expense), net.... 13 (34) (42) 73 105 72
------- ------- ------- ------- ------- -------
Net loss.................................... $(1,281) $(1,358) $(1,308) $(1,169) $(1,489) $(2,655)
======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF REVENUES:
Revenues.................................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................ 46.3 35.7 28.1 30.8 32.5 31.1
------- ------- ------- ------- ------- -------
Gross profit................................ 53.7 64.3 71.9 69.2 67.5 68.9
------- ------- ------- ------- ------- -------
Operating expenses:
Research and development.................. 220.0 120.1 92.5 64.5 59.8 56.8
In-process research and development....... -- -- -- -- 4.2 --
Sales and marketing....................... 139.4 84.3 66.9 49.8 43.7 36.2
General and administrative................ 80.6 43.8 32.9 25.8 13.2 18.0
Stock-based compensation.................. -- -- 2.6 5.5 13.5 36.3
------- ------- ------- ------- ------- -------
Total operating expenses................ 440.0 248.2 194.9 145.6 134.4 147.3
------- ------- ------- ------- ------- -------
Loss from operations........................ (386.3) (183.9) (122.9) (76.4) (66.9) (78.4)
Interest and other income (expense), net.... 3.9 (4.7) (4.1) 4.5 4.4 2.1
------- ------- ------- ------- ------- -------
Net loss.................................... (382.4) (188.6) (127.0) (71.9) (62.5) (76.3)
======= ======= ======= ======= ======= =======
</TABLE>
The $105,000 decrease in general and administrative expenses from the
quarter ended June 30, 1999 to the quarter ended September 30, 1999 was due to a
decrease in professional services expenses and a lower bad debt provision in the
third quarter based on the profile of receivables at that time. The $312,000
increase in general and administrative expenses from the quarter ended September
30, 1999 to the quarter ended December 31, 1999 was due primarily to a
significant increase in costs associated with consulting, recruiting and
professional services, including costs related to the conversion to a new
general ledger accounting system. Interest and other income (expense), net has
fluctuated across quarters as a result of interest earned on cash balances.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. The primary factors that
may affect us include the timing of sales of our source media router
26
<PAGE> 29
products, new product introductions by our competitors and general economic
conditions as well as those specific to the Internet and related industries.
Our revenues and operating results depend upon the volume and timing of
customer orders and the date of product delivery. Historically, a substantial
portion of revenues in a given quarter have been recorded in the third month of
that quarter, with a concentration of these revenues in the last two weeks of
the third month. We expect this trend to continue and, therefore, any failure or
delay in the closing of orders would harm our quarterly operating results.
We plan to increase significantly our operating expenses to fund greater
levels of research and development, expand our sales and marketing operations,
broaden our customer support capabilities and develop new distribution channels.
We also plan to expand our general and administrative functions to address the
increased reporting and other administrative demands, which will result from
being a publicly traded company and the increasing size of our business. Our
operating expenses are largely based on anticipated revenue trends and a high
percentage of our expenses are, and will continue to be, fixed in the short
term. As a result, a delay in generating or recognizing revenue for the reasons
set forth above, or for any other reason, could cause significant variations in
our operating results from quarter to quarter and could result in substantial
operating losses.
Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock may fall.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations primarily through private
sales of convertible preferred stock, with proceeds of $26.6 million, as well as
through capital leases for computers, office equipment, software and furniture.
We used $4.2 million in cash for operations in 1999, a decrease of $716,000
from the $4.9 million used in 1998. The change was attributable to an increase
in our net loss from $5.0 million in 1998 to $6.6 million in 1999 and an
increase in receivables, offset by increased accounts payable, accrued expenses
and non-cash charges in 1999. Cash used in investing activities was $1.6 million
in 1999 whereas we generated $251,000 in cash from investing activities in 1998.
We generated $7.4 million in cash in 1998 and $17.2 million in cash in 1999 from
financing activities, primarily from private sales of convertible preferred
stock. We have used leases to partially finance capital purchases. In 1999, we
spent $313,000 acquiring certain assets of Varuna Software, Inc.
Cash, cash equivalents and short-term investments totaled $14.4 million at
December 31, 1999, up from $3.0 million at December 31, 1998. The increase came
solely from financing activities, offset by cash used in operations, and to a
lesser extent, the purchase of equipment. The increase was primarily due to the
receipt of $17.5 million in proceeds from the sale of preferred stock in March
and June 1999. Our capital requirements depend on numerous factors, including:
- timing and amount of sales of our products;
- market acceptance of our products;
- the resources we devote to developing, marketing, selling and supporting
our products; and
- the timing and extent of establishing international operations.
We expect to devote substantial capital resources to continue our research
and development efforts, to hire and expand our sales, support, marketing and
product development organizations, to expand marketing programs, to establish
additional facilities worldwide and for other general corporate activities.
Although we believe that our current cash balances will be sufficient to fund
our operations for at least the next 12 months, there can be no assurance that
we will not require additional
27
<PAGE> 30
financing within this time frame or that such additional funding, if needed,
will be available on terms acceptable to us or at all.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. FAS No. 133
establishes methods for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because we do
not currently hold any derivative instruments and do not engage in hedging
activities, we expect that the adoption of FAS No. 133 will not have a material
impact on our financial position or results of operations.
In December 1999, the SEC issued SAB 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. Management
believes that the impact of SAB 101 will not have a material effect on the
financial position or results of operations of the Company.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET INTEREST RATE SENSITIVITY
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we have
invested in may be subject to market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. To minimize
this risk, we maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds and government and non-government debt securities. In general, money
market funds are not subject to market risk because the interest paid on such
funds fluctuates with the prevailing interest rate. In addition, we invest in
relatively short-term securities. As of December 31, 1999, all of our investment
were classified as cash and cash equivalents. See Note 2 to the Consolidated
Financial Statements.
28
<PAGE> 31
BUSINESS
OVERVIEW
SkyStream Networks develops and sells a new category of networking products
that enable the Internet to connect with broadcast networks, such as cable,
satellite and digital television networks. This converged network, called the
Broadcast Internet, enhances the delivery of multimedia-rich and other data
intensive content. Our products enable service providers to combine the quality,
scalability and efficiency of broadcast networks with the interactivity and
personalization of the Internet to deliver multimedia-rich content
simultaneously to a large number of users. The Yankee Group, a global market
research firm, forecasts that the market opportunity for equipment that can
enable this combined network will grow to approximately $3.7 billion by 2003,
from virtually nothing in 1998.
We enable the Broadcast Internet through our source media routers, which
aggregate and distribute content across broadcast networks, and edge media
routers, which receive content from broadcast networks and redistribute this
content over the existing Internet infrastructure. We also develop Broadcast
Internet management software that manages content delivery across the converged
network. We produce our source media routers and we currently procure our edge
media routers from an original equipment manufacturer.
Our source media router enables broadcasters to combine Internet content
with their existing video programming through standards based interoperable
interfaces. These media routers also connect to a broad range of proprietary
legacy broadcast equipment as well as non-proprietary standards based equipment.
With our fully interoperable platform, broadcast service providers can quickly
add new revenue generating data services. At the same time, they can lower their
infrastructure costs by purchasing non-proprietary best-of-breed standards based
equipment and connecting it to their network by using our source media router.
Our products are used by broadcast service providers, Internet service
providers, telecommunication service providers and content distribution
providers around the world. With our products, cable, satellite and digital
television broadcasters can use the Broadcast Internet to offer multicast high
speed Internet services, such as live webcasts, streaming audio/video and web
caching, or interactive Internet applications, such as video enhanced e-commerce
and online learning. Internet service providers, telecommunication service
providers and content distribution providers can use our products to leverage
the Broadcast Internet as an additional high speed backbone to deliver
multimedia content closer to the user. Our products have been sold to over 60
end user service providers around the world as of December 31, 1999. Direct and
indirect customers of our products include Cablecom Engineering AG, EchoStar
Communications, iBEAM Broadcasting, Intel, International Datacasting
Corporation, Loral-CyberStar, NAGRA-Kudelski and Pacific Century CyberWorks. We
sell our products through a direct sales force as well as through system
integrators and resellers.
INDUSTRY BACKGROUND
RAPID GROWTH OF THE INTERNET FROM INCREASING USAGE
The Internet has become a global medium for communications, entertainment
and commerce and has changed the way individuals and businesses communicate and
exchange information. The growth of data traffic over the Internet is driven by
a number of factors, including:
- the increase in the number of consumers accessing the Internet on a more
frequent basis;
- the increase in the number of businesses using the Internet not only to
reach customers, but also to conduct business transactions with partners,
vendors and suppliers as well as to support telecommuters;
- the proliferation of new wired and wireless Internet enabled devices;
- the increase in the availability and use of broadband Internet access
services;
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- the proliferation of increasingly complex multimedia-rich content; and
- the emergence of new Internet based applications designed to
simultaneously reach large audiences.
EMERGENCE OF A NEW CLASS OF INTERNET CONTENT
Content on the Internet is evolving rapidly from simple, static web pages
to complex graphics and audio/video streams. Delivery of this new class of
content requires significantly more bandwidth. In addition, while the Internet
has historically been used for e-mail and basic information retrieval, which are
point-to-point exchanges between a user and a host server, new applications are
emerging, such as online learning and live multimedia webcasts, that require the
rich content to reach up to millions of users simultaneously. These applications
require point-to-multipoint exchanges, also known as multicasting. We believe
that as Internet users become more demanding and competition for viewers becomes
more intense, the breadth, complexity and frequency of multicasting rich content
will increase. This emerging content will place further demands on the Internet
infrastructure in terms of bandwidth, scalability and predictability of content
delivery. The following table depicts examples of the traditional Internet
content and the corresponding multimedia-rich, point-to-multipoint content that
is emerging.
[Diagram Depicting The Transition From Traditional Internet Content To Emerging
Internet Content]
INTERNET DESIGN LIMITATIONS FOR EMERGING INTERNET CONTENT
The current Internet infrastructure is not designed to efficiently handle
the delivery of this new multimedia-rich content or to support the multicasting
needs of the emerging applications. Two fundamental design elements of the
Internet create these constraints:
- THE TRADITIONAL INTERNET IS A POINT-TO-POINT NETWORK. The traditional
Internet is built to handle the movement of data from one point to
another using the Internet Protocol, or IP, standard. When the same data
is sent to several locations, it is done by sending additional copies of
that data, separately, on each path that connects the sender to the
individual receivers. As the number of simultaneous receiver locations
increases to the millions, as may be desired for live events, webcasting
and other multicast-based applications, the existing Internet
infrastructure cannot scale to meet the bandwidth demands.
- THE TRADITIONAL INTERNET IS A BEST-EFFORTS NETWORK. The path between each
user's personal computer and the computer that holds the requested
content is a series of interconnected
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computer networks. The content itself is comprised of many data packets
that move from one network to another in a hop-by-hop manner. Not all
networks have the same capacity to carry data and not all devices that
interconnect these networks have the same capacity to process the data at
similar speeds. If any of the intermediate hops experiences congestion,
as is the case when a large number of users tries to access the same
content, some of the data packets can be arbitrarily dropped or delayed.
These errors introduce a degree of unpredictability and unreliability in
content delivery. When the content includes audio and/or video streams,
this loss or delay of data packets can severely impact the listening and
viewing experience for the user.
In recent years, large investments have been made to improve the physical
infrastructure of the Internet and to increase the amount of available
bandwidth. Advances in networking technologies such as gigabit and terabit-speed
routing, optical networking, broadband access, web caching and content
replication have delivered solutions that greatly increase the Internet's
capacity to carry high bandwidth content from point-to-point. However, these
solutions do not address the fundamental need of emerging applications to
deliver multimedia-rich and other data intensive content to a large number of
users simultaneously, in a scalable and predictable manner.
For example, recent attempts to deliver streaming audio and video content
over the Internet to many listeners and viewers simultaneously, such as the
Victoria's Secret webcast, the NetAid concert webcast, the "Star Wars: The
Phantom Menace" movie trailer release and the Super Bowl 2000 webcast,
experienced significant difficulties in delivering a uniform and high quality
experience. In the aftermath of each of these attempts, it was widely reported
in the press that many Internet users could not gain access to the content and
that those who did gain access received poor quality and unsynchronized audio
and video.
The current Internet infrastructure is designed to facilitate interactivity
and communications between users in a network we refer to as the Transaction
Internet. The Transaction Internet experiences particular congestion when
delivering this event based or streaming content over the traditional Internet
infrastructure.
[Diagram depicting data flow in the Transaction Internet]
As a result of the Transaction Internet's inability to deliver high
quality, rich content to a large number of end users simultaneously in a
predictable manner, many content and application developers are electing to
create simplified versions of their content. In addition, after being frustrated
by their past attempts to download multimedia-rich content, Internet users may
limit their future viewing of such content.
BROADCAST NETWORKS -- OPTIMIZED FOR MULTICASTING RICH CONTENT
Unlike the Transaction Internet, broadcast network infrastructures have
been built to optimize the one way transmission of rich content to large numbers
of users in a predictable, reliable and scalable manner. Traditional broadcast
networks, including television, cable and satellite networks, have been
explicitly designed over the last 50 years to deliver high quality, synchronized
audio and video content
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to large populations of listeners and viewers. In addition, over the last five
years many of these networks have migrated from analog to digital transmission
systems, thus greatly enhancing their ability to carry new types of digital
content. The ability to offer Internet enhanced broadcast content would create
incremental revenue opportunities for the service providers that own and operate
these networks. However, broadcast service providers face enormous technological
challenges in extending their networks' capability to deliver traditional
broadcast content as well as Internet content. One such challenge is
broadcasters' need to find bandwidth to offer Internet services in addition to
their traditional broadcast content, which typically consumes substantially all
of their available bandwidth. Current digital broadcast technology is unable to
offer broadcasters the full use of their transmission bandwidth. As a result,
typically between two and ten percent of their available bandwidth goes unused,
filled instead with empty place holders called null packets.
BROADCAST NETWORKS DESIGN LIMITATIONS FOR DELIVERING INTERNET CONTENT
The current digital broadcast network infrastructure is not designed to
efficiently handle the delivery of Internet content. These limitations are a
result of two fundamental issues related to broadcast networks:
- BROADCAST NETWORKS ARE NOT INTERACTIVE. Digital broadcast service
providers typically operate networks that are optimized for the one way
transmission of television oriented services using the Moving Picture
Experts Group, or MPEG, standard. The traditional broadcast networks have
only very limited ability to integrate data seamlessly into their current
audio/video streams. In addition, traditional broadcast networks are not
interactive because they only offer a one way channel of content delivery
and generally lack a return path for data communications from users.
- BROADCAST NETWORKS ARE DOMINATED BY LEGACY EQUIPMENT AND
SERVICES. Current broadcast networks are built using systems that are
predominantly closed and proprietary. These systems limit broadcast
service providers' ability to use best-of-breed equipment to offer new
services. Furthermore, broadcast service providers have an installed base
of equipment, which limits the change they can make to their networks and
requires any incremental changes to be completely compatible with their
existing equipment and services. Also, in the short run, because end
users expect near perfect service reliability, broadcast service
providers cannot afford to turn off on-going services in order to turn on
new Internet based services.
THE NEED FOR A BROADCAST CAPABLE INTERNET
While the Internet presents users with great flexibility to experience data
services in a fully interactive manner, the existing Transaction Internet
network is not designed to support simultaneous content delivery to multiple
users. The broadcast network infrastructures, conversely, are capable of
delivering high quality video programming to many users simultaneously, but
these networks are not designed to provide interactivity to enrich the users'
experiences. A new category of networking products is therefore required to
overcome the challenges facing both the Internet and broadcast networks. These
products would enable broadcast networks to be connected with the Internet,
creating the Broadcast Internet that seamlessly combines the powerful benefits
of each network.
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THE SKYSTREAM NETWORKS SOLUTION
The SkyStream Networks solution combines the efficiency, scalability and
performance of broadcast networks with the interactivity and personalization of
the Internet. Our products and technology enable broadcast networks to connect
with the Internet, creating the Broadcast Internet, which offers a cost
effective, reliable and seamless path for multimedia-rich content to be
delivered to traditional Internet service providers and end users. By enabling
the Broadcast Internet, our solution allows content to be delivered across
multiple paths, as the diagram below depicts.
[Diagram depicting data flow in the Broadcast Internet]
Our products include a new category of interoperable high-performance
networking products known as media routers and sophisticated software that
manages Internet content and services through the Broadcast Internet. Cable,
satellite and digital television broadcasters can use our products to offer
multicast high speed content or interactive Internet applications. With our
products that use the MPEG standard, broadcasters can combine digital video
streams based on MPEG and data based on IP in a cost effective and seamless
manner for content transmission over the Broadcast Internet. Internet service
providers, telecommunications service providers and content distribution
providers can utilize our solution as an incremental high speed backbone to
deliver content and services to the end user.
The key benefits of our solution are:
- SCALABLE AND PREDICTABLE CONTENT DELIVERY. Our source media routers and
software are capable of delivering rich Internet content to a very large
number of locations, which could include service providers and end users,
across broadcast networks in a scalable manner.
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Because our solutions typically use the broadcast network for delivery,
the amount of bandwidth required to broadcast a specific set of content
with our products is fixed, irrespective of the number of receiving
locations. Our solutions eliminate congestion, arbitrary packet loss and
delay variances that may otherwise occur when the same content is
delivered to the same locations over the point-to-point best-efforts
Internet network.
- SEAMLESS INTEROPERABILITY WITH EXISTING EQUIPMENT. Our source media
routers and software are purpose-built to be seamlessly inserted into a
service provider's existing network and to interoperate with all industry
standard digital video and Internet infrastructure equipment, including
network management, subscriber management, digital video multiplexing and
encryption systems. Our solutions enable broadcasters to use their
existing equipment along with new multiple vendor and best-of-breed
broadcast and Internet equipment, thus reducing future equipment costs
and protecting their capital investment in existing equipment. Further,
our products seamlessly merge Internet and broadcast content for delivery
over broadcast networks, without affecting the quality of the underlying
audio, video or Internet data being transmitted.
- BANDWIDTH OPTIMIZATION. Our source media routers and software enable
broadcast networks to provide the high bandwidth capacity needed to
handle a full range of emerging multimedia-rich content in a secure
environment. In addition, through our null packet optimization
technology, our products enable the broadcaster to harvest significant
amounts of otherwise unavailable broadcast bandwidth.
By enabling an interoperable Broadcast Internet, our solutions offer
compelling new Internet content delivery opportunities. We believe that web site
owners will quickly adapt to the availability of significant additional high
quality network capacity by including more full motion video, high quality audio
and photo quality graphics in their web sites and services. In addition, our
solutions make it possible for service providers to offer new interactive and
personalized services and thereby profit from incremental revenues without
making fundamental changes to their infrastructures.
Customer applications of our SkyStream solutions can include the following:
SATELLITE DIRECT-TO-HOME SERVICE PROVIDER: Satellite service providers that
deliver subscription based television services via satellite to their customers
can efficiently and securely provide Internet content or programming with our
solutions. This enhanced content is typically viewed by end users through a
television set with a digital set top box or through a personal computer.
SATELLITE CONTENT DISTRIBUTION SERVICE PROVIDER: Satellite service
providers can deliver multimedia-rich IP and MPEG based programming to other
service providers with our solutions by bypassing the congestion points of the
traditional Internet. This content then may be immediately distributed over the
Internet infrastructure as requested by end users, or it may be cached and held
until requested at a later time.
CABLE SERVICE PROVIDER: Our interoperable solutions allow service
providers to create open architecture systems that enable the use of
best-of-breed equipment and software, while adding a key integration point for
high speed data services. For example, cable service providers use our solutions
to improve multimedia-rich content delivery to digital set top basics and cable
modems while interoperating with existing equipment, such as video encoders,
multiplexers and security systems.
OVER-THE-AIR DIGITAL TELEVISION BROADCASTER: With our solutions,
over-the-air digital television broadcasters can insert Internet content into
their broadcast networks, simultaneously distribute television and Internet
content over their network and enable the reception of the content by end users
with digital television receivers and personal computers.
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SKYSTREAM STRATEGY
Our objective is to become the leading global provider of hardware and
software solutions that deliver Internet and broadcast media content over the
Broadcast Internet in an efficient, predictable and scalable manner. The key
elements of our strategy are to:
EXTEND OUR LEADERSHIP IN ENABLING THE BROADCAST INTERNET. We have developed
products that merge the traditional Internet with broadcast networks, creating a
combined medium called the Broadcast Internet that is optimized for multiple
types of content. We intend to apply our early market leadership position,
differentiated technology and customer focus to build solutions that expand the
efficiency, performance and accessibility of the Broadcast Internet.
CREATE AND ENHANCE AN OPEN PLATFORM FOR THE BROADCAST INTERNET. Our
products are fully interoperable with all industry standard networking and
broadcast equipment and create an integration point for IP and MPEG based
content using industry standards. Our open platform enables the users of our
products to seamlessly integrate and deliver content securely over cable,
satellite and digital television networks. We will continue to develop products
that are interoperable with new and legacy equipment. We will also strive to
lead the adoption of industry standards.
DRIVE BROADCAST INTERNET ADOPTION ACROSS A BROAD RANGE OF INDUSTRY
SEGMENTS. Our products are used by broadcast service providers, Internet service
providers, telecommunication service providers and content distribution
providers around the world. We believe that our products represent a compelling
value proposition that is applicable to every multicast or broadcast stream
delivered over service provider networks. To further penetrate our target
markets and increase awareness of our solutions across a range of customers, we
intend to expand our global direct and indirect sales and distribution channels.
We also plan to educate and support content developers to purpose-build content
for the Broadcast Internet in order to increase demand for our solutions across
existing and new customer segments.
LEVERAGE AND EXPAND BROADCAST INTERNET RELATIONSHIPS. We have established
relationships with many of the leading broadcast and Internet equipment vendors
that service the Broadcast Internet. We believe a broad range of relationships,
including those we have with General Instrument, Lucent Technologies and Real
Networks, will further facilitate end-to-end delivery of content and value added
services across the Broadcast Internet. We believe these relationships are also
important to extend our open platform. We plan to leverage and expand existing
and new relationships to extend our leadership in enabling the Broadcast
Internet.
OFFER A COMPELLING VALUE PROPOSITION TO OUR CUSTOMERS. As our interoperable
media routers and software are deployed throughout our customers' networks, we
believe that our customers can introduce new broadcast and Internet services and
generate incremental revenues. At the same time, with our fully interoperable
architecture, our customers can lower costs by utilizing our null packet
optimization technology to harvest otherwise wasted bandwidth and by integrating
existing legacy equipment with best-of-breed components from their suppliers of
choice. We will continue to work closely with our customers to identify, enhance
and develop solutions that increase revenue generating opportunities and lower
infrastructure costs by reducing dependence on proprietary systems.
PRODUCTS
We develop and sell source media routers and software that allow rich
Internet content to be broadcast to millions of users simultaneously, securely
and with low latency across existing broadcast networks. Our flagship product
line of source media routers, the DBN series, enables cable, satellite and
digital television broadcasters to add IP data broadcast services to their
existing programming by inserting IP data into their MPEG transmission streams.
We also provide edge media routers that enable Internet service providers and
telecommunications service providers to remotely receive Internet protocol data
services from broadcasters and deliver them throughout their networks. Our
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family of Broadcast Internet management software enables broadcasters to
aggregate, schedule and broadcast web and data services, or channels, to a
target set of receiving locations on their network.
A simplified diagram of the placement of source media routers and edge
media routers in the Broadcast Internet network is shown below:
[Diagram depicting placement of source media routers and edge media routers in
the Broadcast Internet network]
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SOURCE MEDIA ROUTERS
Our source media routers inject IP data into MPEG streams for broadcast
over cable, satellite, and digital television systems. Source media routers are
segmented by function as well as by market segment served, as summarized in the
table below:
[Table depicting market served and function of media routers]
Our source media routers are typically deployed in a rack at the service
providers' network transmission point such as a satellite uplink or cable
headend facility. Our source media router line of products is sold as a
complete, integrated solution that does not require any additional hardware or
software to integrate with a broadcaster's uplink network. In addition to our
standard features, we sell upgrade hardware and software features such as IP
Quality of Service and fixed key conditional access security to improve services
or performance in the delivery of IP channels. List prices for our source media
routers range from approximately $36,000 to $55,000 per unit depending on
product series and configuration. Each source media router is typically deployed
in the network with a fully redundant second unit.
EDGE MEDIA ROUTERS
Our edge media routers are typically deployed at remote network reception
points such as the Internet service provider, CLEC or cable headend facility.
Our edge media router products are capable of remotely receiving and routing
broadcast data content, typically originating from a SkyStream source media
router, and routing content through either the existing Internet access network
or directly to a corporate end user via a local area network. The edge media
router is typically situated in a rack in a service provider's facility. Each
edge media router is typically configured to receive content from a specific
Broadcast Internet service provider. Therefore, multiple edge media routers may
be located at a single reception point to enable multiple Broadcast Internet
services. List prices for our edge media routers range from approximately $3,500
to $5,000 per unit depending on feature configuration. We currently procure our
edge media routers from an original equipment manufacturer and market and
support them as a SkyStream branded products.
BROADCAST INTERNET MANAGEMENT SOFTWARE
Our Broadcast Internet management software enables service providers to
easily and effectively manage the collection, preparation and broadcast of
Internet content. Our software also enables a Broadcast Internet service
provider to offer a customizable program guide for its programming and content
delivery schedule. The suite of software includes integrated server software
modules for the service provider facility and client modules for the receiving
locations.
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SERVER SOFTWARE. Our server software collects, schedules and broadcasts the
web channels and an associated program guide over the network. Our server
software allows service providers to set up the web channels for delivery to a
targeted audience on the network. The server software is offered in three
versions ranging from an evaluation version to a professional version that
contains all of the software features and functionality at a list price of
approximately $40,000. Our server software is sold separately from our source
media routers.
CLIENT SOFTWARE. Our client software that selects, receives and caches
content for delay-free viewing is used in conjunction with the server software
to efficiently manage the collection of Broadcast Internet content at the user's
receiving device. Client software is available in two primary formats: a service
provider version and a consumer version. The service provider client software is
used in conjunction with edge media routers and enables service providers to
manage and filter the Broadcast Internet content being distributed. This content
can be cached and delivered to the Internet service provider's customers over
existing Internet networks. The consumer client software version resides on the
consumer's client device such as a personal computer or a set top device. This
software allows the end consumer to browse and select specific Broadcast
Internet content. Both versions of the client software come with a customizable
program guide that lists web content available for viewing or caching. The
service provider client software is licensed on a per installation basis at a
list price of approximately $2,500 and the consumer client software is licensed
on a per device basis either to the manufacturer of the consumer's client device
or to the consumer.
SKYSTREAM CUSTOMERS
As of December 31, 1999, the following customers had purchased more than
$100,000 from SkyStream:
<TABLE>
<CAPTION>
RESELLERS
DIRECT CUSTOMERS (PRIMARY END USER(S) OF RESELLER)
---------------- -----------------------------------------------
<S> <C>
Cablecom Harris Corporation (Granite Broadcasting
Corporation)
EchoStar Communications Ideal Systems (Mentor Data Systems)
Geocast International Datacasting Corporation (Loral-
Cyberstar/Telefonica)
GV Broadcasting Miralite Communications (State University of
New York)
iBEAM Broadcasting NAGRA-Kudelski (Polsat)
Intel Corporation Radyne Comstream (Reuters)
Pacific Century CyberWorks Scientific-Atlanta (Pacific Century CyberWorks)
</TABLE>
The primary end user(s) for each reseller accounted for more than 40% of
sales to that reseller. As of December 31, 1999, we had sold over 300 source
media routers. In the year ended December 31,1999, EchoStar Communications
accounted for approximately 38% of our revenue, International Datacasting
Corporation accounted for approximately 12% of our revenue and Cablecom
accounted for approximately 10% of our revenue.
Representative examples of how our customers use our products are set forth
below.
SATELLITE DIRECT-TO-HOME SERVICE PROVIDER
An affiliate of EchoStar Technologies Corporation delivers subscription
based satellite digital television programs to millions of home and business
viewers around the United States. In developing their current generation digital
uplink, EchoStar was looking for a way to create an interoperable architecture
that integrated their existing video equipment with a secure access system. By
using SkyStream's DBN-26 source media router, EchoStar can integrate
best-of-breed components from
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different suppliers into an open architecture instead of limiting itself to
vendors providing only proprietary interfaces. Placed as the last digital
gateway before the content is broadcast, the DBN-26 source media router
scrambles video programming and inserts tables for controlling the look and feel
of the Dish Network service. EchoStar's selection of the DBN-26 source media
router will enable them to significantly lower their uplink infrastructure costs
through its interoperable architecture.
SATELLITE CONTENT DISTRIBUTION SERVICE PROVIDER
iBEAM Broadcasting has developed an Internet Broadcast Network that is
optimized for the delivery of streaming media. The mission of iBEAM Broadcasting
is to bring the fidelity, scale, and efficiency of traditional broadcasting to
the Internet. iBEAM's advanced networking architecture creates similar
efficiencies to traditional broadcasting by harnessing the point-to-multipoint
power of satellite broadcasting and combining it with the interactivity of the
Internet. By selecting SkyStream's DBN-26 source media router to distribute
point-to-multipoint satellite broadcasting of Internet content to their
intelligent iBEAM servers located at the "edge" of the Internet, iBEAM was able
to create a worldwide network to deploy rich, streaming video and audio content
to Internet service providers' around the world. The DBN-26 source media router
also scrambles the content to secure the delivery to its authorized customers.
Effectively, SkyStream enables iBEAM to expand rapidly to global locations
without customizing its equipment to adhere to proprietary and closed satellite
systems.
CABLE SERVICE PROVIDER
Cablecom is a leading cable company in Switzerland, supplying digital
cable-based television programming to over 1.5 million households. In building
its architecture, Cablecom was looking to find a way to utilize broadcast
equipment from a broad group of suppliers who had never previously integrated
their equipment together. Furthermore, the company wanted to build a next
generation architecture that allowed them to leave as an option the ability to
add different video and secure access equipment, as well as IP data services
without having to perform extensive re-engineering each time they wanted to add
a new product from a new supplier. The DBN-26 source media router is integrated
into each of Cablecom's headend facilities at the integration point for MPEG
video, IP Data and secure scrambling systems. Cablecom's selection of the DBN-26
source media router allowed them to move beyond a proprietary architecture and
integrate new services using best-of-breed equipment suppliers.
OVER-THE-AIR DIGITAL TELEVISION BROADCASTER
Granite Broadcasting Corporation is a television broadcaster that operates
nine television stations in geographically diverse markets, reaching almost 7.0%
of the nation's television households. In the process of creating their digital
television transmission system, Granite needed to outfit their architecture with
the ability to add IP data streams to their network, without causing any
interruption to their video programming equipment. Granite purchased our DBN-35
source media router and Broadcast Internet management software, which are
private labeled to Harris Corporation and sold under the brand name DataPlus,
for their two flagship San Francisco Bay area based stations. The DBN-35 source
media router enables Granite to add real time streaming IP content to their
digital television transmission, allowing Granite to create numerous new revenue
opportunities for digital television stations in the future.
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TECHNOLOGY
We believe our unique product architecture and technology is designed to
optimize content delivery across the Broadcast Internet and provides us with a
fundamental competitive advantage. We also believe our differentiated technology
has positioned us to efficiently develop and offer future next-generation
products. The following are key components of our differentiated technology
platform:
UNIQUE PRODUCT ARCHITECTURE. Our source media routers are purpose-built for
the reliable, high-performance delivery of content across the Broadcast
Internet. Our source media router includes MPEG transport stream interface
hardware that provides wire-speed MPEG transport packet pre-processing,
filtering, time stamping and wire-speed MPEG transport packet scrambling. Our
source media router software handles the MPEG streams on a packet-by-packet
basis, thus enabling maximum control over the identification, modification,
routing and re-multiplexing of individual packets and flows within the transport
stream. Our purpose-built hardware and software is designed to achieve high
levels of reliability as a result of system level redundancy for MPEG stream
handling, IP data processing and conditional access processing. This system
level redundancy supports continuous operation and provides protection from
single points of failure in the broadcast transmission chain.
MULTI-VENDOR INTEROPERABILITY. Our solutions offer flexibility and are
interoperable with numerous types of equipment from a broad range of vendors.
This interoperability is achieved with our products through the implementation
of standards-based interfaces and protocols, where applicable. Our source media
routers implement the standards for MPEG transport interfaces, IP encapsulation
formats, and conditional access interfaces, as specified by national and
international standards setting bodies such as Digital Video Broadcasting,
American Television Standards Committee, Society of Motion Pictures and
Television Engineers and Internet Engineering Task Force. Our source media
routers also interoperate with popular but non-standard broadcast equipment. For
areas of inter-system interaction where standards do not exist or apply
directly, our source media routers implement a common messaging architecture to
facilitate communication with third-party conditional access, traffic, control
and scheduling systems.
BANDWIDTH MANAGEMENT. Our null packet optimization technology is integrated
into our source media routers and can be applied to reclaim lost and unused
bandwidth on a broadcast network. As a consequence of the inherent
inefficiencies of current MPEG compression and multiplexing technologies,
typically between two to ten percent of the broadcast network bandwidth is
wasted and becomes unavailable to the broadcast service provider. This bandwidth
can be used effectively to add new Internet content-based services.
KEY PRODUCT LOCATION IN THE NETWORK. Our source media routers are installed
at the egress point of each broadcast transmission chain, creating a new point
of integration for MPEG streams, conditional access and IP data. This capability
provides the broadcast service provider tremendous flexibility for network
expansion as well as additional new services, enhanced existing services with
new data elements and tiered services. In addition, our edge media routers work
in conjunction with our source media routers to enable the easy rollout of value
added services. Furthermore, our edge media routers facilitate other content
delivery solutions, such as web caching, which move content closer to the edge
of the network and continue to enhance performance and speed of content
delivery.
END-TO-END CONTENT DELIVERY MANAGEMENT. Our Broadcast Internet management
software provides a complete data delivery solution for our customers and end
users. Because specific software is provided for both the server and the end
user's device, content may be both pushed and pulled through the Broadcast
Internet. The broadcast service provider can create, schedule, announce and
manage the delivery of multicast Internet content of any type to any number of
users. The subscribers of such services are able to personalize the reception of
these services and receive them in a seamless manner.
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SALES & MARKETING
We sell and market our products worldwide through our direct sales force
and multiple indirect channels.
DIRECT SALES. Our direct sales efforts have been primarily focused on
satellite, digital television and cable broadcasters. For the year ended
December 31, 1999, direct sales accounted for approximately 82% of our revenue.
Our direct sales organization consisted of a total of eleven people as of
February 29, 2000. We have sales offices in Mountain View, California; Atlanta,
Georgia; and London. We plan on hiring a significant number of sales personnel
as we expand our direct sales force around the world.
INDIRECT SALES. We have entered into an original equipment manufacturer
agreement with Harris Corporation, a leading supplier of broadcasting equipment
to the television broadcast market. Harris Corporation is the largest
manufacturer of digital television equipment in the United States. In addition,
we have reseller agreements with International Datacasting Corporation, Miralite
Communications and distribution agreements with distributors in Australia and
Japan. We also have selling relationships with large equipment suppliers who
purchase our products for integration into a complete system which are then sold
to service providers. These companies include Radyne Comstream, General
Instrument, Lucent Technologies, NAGRA-Kudelski and Scientific-Atlanta.
MARKETING. Our product marketing and marketing communications specialists
develop and implement specific marketing strategies for our products. Our
marketing organization is responsible for product feature and schedule
definition, sales and channel support, product presentations, documentation and
pricing, and business development. Our marketing organization also performs
activities such as marketing communications, marketing research, web site
management, public relations, advertising and trade shows. There were eight
employees in the marketing department as of February 29, 2000.
SUPPORT SERVICES
We offer a set of integration and support services to our customers. Our
customers receive support from the sales process through installation and during
on-going operation. Our customers generally purchase one year of our SkySupport
customer service program when purchasing our products. As of February 29, 2000,
our technical support team consisted of six professional staff. These employees
offer 24 hour phone support seven days per week to our customer base worldwide.
They are trained to answer most technical questions by phone, however, they may
also perform on-site support visits. This group also provides training courses
for our customers and partners.
MANUFACTURING
Our manufacturing operation is entirely outsourced to Pemstar, a contract
manufacturer. Pemstar, located in San Jose, California, is an established
contract manufacturer with ISO 9001 certification. This subcontracting
arrangement includes material procurement, board level assembly, final assembly,
test and shipment to our customers. We do not have a written agreement with
Pemstar, except on a purchase order basis. Pemstar is not obligated to provide
us with specific quantities or prices. We utilize automated design,
manufacturing and test processes to minimize cycle times and improve product
quality. We design and implement all of the tests that are required to meet
internal and external quality standards, and routinely monitor product quality
via on-site inspections. This arrangement provides us with the following
benefits:
- we operate without dedicating substantial space to manufacturing
operations;
- we conserve a significant portion of the working capital that would be
required for funding inventory; and
- we can more easily adjust manufacturing volumes to meet changes in
demand.
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<PAGE> 44
We provide product demand forecasts to Pemstar approximately three months
prior to scheduled delivery of products to our customers. A combination of
standard parts and components are used, which are generally available from more
than one vendor.
If Pemstar's manufacturing capacity becomes constrained and they are unable
to provide us with adequate supplies of high-quality products, we may be unable
to fulfill customer orders. As a result, our relationships with our customers
could suffer and our sales could be harmed. Because we sell a large percentage
of our source media router products at the end of each fiscal quarter, Pemstar's
manufacturing capacity could become constrained by our placing a large volume of
orders at one time. Although Pemstar has other manufacturing facilities in
Minnesota, the Netherlands, Mexico, China, Singapore and Thailand, transitioning
production to any of those facilities on a rush basis could cause a significant
delay in our production schedule. In addition, if our business grows, Pemstar
may lack the ability to scale its operations to accommodate our future needs.
As of February 29, 2000, we employed six people in our manufacturing group.
RESEARCH AND DEVELOPMENT
We believe that strong product development capabilities are essential to
our strategy of enhancing our core technology, developing additional
applications that incorporate that technology, and maintaining the
competitiveness of our product and service offerings. We are utilizing our
development experience and our first generation source media router hardware and
software to develop additional media routing and multiplexing capabilities to
target the next generation technology and product needs of our customers. We
continue to expand the functionality of our current generation products to
improve performance and scalability, and to provide an enhanced management
interface. Our research and development department is organized into teams that
work in parallel on several projects.
Our research and development process is driven by the availability of new
technology, market demand and customer feedback. We have invested significant
time and resources in creating a structured process for undertaking all product
development projects. This process involves all functional groups and all levels
within the company. Following an assessment of market demand, our research and
development team develops a full set of comprehensive functional product
specifications based on inputs from the product management and sales
organizations. This process is designed to provide a framework for defining and
addressing the steps, tasks and activities required to bring product concepts
and development projects to market.
As of February 29, 2000, we employed forty-four people in our research and
development group. Our research and development expenses totaled $5.4 million
for the year ended December 31, 1999.
COMPETITION
The Broadcast Internet is new and rapidly evolving, and we expect this
market to become highly competitive in the future. We anticipate that other
companies will expand into our market in the future, and introduce competitive
products. We also face indirect competition from public and private companies
providing products that attempt to solve similar broadcast and Internet network
problems to those that our products address. The development of alternative
solutions to broadcast and Internet network problems by competitors,
particularly systems companies who also manufacture components, could
significantly limit our growth. We compete on the basis of the performance,
architecture, functionality and price of our products as well as our level of
customer service.
The Internet infrastructure market has historically been dominated by
companies such as Cisco Systems, Lucent Technologies and Nortel Networks. The
broadcast network equipment market has historically been dominated by companies
such as General Instrument, Harmonic and Scientific-Atlanta. These are large
public companies that have longer operating histories and significantly greater
financial, technical, marketing and other resources than we have. As a result,
these companies
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<PAGE> 45
are able to devote greater resources to the development, promotion, sale and
support of their products. In addition, our competitors that have large market
capitalizations or cash reserves are much better positioned than we are to
acquire other companies that may have new technologies or products that may
displace our product lines. Any of these acquisitions could give our competitors
a strategic advantage. In addition, we believe that the Broadcast Internet
industry is likely to encounter consolidation in the future. Such consolidation
could lead to the formation of more formidable competitors.
Many of our potential competitors have significantly more established sales
and customer support organizations than we do. In addition, many of our
competitors have much greater name recognition and have more extensive customer
bases, better developed distribution channels and broader product offerings than
our company. These companies can use their customer bases and broader product
offerings and adopt aggressive pricing policies to gain market share. We expect
to encounter potential customers that, due to existing relationships with our
competitors, are committed to the products offered by these competitors. As a
result, these potential customers may not consider purchasing our products.
In addition, a number of private companies have developed products to
address problems similar to those our products address. With respect to our
source media router products, our competitors include Logic Innovations,
Harmonic and Thomcast. We currently procure our edge media routers from
BroadLogic, an original equipment manufacturer, on a purchase order basis.
BroadLogic also sells a similar product under their own name, which could result
in our competing with BroadLogic for the same customers. With respect to our
edge media router products, our competitors include Harmonic and Viacast
Networks, Inc. With respect to our Broadcast Internet management software, we
believe that we may encounter competition from The Fantastic Corporation,
KenCast, NDS Group plc and Starburst Software.
Existing and potential customers are also our potential competitors. These
customers may develop or acquire additional competitive products or technologies
in the future, which may cause them to reduce or cease their purchases from us.
As a result of these factors, we expect that competitive pressures may
result in lower prices, reduced margins and loss of market share.
INTELLECTUAL PROPERTY
Our success and ability to compete are substantially dependent upon our
internally developed technology and know how. We have filed eleven patent
applications to date. Our engineering teams have significant expertise in
ensuring interoperability among industry standard video and IP protocols and
proprietary video compression and security standards. Our null packet
optimization technology, which is a core feature of most of our source media
routers, was developed internally and is the subject of one of our patent
applications.
While we rely on patent, copyright, trade secret and trademark law to
protect our technology, we also believe that factors such as the technological
and creative skills of our personnel, new product developments, frequent product
enhancements and reliable product maintenance are essential to establishing and
maintaining a technology leadership position. There can be no assurance that
others will not develop technologies that are similar or superior to our
technology.
Our success will depend upon our ability to obtain necessary intellectual
property rights and protect our intellectual property rights. We cannot be
certain that we will be able to obtain the necessary intellectual property
rights or that other parties will not contest our intellectual property rights.
We currently license certain MPEG-related patented technology. These licenses
can be terminated at any time. If any of these licenses are terminated we may be
unable to enter into alternative licenses on a timely basis and on acceptable
terms.
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EMPLOYEES
As of February 29, 2000, we had a total of 97 employees, 88 of whom were
based in the United States. Of the total, 44 were engaged in research and
development, 25 were engaged in sales, marketing and customer support, 10 were
engaged in operations, and 18 were in administration and finance. None of our
employees is subject to a collective bargaining agreement and we believe that
our relations with our employees are excellent.
FACILITIES
As of December 31, 1999, our principal administrative, sales, marketing and
research and development facility occupied approximately 22,000 square feet in
Mountain View, California. In February 2000, we entered into a lease agreement
for approximately 46,000 square feet in Sunnyvale, California and plan to move
our principal administrative, sales, marketing and research and development
facility there in the third quarter of 2000. We have sales offices in Atlanta
and London. We have a software development team located in Thunder Bay, Ontario.
ADVISORY BOARD
We have assembled an Advisory Board composed of industry experts to review
our products and provide specific feedback in technology applications and
business market focus. Our Advisory Board meets semi-annually. Members of the
Advisory Board are John D. Abel, Vice President, Business Development of GeoCast
Network Systems, Inc.; Martin Dunsmuir, General Manager, Emerging Technologies
of RealNetworks; Thomas C. Jacobson, Founder and Consultant of T.C. Jacobson &
Associates; Richard Johnson, Vice President of Advanced Development of EchoStar
Communications Corporation; and Roland N. Noll, Founder and Consultant of R2
Technologies.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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<PAGE> 47
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information with respect to our executive
officers and directors as of the date of this prospectus.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James D. Olson.............. 49 President, Chief Executive Officer and Director
Susan Ketcham............... 44 Vice President of Finance, Chief Financial Officer,
Treasurer and Secretary
Chandrasekharan 41 Vice President of Engineering and Chief Technology
Nilakantan................ Officer
Clint Chao.................. 37 Vice President of Marketing
Daniel W. Riordan........... 37 Vice President of Sales
David Olson................. 50 Vice President of Operations
Roger E. George............. 34 Vice President of Legal Affairs and General Counsel
Valerie Wilson.............. 32 Vice President of Business Development
Wendell G. Van 55 Director
Auken(1)(2)...............
James Ramo(1)............... 53 Director
Geoffrey Y. Yang(2)......... 40 Director
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
JAMES D. OLSON has served as President, Chief Executive Officer and
director of SkyStream since July 1997. From May 1996 to July 1997, Mr. Olson was
Senior Vice President and General Manager of the Wide Area Network Operations of
3Com Corporation, a supplier of networking products. From September 1974 to May
1996, Mr. Olson held various positions with the Hewlett-Packard Corporation,
most recently as general manager of the Video Communications Division. Mr. Olson
holds a BSEE degree from the University of California, Davis and MSEE and MBA
degrees from Santa Clara University.
SUSAN KETCHAM has served as Chief Financial Officer of SkyStream since
January 2000 and as Vice President of Finance since June 1998. Ms. Ketcham
served as Director of Finance from October 1997 to June 1998. From February 1996
to September 1997, Ms. Ketcham served as Director of Finance with Target
Therapeutics, Inc., a medical device company acquired by Boston Scientific in
1997. From February 1992 to February 1996, Ms. Ketcham held various financial
management positions with Sybase, Inc., a database software provider, most
recently as Controller of the Customer Service Division. Ms. Ketcham holds a BA
degree in American History from Tufts University, an MBA degree from the Wharton
School and is a Certified Financial Analyst. Ms. Ketcham also serves on the
board of directors of KQED, a local public television station.
CHANDRASEKHARAN NILAKANTAN has served as Vice President of Engineering and
Chief Technology Officer of SkyStream since January 2000. Mr. Nilakantan served
as Vice President of Manufacturing and Engineering from March 1998 to January
2000. From January 1988 to February 1998, Mr. Nilakantan served in various
positions with 3Com Corporation, most recently as Vice President and General
Manager of the Enterprise WAN Division. Mr. Nilakantan holds a BSEE degree from
IIT, Madras, India and a MS degree in Engineering Management from Santa Clara
University.
CLINT CHAO has served as Vice President of Marketing of SkyStream since
November 1998. Mr. Chao served as Vice President of Marketing and Sales of
SkyStream from May 1998 to November 1998. From April 1990 to April 1998, Mr.
Chao held various positions with C-Cube Microsystems Inc., a digital video
compression technology company, most recently as Senior Director of Marketing
for the PC/CODEC Division. From December 1984 to April 1990, Mr. Chao held
various sales management
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positions with Motorola Inc.'s Semiconductor Products Sector. Mr. Chao holds a
BS degree in Electrical Engineering and Computer Sciences from the University of
California, Berkeley.
DANIEL W. RIORDAN joined SkyStream in November 1998 and has served as Vice
President of Sales since that time. From November 1997 to November 1998, Mr.
Riordan was Vice President of Sales and Marketing at Telcom Semiconductor, a
manufacturer of analog communications integrated circuits. From May 1994 to
November 1997, Mr. Riordan was the director of North American Sales at C-Cube
Microsystems, Inc. Mr. Riordan holds a BSEE degree from California Polytechnic
University in San Luis Obispo and an MBA degree from the University of Phoenix.
DAVID OLSON joined SkyStream in November 1999 and has served as Vice
President of Operations since that time. From May 1996 to June of 1999, Mr.
Olson served in various positions with Avid Technology, a developer of software
and systems for creating and manipulating digital media content, most recently
as Senior Vice President and General Manager of the Broadcast News Division.
From January 1997 to December 1997, Mr. Olson served as Senior Vice President of
Worldwide Operations and Chief Operating Officer of Digidesign, a division of
Avid Technology. Mr. Olson served as Senior Vice President of Worldwide
Operations of Avid Technology from May 1996 to January of 1997. From August 1991
to May of 1996, Mr. Olson served as Vice President of Operations of Digidesign,
which was subsequently acquired by Avid Technology. Mr. Olson holds a BA degree
in History and Humanities and an MA degree in History from the University of
Minnesota and an MBA degree from the Harvard Graduate School of Business
Administration.
ROGER E. GEORGE joined SkyStream in February 2000 and has served as Vice
President of Legal Affairs and General Counsel since that time. From May 1995 to
February 2000, Mr. George was an attorney with Wilson Sonsini Goodrich & Rosati,
P.C., most recently as a partner of the firm. Mr. George holds BS in Commerce
and JD degrees from the University of Virginia.
VALERIE WILSON joined SkyStream in March 2000 and has served as Vice
President of Business Development since that time. Prior to joining SkyStream,
from August 1997 to February 2000, Ms. Wilson served in various capacities in
the Investment Banking division of FleetBoston Robertson Stephens, most recently
as Vice President in the Communications Investment Banking division. From June
1996 to May 1997, Ms. Wilson served as a business development associate for
Continental Cablevision in the High-Speed Data Group. From July 1993 to July
1995, Ms. Wilson served as Director of Marketing for the Massachusetts Mutual
Life Insurance Company. Ms. Wilson holds a BA degree in Political Science and an
MA degree in Philosophy from Stanford University and an MBA degree from the Amos
Tuck School of Business Administration.
WENDELL VAN AUKEN has been a director of SkyStream since February 1997.
Since 1986, Mr. Van Auken has been a general partner of the Mayfield Fund, a
venture capital firm. Mr. Van Auken is a director of Advent Software, Inc., a
portfolio management software company, Montgomery Street Income Securities Inc.,
a closed-end bond fund, and Netcentives Inc., a provider of Internet marketing,
products and services. Mr. Van Auken holds a BEE degree from Rensselaer
Polytechnic Institute and an MBA degree from Stanford University.
JAMES RAMO has been a director of SkyStream since May 1999. Since January
2000, Mr. Ramo has served as Chief Executive Officer of Geocast Network Systems,
Inc., a provider of audio-visual and interactive content. From September 1997 to
October 1999, Mr. Ramo served as President and Chief Operating Officer of TVN
Entertainment Corporation, a provider of cable television programming and
services. From January 1990 to July 1997, Mr. Ramo served as Executive Vice
President of DirecTV, a digital broadcast satellite television service provider.
Mr. Ramo holds a BA degree in Economics and Political Science from the
University of California, Berkeley and an MS degree from the London School of
Economics.
GEOFFREY Y. YANG has been a director of SkyStream since February 1997.
Since June 1989, Mr. Yang has been a general partner of Institutional Venture
Partners, a venture capital firm. Mr. Yang also has been a managing director of
Redpoint Ventures, a venture capital firm, since August 1999.
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Mr. Yang is a director of Turnstone Systems, Inc., a provider of digital
subscriber line deployment and management products, MMC Networks, Inc., a
developer of network processors, Ask Jeeves, Inc., a provider of
natural-language question answering services on the Internet, and TiVo, a
provider of personalized television services. Mr. Yang holds a BA degree in
economics and a BSE degree in Engineering and Management Systems from Princeton
University and an MBA from Stanford University.
OFFICERS
Upon completion of the offering, our bylaws will provide that executive
officers are appointed by the board of directors and serve for periods as
determined by the board of directors. There are no family relationships among
any of our directors, officers or key employees.
BOARD OF DIRECTORS
Our board of directors currently consists of four members. Our bylaws
provide that the board of directors shall determine the number of directors on
our board. Upon completion of this offering, our certificate of incorporation
will provide for a classified board of directors consisting of three classes of
directors, each serving staggered three-year terms. As a result, one class of
our board of directors will be elected each year. To implement the classified
structure, Messrs. Olson and Ramo have been elected Class I Directors, whose
terms expire at the 2001 annual meeting of stockholders. Mr. Yang has been
elected a Class II Director, whose term expires at the 2002 annual meeting of
stockholders. Mr. Van Auken has been elected a Class III Director, whose term
expires at the 2003 annual meeting of stockholders. This classification of the
board of directors may delay or prevent a change in control of our company or in
our management. See "Description of Capital Stock -- Delaware Anti-Takeover Law
and Certain Charter and Bylaw Provisions".
BOARD COMMITTEES
We established an audit committee in February 2000. The audit committee
consists of Messrs. Van Auken and Ramo. The audit committee reviews our internal
accounting procedures and consults with and reviews the services provided by our
independent accountants.
We established a compensation committee in January 1999. The compensation
committee consists of Messrs. Van Auken and Yang. The compensation committee
reviews and recommends to the board of directors the compensation of all of our
officers and directors, including stock compensation and loans and establishes
and reviews general policies relating to the compensation and benefits of our
employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
interlocking relationship exists between any member of our board of directors or
our compensation committee and any member of the board of directors or
compensation committee of any other company, and no such interlocking
relationship has existed in the past.
DIRECTOR COMPENSATION
We do not currently compensate our directors in cash for their service as
members of the board of directors, although they are reimbursed for certain
expenses in connection with attendance at board of director and committee
meetings. Under our 1996 Stock Option Plan, nonemployee directors are eligible
to receive stock option grants at the discretion of the board of directors. Upon
completion of this offering, nonemployee directors will receive automatic annual
nondiscretionary stock option grants under our 2000 Director Stock Option Plan
and also will be eligible to receive additional stock option grants at the
discretion of the board of directors. For further information regarding the
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<PAGE> 50
provisions of the 1996 Stock Option Plan and the 2000 Director Stock Option
Plan, see "Incentive Stock Plans".
LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
Upon completion of the offering, our certificate of incorporation will
limit the liability of directors to the fullest extent permitted by Delaware
law. Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
The limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Upon completion of this offering, our certificate of incorporation will
provide that we shall indemnify our directors, officers and employees and may
indemnify our other agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also will permit us to
secure insurance on behalf of any officer, director, employee or other agent for
any liability arising out of his or her actions in their capacity as an officer,
director, employee or other agent, regardless of whether we would have the power
to indemnify him or her under Delaware law.
We have entered into agreements to indemnify our directors and executive
officers in addition to the indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors and
executive officers for judgments, fines, settlement amounts and certain
expenses, including attorneys' fees incurred by the director or executive
officer in any action or proceeding, including any action by or in the right of
SkyStream, arising out of the person's services as a director or executive
officer of us, any of our subsidiaries or any other company or enterprise to
which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative action, if successful, might otherwise benefit us and our
stockholders. A stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement or damage awards against our directors and
officers under these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table indicates the compensation earned for services rendered
to SkyStream in all capacities for the year ended December 31, 1999 by our Chief
Executive Officer and our next most highly compensated executive officers who
earned more than $100,000 during the year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- ---------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
James D. Olson............... $175,000 $100,000 -- $9,579
President and Chief
Executive Officer
Chandrasekharan Nilakantan... 180,000 23,090 -- --
Vice President of
Engineering
Clint Chao................... 170,000 35,724 -- --
Vice President of Marketing
Daniel W. Riordan............ 150,000 106,774 -- --
Vice President of Sales
Robert S. Robinett........... 140,000 29,125 -- --
Former Vice President of
Business Development
</TABLE>
The amount in the column entitled "All Other Compensation" represents
interest forgiven under a note payable by Mr. Olson.
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any options to the executive officers named in the summary
compensation table during the year ended December 31, 1999. We granted a total
of 1,976,336 options to our employees and consultants during 1999. All of these
options were granted under our 1996 Stock Option Plan and have a term of 10
years, subject to earlier termination in the event the optionees' services to us
cease. The exercise prices of the options we granted were equal to the fair
market value of our common stock, as valued by our board of directors, on the
date of grant. Options under the 1996 Stock Option Plan generally vest over four
years with 25% of the shares subject to the option vesting on the first
anniversary of the grant date, and the remaining option shares vesting ratably
monthly thereafter.
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AGGREGATE OPTION EXERCISES AND OPTION VALUES
The following table provides information concerning the number of options
exercised during the year ended December 31, 1999 by the executive officers
named in the summary compensation table and the number and value of vested and
unvested options those officers held as of December 31, 1999.
The amounts in the "Value Realized" column are equal to the fair market
value of the purchased shares on the option exercise date, less the exercise
price paid for such shares.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 (#) DECEMBER 31, 1999 ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James D. Olson.............. -- -- -- -- -- --
Chandrasekharan
Nilakantan................ 150,000 540,450 277,500 -- 999,833 --
Clint Chao.................. 375,000 1,320,000 -- -- -- --
Daniel W. Riordan........... -- -- 85,313 229,687 287,505 774,045
Robert S. Robinett.......... -- -- -- -- -- --
</TABLE>
The value realized is calculated on the basis of the fair market value of
the common stock on the date of exercise minus the exercise price. It does not
necessarily indicate that the optionee sold the stock for the amount listed. The
value of in-the-money options represents the positive spread between the
exercise price of the stock options and the fair market value of the common
stock on the date of exercise as determined by our board of directors. Our board
of directors determined that the fair market value of our common stock was $3.67
per share as of December 31, 1999.
INCENTIVE STOCK PLANS
OUR 1996 STOCK OPTION PLAN
Our 1996 Stock Option Plan was adopted by our board of directors and
stockholders in July 1996. The Plan was amended in February 1997, February 1999,
January 2000 and February 2000. A total of 14,898,900 shares of common stock
have been reserved for issuance under our stock option plan, together with an
annual increase in the number of shares reserved thereunder beginning on the
first day of our fiscal year -- commencing January 1, 2001 -- in an amount equal
to the lesser of:
- 3,500,000 shares;
- 5% of our outstanding shares of common stock on the last day of the prior
fiscal year; or
- a lesser amount determined by our board of directors
Our stock option plan provides for grants of incentive stock options to our
employees including officers and employee directors and nonstatutory stock
options to our consultants and nonemployee directors. The purposes of our stock
option plan are to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentive to our employees
and consultants and to promote the success of our business. At the request of
the board of directors, the compensation committee administers our stock option
plan and determines the optionees and the terms of options granted, including
the exercise price, number of shares subject to the option and the
exercisability thereof.
The term of an option granted under the 1996 Stock Option Plan is stated in
the option agreement. However, the term of an incentive stock option may not
exceed ten years and, in the case of an option granted to an optionee who owns
more than 10 percent of our outstanding stock at the
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time of grant, the term of an option may not exceed five years. Options granted
under the 1996 Stock Option Plan vest and become exercisable as set forth in
each option agreement.
With respect to any optionee who owns more than 10 percent of our
outstanding stock, the exercise price of any stock option granted must be at
least 110% of the fair market value on the date of grant.
No incentive stock options may be granted to any optionee, which, when
combined with all other incentive stock options becoming exercisable in any
calendar year that the optionee holds, would have an aggregate fair market value
in excess of $100,000. In any fiscal year, we may not grant any employee options
to purchase more than 500,000 shares or 2,500,000 shares in the case of an
employee's initial employment.
As of December 31, 1999, we had issued 3,152,154 shares of common stock
upon the exercise of options granted under the 1996 Stock Option Plan, we had
outstanding options to purchase 2,572,449 shares of common stock at a weighted
average exercise price of $1.31 per share and 1,674,300 shares remain available
for future option grants under the 1996 Stock Option Plan.
The 1996 Stock Option Plan will terminate in February 2010, unless our
board of directors terminates it sooner.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 Employee Stock Purchase Plan was adopted by our board of directors
and approved by our stockholders in February 2000 and will be effective upon
completion of this offering. The 2000 Employee Stock Purchase Plan provides our
employees with an opportunity to purchase common stock of SkyStream through
accumulated payroll deductions. A total of 500,000 shares of common stock have
been reserved for issuance under the 2000 Employee Stock Purchase Plan, none of
which have been issued. Beginning on the first day of our fiscal year commencing
in 2001, the shares reserved for issuance under the 2000 Employee Stock Purchase
Plan will be increased by an amount equal to the lesser of:
- 1,500,000 shares;
- 3% of the outstanding shares on that date; or
- a lesser amount determined by the board of directors.
The 2000 Employee Stock Purchase Plan will be administered by our board of
directors or by a committee appointed by the board of directors. The 2000
Employee Stock Purchase Plan will permit eligible employees to purchase common
stock through payroll deductions of up to 15% of an employee's base compensation
as indicated on the employee's Form W-2, provided that no employee may purchase
more than $25,000 worth of stock pursuant to our stock purchase plans in one
calendar year, determined at the fair market value of the shares at the time of
grant.
Unless the board of directors or its committee determines otherwise, the
2000 Employee Stock Purchase Plan will be implemented in a series of overlapping
24 month offering periods, each offering period consisting of four six month
purchase periods. The first offering period will begin on the effective date of
this offering and end on the last trading day on or before October 31, 2000.
Thereafter, offering periods will begin on the first trading day on or after May
1 and November 1 of each year and will terminate on the last trading day in the
period six months later. Each participant in the 2000 Employee Stock Purchase
Plan will be granted an option on the first trading day of an offering period to
purchase common stock and the option will be automatically exercised on the date
six months later, the end of a purchase period, throughout the offering period.
If the fair market value of our common stock on any purchase date is lower than
the fair market value on the start date of that offering period, then all
participants in that offering period will be automatically withdrawn from that
offering period and re-enrolled in the offering period that immediately follows.
The purchase price of our common stock under the 2000 Employee Stock Purchase
Plan will be 85% of the lesser of the
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<PAGE> 54
fair market value per share on the start date of the offering period or at the
end of the purchase period. Employees may end their participation in an offering
period at any time, and their participation automatically ends on termination of
employment.
In the event we are acquired and the acquiring corporation does not assume
or substitute for the outstanding options, the offering and purchase periods
then in progress will be shortened and all options automatically exercised. The
board of directors may amend, modify or terminate the 2000 Employee Stock
Purchase Plan at any time as long as the amendment, modification or termination
does not adversely affect the rights of the participants or is pursuant to
specific provisions in the plan. The 2000 Employee Stock Purchase Plan will
terminate in February 2010 unless terminated earlier in accordance with its
provisions.
2000 DIRECTOR STOCK OPTION PLAN
Our 2000 Director Stock Option Plan will become effective upon the closing
of this offering. We have reserved a total of 400,000 shares of common stock for
issuance under the 2000 Director Stock Option Plan, together with an annual
increase in the number of shares reserved thereunder beginning on the first day
of our fiscal year commencing January 1, 2001 equal to the lesser of:
- 100,000 shares;
- 0.25% of the outstanding shares on that date; or
- a lesser amount determined by the board of directors.
The option grants under the 2000 Director Stock Option Plan are automatic
and non-discretionary, and the exercise price of the options is 100% of the fair
market value of our common stock on the grant date.
The 2000 Director Stock Option Plan provides for an initial grant to a
nonemployee director of an option to purchase 30,000 shares of common stock on
the date on which he or she becomes a member of the board of directors. A
nonemployee director who becomes chairman will receive an additional initial
option to purchase 2,000 shares on the date on which he or she becomes chairman.
Additional initial options to purchase 2,000 shares will be granted to a
nonemployee director on the date the nonemployee director first joins the audit
committee of the board of directors and on the date the nonemployee director
first joins the compensation committee of the board of directors. Each
nonemployee director will thereafter automatically be granted an additional
option to purchase 10,000 shares of common stock at the next meeting of the
board of directors following the annual meeting of stockholders, if on the date
of the annual meeting, the director has served on the board of directors for at
least six months. The subsequent option will be increased by 2,000 shares for
service as chairman, 2,000 shares for service on the audit committee and 2,000
shares for service on the compensation committee.
The term of the options granted under the 2000 Director Stock Option Plan
is ten years, but the options expire three months following the termination of
the optionee's status as a director or twelve months if the termination is due
to death or disability. The initial 30,000 share grants will become exercisable
at a rate of 25% of the shares on the first anniversary of the grant date and at
a rate of 1/48 of the shares per month thereafter. The subsequent 10,000 share
grants will become exercisable at the rate of 1/48 of the shares per month
thereafter.
401(K) PLAN
In January 1997, we established a Retirement Savings and Investment Plan,
the 401(k) plan, covering our full-time employees located in the United States.
The 401(k) Plan is intended to qualify under Section 401(k) of the Internal
Revenue Code, so that contributions to the 401(k) Plan by employees or by us and
the investment earnings thereon are not taxable to the employees until
withdrawn. If our 401(k) Plan qualifies under Section 401(k) of the Internal
Revenue Code, our
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<PAGE> 55
contributions will be deductible by us when made. Our employees may elect to
reduce their current compensation by up to the statutorily prescribed annual
limit of $10,000 in 2000 and to have those funds contributed to the 401(k) Plan.
The 401(k) Plan permits us, but does not require us, to make additional matching
contributions on behalf of all participants. To date, we have not made any
contributions to the 401(k) Plan.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
On June 13, 1997, we entered into an employment offer letter with James D.
Olson, our Chief Executive Officer. In connection with the offer letter, Mr.
Olson purchased 1,638,750 shares of common stock pursuant to a restricted stock
purchase agreement. These shares are subject to a right of repurchase that
lapses over a four-year period at the rate of 25% after one year of employment
and ratably monthly thereafter. Mr. Olson purchased the shares with a full
recourse promissory note bearing interest at the minimum rate allowable to avoid
imputation of interest compounded annually. The interest is to be forgiven
annually as long as we employ Mr. Olson, with the amount of the forgiveness
grossed up for federal and state income tax purposes. Mr. Olson is entitled to
receive an amount equal to his base salary for a period of six months in the
event he is terminated for reasons other than cause. During such period, Mr.
Olson is to continue to vest in his stock options and to participate in employee
health, medical and other benefits as if he was an employee.
On January 28, 2000, we entered into an employment offer letter with Roger
E. George, our Vice President of Legal Affairs and General Counsel. In
connection with the offer letter, Mr. George purchased 150,000 shares of common
stock pursuant to a restricted stock purchase agreement. These shares are
subject to a right of repurchase that lapses over a four-year period at the rate
of 25% after one year of employment and ratably monthly thereafter. Mr. George
purchased the shares with a full recourse promissory note bearing interest at
the minimum rate allowable to avoid imputation of interest compounded annually.
Interest on the note is forgiven as long as we employ Mr. George. If in the
first year of his employment we are acquired or sold and Mr. George is
involuntarily or constructively terminated without cause, 50% of our right to
repurchase the shares will lapse.
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<PAGE> 56
RELATED PARTY TRANSACTIONS
The following is a description of transactions since July 1996 to which we
have been a party, in which the amount involved in the transaction exceeds
$60,000 and in which any director, executive officer or holder of more than 5%
of our capital stock had or will have a direct or indirect material interest
other than compensation arrangements which are otherwise required to be
described under "Management".
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS
COMMON STOCK
On July 1, 1996 we issued 1,169,025 shares of common stock to each of our
founders, Robert S. Robinett, Regis Gratacap, Simon Wong and William Slattery
for aggregate proceeds of $40,000. The shares were issued pursuant to founders'
restricted stock purchase agreements and are subject to a right of repurchase by
SkyStream, which lapses monthly over a period of four years. All of the shares
issued to our founders will be fully vested in July 2000. In addition the
following table summarizes sales of common stock on exercise of options by our
officers, directors and principal stockholders and persons and entities
affiliated with them:
<TABLE>
<CAPTION>
PURCHASER DATE OF PURCHASE PRICE PER SHARE SHARES OF COMMON STOCK
--------- ------------------ --------------- ----------------------
<S> <C> <C> <C>
James D. Olson.............. January 29, 1998* $ .06 1,638,750
January 25, 2000* $ 6.67 525,000
Clint Chao.................. January 20, 1999 $ .15 375,000
Roger E. George............. February 4, 2000 $ 9.33 150,000
Regis Gratacap.............. January 25, 2000 $ 6.67 75,000
Susan Ketcham............... November 15, 1999 $ .06 55,467
November 15, 1999 $ .15 11,718
December 27, 1999 $ .06 57,034
December 27, 1999 $ .15 25,781
December 27, 1999 $ 2.67 37,499
Chandrasekharan
Nilakantan................ June 4, 1999 $ .06 150,000
January 12, 2000* $ .15 277,500
David Olson................. November 11, 1999* $ 2.67 262,500
James Ramo.................. January 14, 2000 $ 1.33 12,500
Robert S. Robinett.......... January 25, 2000* $ 6.67 75,000
William Slattery............ January 25, 2000* $ 6.67 75,000
Simon Wong.................. January 25, 2000* $ 6.67 75,000
</TABLE>
- ---------------
* The purchaser signed a full resource promissory note as consideration for this
purchase. For a description of these promissory notes, see "-- Loans to
Executive Officers".
PREFERRED STOCK
The following table summarizes the sales of preferred stock to our
executive officers, directors and principal stockholders, and persons and
entities associated with them. Each share of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock automatically converts into
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<PAGE> 57
one share of common stock upon the closing of this offering. See "Principal
Stockholders" for a summary of the affiliations of each of the persons and
entities described below.
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C TOTAL VALUE OF
PREFERRED PREFERRED PREFERRED PREFERRED STOCK
STOCK STOCK STOCK PURCHASED
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Date of sale.................... 02/12/97 03/25/98 03/22/99
Price per share................. $ 0.67 $ 1.50 $ 3.33 $26,995,003
Entities associated with our
directors:
Entities Associated with
Mayfield Fund (Mr. Van
Auken)..................... 3,300,000 1,666,668 1,200,000 $ 8,700,002
Entities Associated with
Institutional Venture
Partners (Mr. Yang)........ 3,300,000 1,666,667 1,200,000 $ 8,700,000
Norwest Venture Partners VII,
L.P........................... -- -- 2,400,000 $ 8,000,000
</TABLE>
The purchase of Series C Preferred Stock by entities associated with
Mayfield Fund includes 71,250 shares of Series C Preferred Stock purchased by
Mr. Van Auken's family trust.
STOCK OPTION GRANTS TO OFFICERS AND DIRECTORS
Stock option grants to our directors and executive officers are described
under the captions "Management -- Director Compensation" and "-- Executive
Compensation". Since our inception, we have granted options to our directors and
current and former executive officers, including the Named Executive Officers as
follows:
<TABLE>
<CAPTION>
NUMBER
OF
NAME SHARES GRANT DATE EXERCISE PRICE
---- --------- ------------------ --------------
<S> <C> <C> <C>
James D. Olson........................... 1,638,750 July 14, 1997 $ 0.06
525,000 January 19, 2000 6.67
Clint Chao............................... 375,000 May 4, 1998 0.15
120,000 January 19, 2000 6.67
Roger E. George.......................... 150,000 February 1, 2000 9.33
Susan Ketcham............................ 82,500 October 2, 1997 0.06
30,000 March 3, 1998 0.06
37,500 June 25, 1998 0.15
75,000 September 29, 1999 2.67
Chandrasekharan Nilakantan............... 427,500 March 3, 1998 0.06
120,000 January 19, 2000 6.67
David Olson.............................. 262,500 November 11, 1999 2.67
James Ramo............................... 75,000 May 6, 1999 1.33
Daniel W. Riordan........................ 315,000 December 1, 1998 0.30
Valerie Wilson........................... 175,000 March 4, 2000 12.00
</TABLE>
LOANS TO EXECUTIVE OFFICERS AND FOUNDERS
JAMES D. OLSON. In January 2000 in connection with James D. Olson's
purchase of 525,000 shares of our common stock pursuant to a restricted stock
purchase agreement, we loaned Mr. Olson $3,500,000 under a secured full recourse
promissory note with interest at the minimum rate allowable to avoid imputation
of interest, compounded annually. Interest is forgiven annually as long as he
remains our employee. Principal and interest on the note become due and payable
on the earlier of five years from the date of the note or 90 days after Mr.
Olson's termination of employment with us.
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<PAGE> 58
In January 1998 in connection with Mr. Olson's exercise of an option to
purchase 1,638,750 shares of our common stock pursuant to a restricted stock
purchase agreement, we loaned Mr. Olson $109,250 under a secured full recourse
promissory note with interest at the minimum rate allowable to avoid imputation
of interest, compounded annually. Interest is forgiven annually as long as he
remains our employee. Principal and interest on the note become due and payable
on the earlier of five years from the date of the note or 90 days after Mr.
Olson's termination of employment with us.
CLINT CHAO. In January 2000 in connection with Clint Chao's purchase of
120,000 shares of our common stock pursuant to a restricted stock purchase
agreement, we loaned Mr. Chao $800,000 under a secured full recourse promissory
note with interest at the minimum rate allowable to avoid imputation of
interest, compounded annually. Principal and interest on the note become due and
payable on the earlier of five years from the date of the note or 90 days after
Mr. Chao's termination of employment with us.
CHANDRASEKHARAN NILAKANTAN. In January 2000 in connection with
Chandrasekharan Nilakantan's purchase of 120,000 shares of our common stock
pursuant to a restricted stock purchase agreement, we loaned Mr. Nilakantan
$800,000 under a secured full recourse promissory note with interest at the
minimum rate allowable to avoid imputation of interest, compounded annually.
Principal and interest on the note become due and payable on the earlier of five
years from the date of the note or 90 days after Mr. Nilakantan's termination of
employment with us.
DAVID OLSON. In November 1999 in connection with David Olson's purchase of
262,500 shares of our common stock pursuant to a restricted stock purchase
agreement, we loaned Mr. Olson $700,000 under a secured full recourse promissory
note with interest at the minimum rate allowable to avoid imputation of
interest, compounded annually. Principal and interest on the note become due and
payable on the earlier of five years from the date of the note or 90 days after
Mr. Olson's termination of employment with us.
ROGER E. GEORGE. In February 2000 in connection with Roger E. George's
purchase of 150,000 shares of our common stock pursuant to a restricted stock
purchase agreement, we loaned Mr. George $1,400,000 under a secured full
recourse promissory note with interest at the minimum rate allowable to avoid
imputation of interest, compounded annually. Interest is forgiven annually as
long as he remains our employee. Principal and interest on the note become due
and payable on the earlier of five years from the date of the note or 90 days
after Mr. George's termination of employment with us.
ROBERT S. ROBINETT. In January 2000 in connection with Robert S. Robinett's
purchase of 75,000 shares of our common stock pursuant to a restricted stock
purchase agreement, we loaned Mr. Robinett $500,000 under a secured full
recourse promissory note with interest at the minimum rate allowable to avoid
imputation of interest, compounded annually. Principal and interest on the note
become due and payable on the earlier of five years from the date of the note or
90 days after Mr. Robinett's termination of employment with us.
WILLIAM SLATTERY. In January 2000 in connection with William Slattery's
purchase of 75,000 shares of our common stock pursuant to a restricted stock
purchase agreement, we loaned Mr. Slattery $500,000 under a secured full
recourse promissory note with interest at the minimum rate allowable to avoid
imputation of interest, compounded annually. Principal and interest on the note
become due and payable on the earlier of five years from the date of the note or
90 days after Mr. Slattery's termination of employment with us.
REGIS GRATACAP. In January 2000 in connection with Regis Gratacap's
purchase of 75,000 shares of our common stock pursuant to a restricted stock
purchase agreement, we loaned Mr. Gratacap $500,000 under a secured full
recourse promissory note with interest at the minimum rate allowable to avoid
imputation of interest, compounded annually. Principal and interest on the note
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<PAGE> 59
become due and payable on the earlier of five years from the date of the note or
90 days after Mr. Gratacap's termination of employment with us.
SIMON WONG. In January 2000 in connection with Simon Wong's purchase of
75,000 shares of our common stock pursuant to a restricted stock purchase
agreement, we loaned Mr. Wong $500,000 under a secured full recourse promissory
note with interest at the minimum rate allowable to avoid imputation of
interest, compounded annually. Principal and interest on the note become due and
payable on the earlier of five years from the date of the note or 90 days after
Mr. Wong's termination of employment with us.
INDEMNIFICATION
We have entered into indemnification agreements with each of our directors
and executive officers. The indemnification agreements will require us to
indemnify our directors and officers to the fullest extent permitted by Delaware
law. See "-- Limitation of Liability and Indemnification".
SALES TO RELATED PARTIES
For the year ended December 31, 1999 we sold $137,000 of products to
Geocast Network Systems. In January 2000, one of our directors, James Ramo, was
appointed Chief Executive Officer of Geocast Network Systems.
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<PAGE> 60
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of December 31, 1999, and as
adjusted to reflect the sale of common stock offered in this prospectus, by:
- each stockholder known by us to own beneficially more than 5% of our
common stock, as explained below;
- each of the Named Executive Officers;
- each of our directors; and
- all of our directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
NUMBER OF BENEFICIALLY OWNED
SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
5% STOCKHOLDERS
Entities affiliated with Institutional Venture
Partners.............................................. 6,166,667
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, California 94025
Entities affiliated with Mayfield Fund.................. 6,166,668
2800 Sand Hill Road
Menlo Park, California 94025
Norwest Venture Partners VII L.P........................ 2,400,000
245 Lytton Ave., Ste. 250
Palo Alto, California 94301
William Slattery........................................ 1,169,025
Regis Gratacap.......................................... 1,169,025
Simon Wong.............................................. 1,169,025
DIRECTORS AND NAMED EXECUTIVE OFFICERS
James D. Olson.......................................... 1,638,750
Clint Chao.............................................. 375,000
Daniel W. Riordan....................................... 98,438
Chandrasekharan Nilakantan.............................. 427,500
Robert S. Robinett...................................... 1,169,025
Wendell Van Auken....................................... 6,166,668
James Ramo.............................................. 14,063
Geoffrey Y. Yang........................................ 6,166,667
All directors and officers as a group (11 persons)...... 16,506,111
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
Except as otherwise noted above, the address of each person listed on the
table is 555 Clyde Avenue, Suite B, Mountain View, CA 94043.
As of December 31, 1999, shares of our common stock were
outstanding, assuming that each share of Preferred Stock was converted on a
one-for-one basis into common stock. The columns regarding beneficial ownership
after the offering assumes that the underwriters' over-allotment option is not
exercised. If the over-allotment option is exercised in full, we will sell an
aggregate of shares of new common stock.
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<PAGE> 61
We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, we
have included the shares of common stock subject to options or warrants held by
that person that are currently exercisable or will become exercisable within 60
days after December 31, 1999, but we have not included those shares for purposes
of computing percentage ownership of any other person. We have assumed unless
otherwise indicated below that the person and entities named in the table have
sole voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable.
The beneficial ownership of the persons set forth in the table above
includes the following options to purchase our common stock that may be
exercised by such person within 60 days of December 31, 1999:
SECURITIES EXERCISABLE WITHIN 60 DAYS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
OPTIONS
-------
<S> <C>
James D. Olson.............................................. --
Clint Chao.................................................. --
Daniel W. Riordan........................................... 98,438
Chandrasekharan Nilakantan.................................. 277,500
David Olson................................................. --
Susan Ketcham............................................... --
Roger E. George............................................. --
Valerie Wilson.............................................. --
Robert S. Robinett.......................................... --
Wendell Van Auken........................................... --
James Ramo.................................................. 14,063
Geoffrey Y. Yang............................................ --
All directors and officers as a group....................... 390,001
</TABLE>
The beneficial ownership reported for the Institutional Venture Partners
entities and Mr. Yang includes 5,768,400 shares held by Institutional Venture
Partners VII, LP, 173,832 shares held by IVP Founders Fund I, LP, 120,000 shares
held by IVP Broadband Fund, LP and 104,435 shares held by Institutional Venture
Management VII, LP. Mr. Yang disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest therein. The General Partner of
Institutional Venture Partners VII is Institutional Venture Management VII, LP.
The General Partner of IVP Founders Fund LP is Institutional Venture Management
VI, LP. The General Partner of IVP Broadband Fund, LP is IVP Broadband
Management. The Managing Director of IVP Broadband Management is Institutional
Venture Management VIII, LLC. Mr. Yang is a general partner of Institutional
Venture Management VII, LP, Institutional Venture Management VI, LP and
Institutional Venture Management VIII, LLC. Each of these persons disclaims
beneficial ownership of the shares except to the extent of their pecuniary
interest therein.
The beneficial ownership reported for the Mayfield Fund entities and Mr.
Van Auken includes 5,430,834 shares held by Mayfield VIII, LP, 378,750 shares
held by Broadcast Trust and 285,834 shares held by Mayfield Associates Fund III,
LP. Mr. Van Auken disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. The General Partner of Mayfield VIII,
LP and Mayfield Associates Fund III, LP is Mayfield VIII Management, LLC. Mr.
Van Auken is a Managing Director of Mayfield VIII Management, LLC. Each of these
persons disclaims beneficial ownership of the shares except to the extent of
their pecuniary interest therein. The beneficial ownership for entities
affiliated with Mayfield Fund includes 71,250 shares of Series C Preferred Stock
held by Mr. Van Auken's family trust.
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<PAGE> 62
The general partner of Norwest Venture Partners, VII, LP is Itasca VC
Partners VII, LLP. Promod Haque is a managing partner of Itasca VC Partners VII,
LLP. Mr. Haque disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein.
As of December 31, 1999, 170,484 of the shares held by Mr. Slattery were
subject to a right of repurchase by SkyStream at cost in the event Mr. Slattery
ceases to be an employee of SkyStream. The right of repurchase lapses at a rate
of 24,354 shares per month.
As of December 31, 1999, 170,484 of the shares held by Mr. Gratacap were
subject to a right of repurchase by SkyStream at cost in the event Mr. Gratacap
ceases to be an employee of SkyStream. The right of repurchase lapses at a rate
of 24,354 shares per month.
The beneficial ownership reported for Mr. Wong includes 15,000 shares held
in trust for Mr. Wong's children over which Mr. Wong disclaims beneficial
ownership. As of December 31, 1999, 170,484 of the shares held by Mr. Wong were
subject to a right of repurchase by SkyStream at cost in the event Mr. Wong
ceases to be an employee of SkyStream. The right of repurchase lapses at a rate
of 24,354 shares per month.
The beneficial ownership reported for Mr. Olson includes 1,638,750 shares
held by a family trust for Mr. Olson and 34,284 shares held in trust for Mr.
Olson's children over which Mr. Olson disclaims beneficial ownership. As of
December 31, 1999, 648,674 of the shares held by the Olson Family Trust were
subject to a right of repurchase by SkyStream at cost in the event Mr. Olson
ceases to be an employee of SkyStream. The right of repurchase lapses at a rate
of 34,141 shares per month.
The beneficial ownership reported for Mr. Chao as of December 31, 1999
includes 226,563 shares which are subject to repurchase by SkyStream at cost in
the event Mr. Chao ceases to be an employee of SkyStream. The right of
repurchase lapses at a rate of 7,813 shares per month.
The beneficial ownership reported for Mr. Robinett includes 30,000 shares
held in trust for Mr. Robinett's children over which Mr. Robinett disclaims
beneficial ownership. As of December 31, 1999, 170,484 of the shares held by Mr.
Robinett were subject to a right of repurchase by SkyStream at cost in the event
Mr. Robinett ceases to be an employee of SkyStream. The right of repurchase
lapses at a rate of 24,354 shares per month.
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<PAGE> 63
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of this offering, we will be authorized to issue
350,000,000 shares of common stock, $0.001 par value, and 10,000,000 shares of
undesignated preferred stock, $0.001 par value. Immediately after this offering,
we estimate there will be approximately shares of common stock
outstanding, 2,572,449 shares of common stock will be issuable upon exercise of
outstanding options assuming there are no additional option grants after
December 31, 1999, and no shares of preferred stock will be issued and
outstanding based on shares and options outstanding as of December 31, 1999.
The figure for outstanding shares of common stock upon completion of this
offering does not reflect the issuance of an aggregate of 53,078 shares of
common stock in connection with the presumed cash exercise of warrants to
purchase shares of common stock issued to four individual investors. Under the
terms of the warrant, the per share exercise price of the warrant is $1.08. The
purchase price for the shares of common stock which can be purchase under the
warrants is payable in cash or by applying the value of a portion of the
warrant, which is equal to the number of shares of common stock into which the
Series B Preferred Stock issuable under the warrant is convertible, multiplied
by the fair market value of the shares of common stock into which the shares of
Series B Preferred Stock issuable upon exercise of the warrant may be converted,
less the per share exercise price, in lieu of payment of the exercise price per
share.
Upon completion of this offering, our certificate of incorporation and
bylaws will contain provisions that are intended to enhance the likelihood of
continuity and stability in the composition of the board of directors and which
may have the effect of delaying, deferring, or preventing a future takeover or
change in control of SkyStream unless such takeover or change in control is
approved by the board of directors.
COMMON STOCK
Holders of common stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Holders of common stock do not have
cumulative voting rights, and therefore, holders of a majority of the shares
voting for the election of directors can elect all of the directors. If this
occurs, the holders of the remaining shares will not be able to elect any
directors.
Holders of the common stock are entitled to receive such dividends as may
be declared from time to time by the board of directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between SkyStream and our debtholders. We have never declared or paid cash
dividends on our capital stock, expect to retain future earnings, if any, for
use in the operation and expansion of our business, and do not anticipate paying
any cash dividends in the foreseeable future. In the event of liquidation,
dissolution or winding up of SkyStream, the holders of common stock are entitled
to share ratably in all assets legally available for distribution after payment
of all debts and other liabilities and subject to the prior rights of any
holders of preferred stock then outstanding. Holders of common stock have no
preemptive or other subscription or conversion rights. There are no redemption
or sinking fund provisions applicable to the common stock, and the shares of
common stock to be issued upon the closing of this offering will be fully paid
and nonassessable.
PREFERRED STOCK
Effective upon the closing of this offering, our board of directors will
have the authority, without action by our stockholders, to designate and issue
10,000,000 shares of currently undesignated preferred stock. The board of
directors has the authority to issue the preferred stock in one or more series
and to fix the price, rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption price, liquidation preferences and the number of
shares constituting a series or the designation of such
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<PAGE> 64
series, without any further vote or action by our stockholders. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of SkyStream without
further action by the stockholders and may adversely affect the market price of,
and the voting and other rights of, the holders of common stock. The issuance of
preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of common stock, including the loss of voting
control to others. We have no current plans to issue any shares of preferred
stock.
WARRANTS
As of December 31, 1999, there were warrants outstanding to purchase 53,078
shares of Series B Preferred Stock. Such Warrants will expire two years after
the effective date of this offering. The exercise price for all outstanding
warrants is $1.08 per share. The exercise price for the warrants is payable by
cash or by applying the value of a portion of the warrant, which is equal to the
number of shares of common stock into which the Series B Preferred Stock
issuable under the warrant is convertible multiplied by the fair market value of
the shares of common stock into which the Series B Preferred Stock issuable upon
exercise of the warrant may be converted, less the per share exercise price, in
lieu of payment of the exercise price per share.
In February 2000, we issued a warrant to purchase 15,000 shares of our
common stock at an exercise price of $8.67 per share.
REGISTRATION RIGHTS
Set forth below is a summary of the registration rights of the holders of
our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock, each of which will convert into common stock immediately prior to the
consummation of this offering.
DEMAND REGISTRATION. At any time after six months following the closing
date of the initial public offering of our common stock, the holders of
registration rights may request us to register shares of common stock subject to
our right, upon advice of our underwriters, to reduce the number of shares
proposed to be registered and provided that at least 40% of the holders of
registrable securities together make the request for registration, and that such
holders request registration of at least 20% of the registrable securities then
outstanding. We will be obligated to effect only two registrations pursuant to
such a request by holders of registration rights. If shares requested to be
included in a registration must be excluded due to market factors, as determined
by the managing underwriter, the shares registered on behalf of the selling
stockholders will be allocated among all holders of shares with rights to be
included in the registration on the basis of the number of shares with such
rights held by such stockholders.
PIGGYBACK REGISTRATION RIGHTS. The holders who have registration rights
have unlimited rights to request that shares be included in any
company-initiated registration of common stock other than registrations of
employee benefit plans or business combinations subject to Rule 145 under the
Securities Act. In our initial registration, the underwriters may, for marketing
reasons, exclude up to all of the shares requested to be registered on behalf of
all stockholders having the right to request inclusion in such registration. In
our subsequent registrations, the underwriters may, for marketing reasons, limit
the shares requested to be registered on behalf of all stockholders having the
right to request inclusion in such registration. In addition, we have the right
to terminate any registration we initiate prior to its effectiveness regardless
of any request for inclusion by any stockholders.
FORM S-3 REGISTRATIONS. After we have qualified for registration on Form
S-3, which will not be available until at least 12 months after we become a
publicly reporting company, holders of registration rights may request in
writing that we effect an unlimited number of registrations of such shares on
Form S-3 provided that the gross offering price of the shares to be so
registered in each such registration exceeds $1,000,000. We are not obligated to
effect a registration on Form S-3 more
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<PAGE> 65
than twice in any twelve-month period or prior to expiration of 90 days
following effectiveness of the most recent registration requested by the
holders.
FUTURE GRANTS OF REGISTRATION RIGHTS. We cannot grant further registration
rights without the prior written consent of current stockholders owning at least
50% of the then-outstanding registrable securities, including grants to any
holder or prospective holder of any registration rights which would be on more
favorable terms than the existing registration rights, including market standoff
requirements.
TRANSFERABILITY. The registration rights are transferable upon notice of
the transfer, provided that the transferee acquires all of the registrable
securities held by the holder, is a constituent partner of the transferor or
assignor, or acquires at least 500,000 shares, and the transferee or assignee
assumes the rights and obligations of the transferor for such shares.
TERMINATION. The registration rights will terminate for all holders of
registrable securities on the first to occur of five years after the
consummation of the offering or the date on which the holder may sell all of its
shares pursuant to Rule 144 during any 90-day period.
ANTITAKEOVER EFFECTS OF SOME PROVISIONS OF CERTIFICATE OF INCORPORATION AND
BYLAWS
Some of the provisions of our certificate of incorporation and bylaws that
will become effective upon the completion of this offering could make the
following more difficult:
- acquisition of SkyStream by means of a tender offer;
- acquisition of SkyStream by means of a proxy contest or otherwise; or
- the removal of our incumbent officers and directors.
These provisions, summarized below, are generally expected to discourage
coercive takeover practices and inadequate takeover bids. These provisions are
also designed to encourage persons seeking to acquire control of SkyStream to
first negotiate with our board of directors. We believe that the benefits of
increased protection resulting from our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure
SkyStream outweigh the disadvantages of discouraging these proposals, because we
believe that the negotiation of these proposals could result in an improvement
of their terms.
ELECTION AND REMOVAL OF DIRECTORS. Upon completion of this offering, our
board of directors will be divided into three classes. The directors in each
class will serve for a three-year term, one class being elected each year by our
stockholders. This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of SkyStream because it generally makes it more difficult for
stockholders to replace a majority of the directors.
STOCKHOLDER MEETINGS. Upon completion of this offering, under our bylaws,
only the board of directors, the chairman of the board, the chief executive
officer or the holders of at least 10% of our capital stock may call special
meetings of stockholders.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF STOCKHOLDER NOMINATIONS AND
PROPOSALS. Upon completion of this offering, our bylaws will contain advance
notice procedures with respect to stockholder proposals and the nomination of
candidates for election as directors, other than nominations made by or at the
direction of the board of directors or a committee of the board.
ELIMINATION OF CUMULATIVE VOTING. Upon completion of this offering, our
certificate of incorporation and bylaws will not provide for cumulative voting
in the election of directors.
UNDESIGNATED PREFERRED STOCK. The authorization of undesignated preferred
stock makes it possible for the board of directors to issue preferred stock with
voting or other right or preferences that could impede the success of any
attempt to change control of SkyStream. These and other
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<PAGE> 66
provisions may have the effect of deferring hostile takeovers or delaying
changes in control or management of SkyStream.
AMENDMENT OF CHARTER PROVISIONS. The amendment of the above provisions
relating to the election and removal of directors and stockholder meetings will
require approval by holders of at least 66 2/3% of the outstanding common stock.
See "Risk Factors -- Provisions of our charter documents may have
anti-takeover effects that could prevent a change in our control" for a further
discussion of the charter documents.
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation law which
regulates corporate acquisitions. Section 203 generally prevents Delaware
corporations, including those whose securities are listed for trading on the
Nasdaq National Market, from engaging in a business combination with any
interested stockholder for three years following the date that such stockholder
became an interested stockholder. A business combination includes, among other
things, a merger or consolidation involving SkyStream and the interested
stockholder and the sale of more than 10% of our assets. Generally, an
interested stockholder is any entity or person beneficially owning 15% or more
of our outstanding voting stock and any entity or person affiliated with or
controlling or controlled by such entity or person. A Delaware corporation may
"opt out" of the Section with an express provision in its original certificate
of incorporation or an express provision in its certification of incorporation
or bylaws resulting from amendments approved by the holders of at least a
majority of the corporation's outstanding voting shares. We have not "opted out"
of the Section.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is BankBoston N.A.
BankBoston is located at 150 Royall Street, Canton, Massachusetts, 02021, and
its telephone number is (781) 575-3120.
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<PAGE> 67
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the public
market could adversely affect the market price of the common stock.
Upon completion of this offering, SkyStream will have outstanding
shares of common stock, assuming the issuance of shares
of common stock offered hereby and no exercise of warrants or options after
December 31, 1999. Of these shares, the shares sold in the
offering will be freely tradable without restriction or further registration
under the Securities Act; provided, however, that if shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act, their
sales of shares would be subject to certain limitations and restrictions that
are described below.
The remaining 23,239,046 shares of common stock held by existing
stockholders were issued and sold by SkyStream in reliance on exemptions from
the registration requirements of the Securities Act. The officers, directors and
certain stockholders have entered into contractual "lock up" agreements
providing that they will not offer, sell, contract to sell, pledge, grant any
option to purchase, make any short sale or otherwise dispose of the shares of
stock owned by them or that could be purchased by them through the exercise of
options to purchase stock for 180 days after the date of this prospectus without
the prior written consent of Goldman Sachs & Co.; provided, however, that this
restriction shall terminate as to 20% of the shares after 90 days and an
additional 20% of the shares after 120 days from the date of this prospectus in
the event that, at such dates, the reported last sale price of SkyStream's
common stock on the NASDAQ National Market is at least twice the initial public
offering price specified in this prospectus for a certain period of time ending
on such dates. As a result of these contractual restrictions, and assuming that
the conditions to release of the shares are met as of 90 days and 120 days after
the date of this prospectus, subject to delays as a result of the timing of
SkyStream's earnings releases and compliance with SkyStream's insider trading
policies, shares will become eligible for sale, subject in most cases to the
limitations of Rule 144 and the lapse of repurchase rights held by us.
<TABLE>
<CAPTION>
APPROXIMATE
DAYS AFTER DATE SHARES ELIGIBLE
OF THIS PROSPECTUS FOR FUTURE SALE COMMENT
------------------ --------------- -------
<S> <C> <C>
On Effectiveness.............. Shares sold in the offering
90 Days after Effectiveness... Initial release of 20% of shares subject to
lock up; shares saleable under Rules 144 and
701
120 Days after Second release of 20% of shares subject to
Effectiveness............... lock up; shares saleable under Rules 144 and
701
180 Days after Lock-up on remaining shares released; shares
Effectiveness............... saleable under Rules 144 and 701
</TABLE>
As of December 31, 1999, there were a total of 2,572,449 shares of common
stock subject to outstanding options under our 1996 Stock Option Plan, 743,640
of which were vested, and all of which are subject to lock-up agreements.
Immediately after the completion of the offering, we intend to file registration
statements on Form S-8 under the Securities Act to register all of the shares of
common stock subject to outstanding options or reserved for future issuance
under our 1996 Stock Plan, as amended, the 2000 Employee Stock Purchase Plan and
the 2000 Director Stock Option Plan. On the date 90 days after the effective
date of the offering, a total of 362,327 shares of common stock subject to
outstanding options will be vested; 120 days after the effective date of the
offering, a total of 402,002 shares of common stock subject to outstanding
options will be vested; and 180 days after the effective date of the offering, a
total of 575,378 shares of common stock subject to outstanding options will be
vested. After the effective dates of the registration statements on Form S-8,
shares purchased upon exercise of options granted pursuant to the 1996 Stock
Option
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<PAGE> 68
Plan, as amended, the 2000 Employee Stock Purchase Plan and the 2000 Director
Stock Option Plan generally would be available for resale in the public market.
The officers, directors and stockholders of SkyStream have agreed not to
sell or otherwise dispose of any of their shares for the time periods described
above. Goldman Sachs & Co., however, may in its sole discretion, at any time
without notice, release all or any portion of the shares subject to lock-up
agreements.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any
three-month period, a number of shares that does not exceed the greater of
- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this
offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice filing and the availability of current
public information about SkyStream.
RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been one of
SkyStream's "affiliates" at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, including the holding period of any prior owner other than an
"affiliate", is entitled to sell such shares without complying with the manner
of sale, notice filing, volume limitation or notice provisions of Rule 144.
Therefore, unless otherwise restricted, "144(k) shares" may be sold immediately
upon the completion of this offering.
RULE 701
In general, under Rule 701, any SkyStream employee, director, officer,
consultant or advisor who purchases shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of the offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.
The Securities and Exchange Commission has indicated that Rule 701 will
apply to typical stock options granted by an issuer before it becomes subject to
the reporting requirements of the Securities Exchange Act of 1934, along with
the shares acquired upon exercise of such options (including exercises after the
date of this prospectus). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than "affiliates", as defined in Rule 144, subject only to the
manner of sale provisions of Rule 144 and by "affiliates" under Rule 144 without
compliance with its one year minimum holding period requirement.
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<PAGE> 69
UNDERWRITING
SkyStream and the underwriters for the offering named below have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co.,
FleetBoston Robertson Stephens Inc. and Dain Rauscher Incorporated are the
representatives of the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co.........................................
FleetBoston Robertson Stephens Inc. ........................
Dain Rauscher Incorporated..................................
------
Total.....................................................
======
</TABLE>
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
shares from SkyStream to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following tables show the per share and total underwriting discounts
and commissions to be paid to the underwriters by SkyStream. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by SkyStream
----------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share............................................. $ $
Total............................................... $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
offering price, the representatives may change the offering price and the other
selling terms.
SkyStream and its directors, officers and significant stockholders have
agreed with the underwriters not to offer, sell, contract to sell, pledge, grant
any option to purchase, make any short sale or otherwise dispose of any of their
common stock or securities convertible into or exchangeable for shares of common
stock during the period from the date of this prospectus continuing through the
date 180 days after the date of this prospectus without the prior written
consent of the Representatives; provided, however, that with respect to our
directors, officers and significant stockholders, this restriction shall
terminate as to 20% of the shares after 90 days and an additional 20% of the
shares after 120 days after the date of this prospectus, subject to delays as a
result of the timing of SkyStream's earnings releases and compliance with
SkyStream's insider trading policies, in the event that, at such dates, the
reported last sale price of SkyStream's common stock on the NASDAQ National
Market is at least twice the initial public offering price specified in this
prospectus for a certain period of time ending on such dates. This agreement
does not apply to any existing employee benefit plans. See "Shares Available for
Future Sale" for a discussion of certain transfer restrictions.
Prior to the offering, there has been no public market for our common
stock. The initial public offering price was negotiated among SkyStream and the
representatives. Among the factors
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<PAGE> 70
considered in determining the initial public offering price of the shares, in
addition to prevailing market conditions, were SkyStream's historical
performance, estimates of the business potential and earnings prospects of
SkyStream, an assessment of SkyStream's management and the consideration of the
above factors in relation to market validation of companies in related
businesses.
The common stock will be quoted on the Nasdaq National Market under the
symbol "SSNW".
In connection with this offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
At SkyStream's request, the underwriters have reserved up to shares
of the common stock offered hereby for sale, at the initial public offering
price, to SkyStream's distributors, suppliers, friends and family members of
employees and other friends of SkyStream through a directed shares program. The
number of shares available to the general public will be reduced to the extent
these persons purchase the reserved shares. Any shares not so purchased will be
offered by the underwriters to the general public on the same basis as the other
shares offered hereby.
SkyStream estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately $1.5
million.
SkyStream has agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
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<PAGE> 71
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Gunderson Dettmer Stough Villeneuve Franklin
& Hachigian, LLP, Menlo Park, California. As of the date of this prospectus, WS
Investment Company 97A and WS Investment Company 98A investment partnerships
composed of certain current and former members of and persons associated with
Wilson Sonsini Goodrich & Rosati, Professional Corporation, in addition to
certain current individual members and associates of Wilson Sonsini Goodrich &
Rosati, Professional Corporation, beneficially own an aggregate of 71,702 shares
of preferred stock which will automatically convert into SkyStream's common
stock upon the close of this offering.
EXPERTS
The consolidated financial statements as of December 31, 1999 and 1998 and
for each of the three years in the period ended December 31, 1999 included in
this Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU MAY FIND ADDITIONAL INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act for the shares of common stock in
this offering. This prospectus does not contain all of the information in the
registration statement and the exhibits and schedule that were filed with the
registration statement. For further information with respect to SkyStream and
our common stock, we refer you to the registration statement and the exhibits
and schedule that were filed with the registration statement. Statements
contained in this prospectus about the contents of any contract or any other
document that is filed as an exhibit to the registration statement are not
necessarily complete, and we refer you to the full text of the contract or other
document filed as an exhibit to the registration statement. A copy of the
registration statement and the exhibits and schedule that were filed with the
registration statement may be inspected without charge at the public reference
facilities maintained by the Securities and Exchange Commission in Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or any part of
the registration statement may be obtained from the Securities and Exchange
Commission upon payment of the prescribed fee. The Securities and Exchange
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission. The address of the
site is http://www.sec.gov.
Upon completion of this offering, SkyStream will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
of 1934, and, in accordance with the requirements of the Securities Exchange Act
of 1934, will file periodic reports, proxy statements and other information with
the Securities and Exchange Commission. These periodic reports, proxy statements
and other information will be available for inspection and copying at the
regional offices, public reference facilities and web site of the Securities and
Exchange Commission referred to above.
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<PAGE> 72
SKYSTREAM NETWORKS INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Deficit and
Redeemable Convertible Preferred Stock.................... F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of SkyStream Networks Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' deficit and
redeemable convertible preferred stock and of cash flows present fairly, in all
material respects, the financial position of SkyStream Networks Inc. and its
subsidiary at December 31, 1999 and 1998 and the consolidated results of their
operations and cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
San Jose, California
February 18, 2000, except for Note 12, as to which the date is March 7, 2000
F-2
<PAGE> 74
SKYSTREAM NETWORKS INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- DECEMBER 31,
1998 1999 1999
------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 2,965 $ 14,443
Accounts receivable, net of allowance for doubtful
accounts of $30 and $183 in 1998 and 1999,
respectively........................................... 600 3,012
Inventories............................................... 167 126
Prepaid expenses and other current assets................. 63 263
------- --------
Total current assets................................. 3,795 17,844
Property and equipment, net................................. 799 1,363
Intangible assets........................................... -- 163
Other assets................................................ 60 29
------- --------
Total assets......................................... $ 4,654 $ 19,399
======= ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 114 $ 984
Accrued liabilities....................................... 308 1,007
Current portion of notes payable and long-term debt....... 497 1,257
Deferred revenues......................................... 73 600
------- --------
Total current liabilities............................ 992 3,848
Notes payable, non-current.................................. 418 187
Long-term debt, non-current................................. 1,750 750
------- --------
Total liabilities.................................... 3,160 4,785
------- --------
Commitments and contingencies (Note 10)
Redeemable convertible preferred stock (Note 6)............. $ 9,137 $ 26,603
------- --------
Stockholders' Equity (Deficit):
Common stock, $0.001 par value:
Authorized: 350,000 shares. Issued and outstanding:
6,671 and 7,979 shares at December 31, 1998 and 1999,
respectively; 23,239 (unaudited) shares at December
31, 1999 issued and outstanding pro forma............ 7 8 $ 23
Additional paid-in capital................................ 243 11,066 37,654
Notes receivable from stockholders........................ (109) (809) (809)
Deferred stock-based compensation......................... -- (7,849) (7,849)
Accumulated deficit....................................... (7,784) (14,405) (14,405)
------- -------- --------
Total stockholders' equity (deficit)................. (7,643) (11,989) $ 14,614
------- -------- --------
Total liabilities redeemable convertible preferred
stock and stockholders' equity (deficit).......... $ 4,654 $ 19,399
======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 75
SKYSTREAM NETWORKS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Revenues.................................................... $ 71 $ 1,256 $ 8,518
Cost of revenues............................................ 241 659 2,646
------- ------- -------
Gross profit (loss)......................................... (170) 597 5,872
Operating expenses:
Research and development.................................. 1,407 2,677 5,403
In-process research and development....................... -- -- 101
Sales and marketing....................................... 191 1,839 3,799
General and administrative................................ 735 1,101 1,698
Stock-based compensation.................................. -- -- 1,700
------- ------- -------
Total operating expenses............................... 2,333 5,617 12,701
------- ------- -------
Loss from operations........................................ (2,503) (5,020) (6,829)
Interest income............................................. 112 143 610
Interest expense............................................ (10) (135) (348)
Other expense............................................... -- (10) (54)
------- ------- -------
Net loss.................................................... $(2,401) $(5,022) $(6,621)
======= ======= =======
Basic and diluted net loss per share........................ $ (6.52) $ (2.05) $ (1.37)
======= ======= =======
Basic and diluted weighted average shares outstanding....... 368 2,449 4,844
======= ======= =======
Pro forma basic and diluted net loss per share
(unaudited)............................................... $ (0.35)
=======
Pro forma basic and diluted weighted average shares
outstanding (unaudited)................................... 18,896
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 76
SKYSTREAM NETWORKS INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT AND REDEEMABLE CONVERTIBLE
PREFERRED STOCK
(IN THOUSANDS)
<TABLE>
REDEEMABLE
CONVERTIBLE
PREFERRED STOCK NOTES
(NOTE 6) COMMON STOCK ADDITIONAL RECEIVABLE
---------------- --------------- PAID-IN FROM
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDERS
------ ------- ------ ------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1996............................ -- $ -- 4,676 $5 $ 35 $ --
Exercise of stock options.............................. -- -- 45 -- 3 --
Issuance of Series A preferred stock, net.............. 6,637 4,099 -- -- -- --
Issuance of Series B preferred stock warrants.......... -- -- -- -- 64 --
Net loss............................................... -- -- -- -- -- --
------ ------- ----- -- ------- -----
Balances, December 31, 1997............................ 6,637 4,099 4,721 5 102 --
Issuance of Series B preferred stock, net.............. 3,367 5,038 -- -- -- --
Exercise of stock options.............................. -- -- 1,799 2 119 (109)
Issuance of common stock............................... -- -- 151 -- 22 --
Net loss............................................... -- -- -- -- -- --
------ ------- ----- -- ------- -----
Balances, December 31, 1998............................ 10,004 9,137 6,671 7 243 (109)
Issuance of Series C preferred stock, net.............. 5,256 17,466 -- -- -- --
Exercise of stock options.............................. -- -- 1,308 1 933 (700)
Option grants to non-employees......................... -- -- -- -- 781 --
Amortization of deferred stock compensation to non-
employees............................................ -- -- -- -- -- --
Deferred employee stock-based compensation............. -- -- -- -- 9,109 --
Amortization of deferred stock-based compensation...... -- -- -- -- -- --
Net loss............................................... -- -- -- -- -- --
------ ------- ----- -- ------- -----
Balances, December 31, 1999............................ 15,260 $26,603 7,979 $8 $11,066 $(809)
====== ======= ===== == ======= =====
DEFERRED
STOCK-BASED ACCUMULATED
COMPENSATION DEFICIT TOTAL
------------ ----------- --------
<S> <C> <C> <C>
Balances, December 31, 1996............................ $ -- $ (361) $ (321)
Exercise of stock options.............................. -- -- 3
Issuance of Series A preferred stock, net.............. -- -- --
Issuance of Series B preferred stock warrants.......... -- -- 64
Net loss............................................... -- (2,401) (2,401)
------- -------- --------
Balances, December 31, 1997............................ -- (2,762) (2,655)
Issuance of Series B preferred stock, net.............. -- -- --
Exercise of stock options.............................. -- -- 12
Issuance of common stock............................... -- -- 22
Net loss............................................... -- (5,022) (5,022)
------- -------- --------
Balances, December 31, 1998............................ -- (7,784) (7,643)
Issuance of Series C preferred stock, net.............. -- -- --
Exercise of stock options.............................. -- -- 234
Option grants to non-employees......................... (781) -- --
Amortization of deferred stock compensation to non-
employees............................................ 341 -- 341
Deferred employee stock-based compensation............. (9,109) --
Amortization of deferred stock-based compensation...... 1,700 -- 1,700
Net loss............................................... -- (6,621) (6,621)
------- -------- --------
Balances, December 31, 1999............................ $(7,849) $(14,405) $(11,989)
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 77
SKYSTREAM NETWORKS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(2,401) $(5,022) $(6,621)
Adjustments to reconcile net loss to net cash used in
operating activities:
In-process research and development..................... -- -- 101
Depreciation and amortization........................... 78 276 708
Stock-based compensation................................ -- -- 1,700
Stock-based compensation for non-employee stock
options................................................ -- -- 341
Amortization of deferred financing costs................ 4 21 21
Loss on disposal of property and equipment.............. -- 9 30
Common stock donated to charity......................... -- 6 --
Provision for doubtful accounts......................... -- 30 164
Changes in operating assets and liabilities:
Accounts receivable................................... -- (630) (2,576)
Interest receivable................................... (45) 45 --
Inventories........................................... (195) 32 41
Prepaid expenses and other current assets............. (86) 23 (200)
Accounts payable...................................... 60 31 870
Accrued liabilities................................... 36 195 699
Deferred revenue...................................... -- 73 527
------- ------- -------
Net cash used in operating activities............... (2,549) (4,911) (4,195)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of certain assets from Varuna Software........ -- -- (313)
Purchase of securities.................................... (4,940) -- --
Proceeds from sale of securities.......................... 3,991 949 --
Acquisition of property and equipment..................... (446) (677) (1,253)
Increase in other assets.................................. -- (21) 10
------- ------- -------
Net cash (used in) provided by investing
activities.......................................... (1,395) 251 (1,556)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable................... 374 484 142
Proceeds from issuance of long-term debt.................. -- 2,000 --
Principal payments on notes payable....................... -- (193) (280)
Principal payments on long-term debt...................... -- -- (333)
Proceeds from issuance of common stock.................... 3 29 234
Proceeds from issuance of redeemable preferred stock, net
of issuance costs....................................... 3,799 5,038 17,466
------- ------- -------
Net cash provided by financing activities........... 4,176 7,358 17,229
------- ------- -------
Net increase in cash and cash equivalents................... 232 2,698 11,478
Cash and cash equivalents, beginning of period.............. 35 267 2,965
------- ------- -------
Cash and cash equivalents, end of period.................... $ 267 $ 2,965 $14,443
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest.................................... $ 10 $ 133 $ 341
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Conversion of stockholder notes payable and related
interest to Series A preferred stock................... $ 300 $ -- $ --
======= ======= =======
Issuance of warrants to lender in connection with
equipment financing line............................... $ 64 $ -- $ --
======= ======= =======
Issuance of note receivable from stockholders for
exercise of stock options.............................. $ -- $ 109 $ 700
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 78
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- FORMATION AND BUSINESS OF THE COMPANY:
SkyStream Networks Inc. (formerly SkyStream Corporation and SkyStream
Networks Corporation) (the "Company") was incorporated in the State of
California in February 1996 to provide digital broadcast networking solutions to
the digital broadcast market. The Company operates in one industry segment.
REINCORPORATION AND STOCK SPLIT
In January 2000, the Company's stockholders' approved the reincorporation
of the Company in the State of Delaware and in March 2000 a three-for-two stock
split became effective. As a result of the reincorporation, the Company will be
authorized, upon the conversion of the currently outstanding preferred stock or
the closing of the proposed initial public offering, to issue 350,000,000 shares
of $0.001 par value common stock and 10,000,000 shares of $0.001 par value
preferred stock. The par value and shares of common and preferred stock in the
accompanying financial statements and footnotes have been retroactively adjusted
to reflect the reincorporation and stock split.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. Any significant inter-company accounts and
transactions have been eliminated.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less at the time of purchase to be cash
equivalents.
REVENUE RECOGNITION
The Company generally recognizes product revenue upon shipment of product
unless there are significant post-delivery obligations or collection is not
considered probable at the time of sale. When significant post-delivery
obligations exist, revenue is deferred until such obligations are fulfilled.
Revenue from service obligations is deferred and recognized ratably over the
period of the obligation. The Company accrues for warranty costs, sales returns,
and other allowances at the time of shipment based on its experience.
Revenue from transactions involving the Company's software application
products is accounted for in accordance with Statement of Position ("SOP") 97-2,
"Software Revenue Recognition", SOP 98-4, "Deferral of Effective Date of SOP
97-2", and SOP 98-9, "Software Revenue Recognition with Respect to Certain
Arrangements". Accordingly, the Company recognizes revenue from licenses of
software application products provided that a purchase order has been received,
the software and related documentation have been shipped, collection of the
resulting receivable is deemed probable, and the fee is fixed or determinable.
To date, revenue from such transactions has not been significant.
F-7
<PAGE> 79
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost less accumulated depreciation.
Depreciation of property and equipment is computed using the straight-line
method over the estimated useful lives of the related assets of two to five
years. Leasehold improvements are amortized over their useful lives or the lease
term, whichever is shorter. Upon sale or retirement of assets, the cost and
related accumulated depreciation are removed from the balance sheet and the
resulting gain or loss is reflected in operations.
INTANGIBLE ASSETS
Intangible assets comprise primarily of purchased technology, goodwill,
assembled workforce and trade name. Intangible assets are amortized on a
straight-line basis over the estimated lives, which generally range from one to
three years. See Note 4.
LONG-LIVED ASSETS
The Company accounts for long-lived assets under Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," which requires
the Company to review for impairment of long-lived assets, whenever events or
changes in circumstances indicate that the carrying amount of an asset might not
be recoverable. When such an event occurs, the Company estimates the future
cashflows expected to result from the use of the asset and its eventual
disposition. If the undiscounted expected future cash flows is less than the
carrying amount of the asset, an impairment loss is recognized. To date, no
impairment loss has been recognized.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is computed on
a first-in, first-out basis. Inventories at December 31, 1998 and 1999 are
comprised entirely of raw materials.
RESEARCH AND DEVELOPMENT COSTS
Expenditures for research and development are charged to expense as
incurred. Under Statement of Financial Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed"
certain software development costs incurred in the period after technological
feasibility has been established and before product release, are required to be
capitalized. Development costs incurred in the period between achievement of
technological feasibility, which the Company defines as the establishment of a
working model, until the general availability of such software to customers, has
been short and software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not capitalized any software
development costs to date.
ADVERTISING
Costs related to advertising and promotion of products are charged to sales
and marketing expense as incurred. Advertising expense for the years ended
December 31, 1999, 1998 and 1997 was $39,000, $45,000 and $5,000, respectively.
CERTAIN RISKS AND UNCERTAINTIES
The Company's products and services are concentrated in a single segment in
the digital broadcasting industry which is characterized by rapid technological
advances, changes in customer
F-8
<PAGE> 80
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
requirements and evolving regulatory requirements and industry standards. The
success of the Company depends on management's ability to anticipate or to
respond quickly and adequately to technological developments in its industry,
changes in customer requirements or changes in regulatory requirements or
industry standards. Any significant delays in the development or introduction of
products or services could have a material adverse effect on the Company's
business and operating results.
The Company is dependent on single or limited sources of supply for certain
key components of its products. An interruption or delay in supply of any of
these components could have a material adverse effect on the Company's business
and operating results.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and cash equivalents
and accounts receivable.
The Company's cash and cash equivalents are deposited with two domestic
financial institutions.
The Company performs ongoing credit evaluations of its customers' financial
condition and generally does not require collateral.
The following table summarizes the Company's revenues and accounts
receivable balances with its major customers as percentages of total
corresponding revenues and accounts receivable at or exceeding 10%:
<TABLE>
<CAPTION>
ACCOUNTS
REVENUES RECEIVABLE
-------------- --------------
YEAR ENDED
DECEMBER 31, DECEMBER 31,
-------------- --------------
1998 1999 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Customer A.................................... 21% 38% 13% 44%
Customer B.................................... 29% 12% 11% 13%
Customer C.................................... 10% 5% 15% 5%
Customer D.................................... 13% -- 30% --
Customer E.................................... -- 10% -- --
Customer F.................................... 7% -- 15% --
</TABLE>
Revenues for 1997 are excluded as they were insignificant.
INCOME TAXES
The Company accounts for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to amounts expected to
be realized.
STOCK-BASED COMPENSATION
The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and complies with the
disclosure provisions of Statement of Financial Accounting Standards ("SFAS")
No. 123, "Accounting for Stock-Based Compensation." The
F-9
<PAGE> 81
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123 and Emerging Issues Task Force ("EITF") EITF 96-18
"Accounting for equity investments that are issued to other than employees for
acquiring, or in conjunction with selling, goods, or services."
COMPREHENSIVE INCOME
The Company adopted the provisions of SFAS No. 130, "Reporting
Comprehensive Income," ("SFAS No. 130"). This statement requires companies to
classify items of other comprehensive income by their nature in the financial
statements and display the accumulated balance of other comprehensive income
separately from retained earnings in the equity section of a statement of
financial position. To date, the Company has not had any transactions that are
required to be reported in comprehensive income (loss) as compared to its
reported net loss and accordingly net loss is equal to comprehensive net loss
for all periods presented.
NET LOSS PER SHARE
The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS No. 128 and SAB 98, basic net loss per share is computed
by dividing the net loss for the period by the weighted average number of shares
of common stock outstanding during the period. Basic weighted average shares
exclude shares of common stock subject to repurchase ("restricted shares").
Diluted net loss per share is computed by dividing the net loss for the period
by the weighted average number of shares of common stock and potential common
stock outstanding during the period, if dilutive. Potential common stock
includes unvested restricted shares of common stock and incremental shares of
common stock issuable upon the exercise of stock options and warrants and upon
conversion of Series A, B and C redeemable convertible preferred stock.
The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Numerator:
Net Loss.......................................... $(2,401) $(5,022) $(6,621)
------- ------- -------
Denominator:
Weighted average shares outstanding............... 4,699 6,377 7,308
Weighted average shares of common stock subject to
repurchase..................................... (4,331) (3,928) (2,464)
------- ------- -------
Denominator for basic and diluted calculation....... 368 2,449 4,844
======= ======= =======
Basic and diluted net loss per share................ $ (6.52) $ (2.05) $ (1.37)
======= ======= =======
</TABLE>
The effects of options to purchase 2,660,935, 2,189,499 and 2,572,449
shares of common stock at an average exercise price of $0.07, $0.14 and $1.31
per share; and 6,637,500, 10,004,169 and 15,260,170 common shares resulting from
the potential conversion of convertible preferred stock for the years ended
December 31, 1997, 1998 and 1999, respectively, have not been included in the
computation of diluted net loss per share as their effect would have been
anti-dilutive.
F-10
<PAGE> 82
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Pro forma net loss per share for the year ended December 31, 1999, is
computed using the weighted average number of shares of common stock
outstanding, including the pro forma effects of the automatic conversion of the
Company's Series A, B and C redeemable convertible preferred stock into shares
of the Company's common stock effective upon the closing of the Company's
initial public offering as if such conversion occurred on January 1, 1999 or at
the date of original issuance, if later. The resulting pro forma adjustment
includes an increase in the weighted average shares used to compute basic net
loss per share of 14,051,851 for the year ended December 31, 1999.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. The Company has not yet determined what
the effect of SFAS No. 133 will be on the operations and financial position of
the Company. The Company will be required to implement SFAS No. 133 as amended
by SFAS No. 137, beginning in 2001. The Company does not currently hold
derivative instruments or engage in hedging activities.
In December 1999, the SEC issued SAB 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. Management
believes that the impact of SAB 101 will not have a material effect on the
financial position or results of operations of the Company.
NOTE 3 -- BALANCE SHEET COMPONENTS (IN THOUSANDS):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1999
------ -------
<S> <C> <C>
Property and equipment, net:
Computer and office equipment............................. $ 879 $ 1,985
Furniture and fixtures.................................... 207 323
Machinery................................................. 41 41
Leasehold improvements.................................... 23 43
------ -------
1,150 2,392
Less: accumulated depreciation and amortization........... (351) (1,029)
------ -------
$ 799 $ 1,363
====== =======
Accrued liabilities:
Accrued compensation...................................... $ 218 $ 419
Accrued receipts.......................................... 37 404
Other accruals............................................ 53 184
------ -------
$ 308 $ 1,007
====== =======
</TABLE>
NOTE 4 -- ASSET ACQUISITION
In September 1999, the Company acquired certain assets of Varuna Software,
Inc., which was developing traffic management systems to maximize digital
technology opportunities in the data
F-11
<PAGE> 83
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
broadcast industry. The cash purchase price including acquisition costs of
approximately $313,000 has been allocated to the tangible and intangible assets
acquired on the basis of their respective fair values on the acquisition date.
The fair value of intangible assets was determined using a combination of
methods, including estimates based on the risk-adjusted income approach for
acquired research and development and completed technology, and on the cost
replacement approach for acquired work force.
The allocation of the purchase price is summarized below (in thousands):
<TABLE>
<S> <C>
Developed technology........................................ $117
In-process research and development......................... 101
Trade name.................................................. 22
Assembled workforce......................................... 39
Fixed assets................................................ 30
Goodwill.................................................... 4
----
Total net purchase price.................................... $313
====
</TABLE>
The amount allocated to in-process research and development represents the
amounts allocated to projects that, as of the date of the acquisition, had not
yet reached technological feasibility and had no alternative future use. At the
date of acquisition the detailed product design and product development up to
the stage prior to the first prototype had been completed on the project. The
Company anticipates spending approximately $200,000 to complete the project and
anticipates the development will be completed and benefits will begin in the
2000 timeframe. The value of these projects was determined by estimating the
resulting net cash flows from the sale of the products resulting from the
completion of the projects, reduced by the portion of the revenue attributable
to core technology and the percentage completion of the project. The resulting
cash flows were then discounted back to their present value at appropriate
discount rates. Cash flows related to the in-process research and development
were discounted at 40%.
Developed technology is technology that is being used in existing products
of the business and is distinguished from in-process technology and advances
that are the basis for the Company's developed and in-process products. New and
in-process products may leverage core technology to different degrees depending
on the extent of incorporation of new, previously undeveloped technologies. The
nature of the efforts to develop the purchased in-process research and
development into commercially viable products principally relates to the
completion of all planning, designing, prototyping and testing activities that
are necessary to establish that the product can be produced to meet its design
specification including function, features and technical performance
requirements. The resulting net cash flows from such products are based on
estimates of revenues, cost of revenues, research and development costs, sales
and marketing costs, and income taxes from such projects. It is reasonably
possible that the development of this technology could fail because of either
prohibitive cost, inability to perform the required efforts to complete the
technology or other factors outside the Company's control such as a change in
the market for the resulting developed products. In addition, at such time that
the project is completed it is reasonably possible that the completed product
does not receive market acceptance or that the Company's development was charged
to the statement of operations in the period of the acquisition.
The results of Varuna Software, Inc. are not material to the operations of
Skystream for 1998 and 1999 and accordingly, no pro forma financial information
has been presented.
F-12
<PAGE> 84
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- BORROWINGS:
EQUIPMENT FINANCING LINE
The Company maintains a $1,000,000 equipment financing line for which
draw-downs were available through April 30, 1999. Borrowings under this
agreement are collateralized by the assets purchased under this equipment
financing line. As of December 31, 1999, thirteen separate equipment notes had
been drawn against this financing line for total principal amounts of
$1,000,000. These notes bear interest at a rate of 14.0% to 14.7%. Payments are
due in installments ending between October 31, 2000 and December 31, 2001.
Aggregate annual maturities of the notes payable are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C>
2000........................................................ $ 395
2001........................................................ 201
-----
596
Less: amount representing interest.......................... (69)
-----
527
Less: current portion....................................... (340)
-----
$ 187
=====
</TABLE>
In October 1997, in connection with the equipment financing line, the
Company issued to the lender warrants to purchase 53,078 shares of Series B
preferred stock. The warrants are exercisable at $1.09 per share and expire at
the earlier of October 2007, or two years after an initial public offering by
the Company. Using the Black-Scholes model, the fair value of these warrants was
determined to be $64,000. This balance is recorded as deferred financing costs
and is amortized over the three year life of the financing line. The
amortization charge for the years ended December 31, 1999, 1998, and 1997 was
$21,000, $21,000 and $4,000, respectively.
LONG TERM DEBT
In August 1998, the Company entered into a long term debt agreement with a
financial institution to borrow up to $2,000,000. As of December 31, 1999,
$1,667,000 was outstanding under this agreement. Borrowings under this agreement
are collateralized by substantially all of the Company's assets, excluding
intellectual property, and are subordinated to any claims under the equipment
financing line. This debt bears interest at the prime rate plus 4.5% (13% at
December 31, 1999). Interest payments are due monthly in arrears commencing with
the initial draw-down. Principal payments are due in twenty-four equal payments
commencing in October 1999.
Aggregate annual payments due on the long term debt are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
<S> <C>
2000........................................................ $1,058
2001........................................................ 788
------
1,846
Less: amount representing interest.......................... (179)
------
1,667
Less: current portion....................................... (917)
------
$ 750
======
</TABLE>
F-13
<PAGE> 85
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- REDEEMABLE CONVERTIBLE PREFERRED STOCK:
At December 31, 1999, preferred stock consists of the following (in
thousands):
<TABLE>
<CAPTION>
COMMON
SHARES STOCK
SHARES ISSUED AND PROCEEDS RESERVED FOR LIQUIDATION
SERIES AUTHORIZED OUTSTANDING (NET) CONVERSION VALUE
------ ---------- ----------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
A.................. 6,637 6,637 $ 4,099 6,637 $ 4,425
B.................. 3,420 3,367 5,038 3,420 5,050
C.................. 5,256 5,256 17,466 5,256 17,520
------ ------ ------- ------ -------
15,313 15,260 $26,603 15,313 $26,995
====== ====== ======= ====== =======
</TABLE>
DIVIDENDS
The holders of Series A, Series B and Series C preferred stock are entitled
to receive dividends of $0.05, $0.15 and $0.33 per share, per annum,
respectively. Such dividends, which are in preference to any dividends on common
stock, are payable whenever funds are legally available and when declared by the
Board of Directors. The right of the holders of the preferred stock to receive
dividends is not cumulative. There have been no dividends declared to date.
CONVERSION
Each share of preferred stock is convertible into one share of common stock
at the option of the holder at any time, with the conversion ratio subject to
antidilution provisions. Conversion is automatic upon either the consent of the
holders of a majority of the outstanding shares of the preferred stock or the
effective date of a public offering of common stock for which the aggregate
proceeds are not less than $15,000,000 and the offering price is not less than
$5.00 per share of common stock. At December 31, 1999, 15,313,248 shares of the
Company's common stock have been reserved for conversion. The stockholders of
preferred stock also have certain registration rights.
VOTING
At any such time as at least 4,500,000 shares of preferred stock are
outstanding, the holders of preferred stock voting as a class shall be entitled
to elect two directors. The holders of common stock voting as a separate class
shall be entitled to elect one director. The remaining directors, or all
directors if less than 4,500,000 shares of preferred stock are outstanding,
shall be elected by the holders of the preferred stock and common stock voting
as one class, with the preferred stockholders included based on the number of
shares of common stock into which such shares of preferred stock could be
converted.
LIQUIDATION
In the event of a liquidation of the Company, the Series A, Series B and
Series C preferred stockholders are entitled to receive $0.67, $1.50 and $3.33
per share, respectively, in preference to any distribution to the common
stockholders. If the assets of the Company are not sufficient to pay this
distribution, then the assets and funds of the Company will be distributed
ratably among the holders of Series A, Series B and Series C preferred stock.
Amounts available for distribution in excess of the Series A, Series B and
Series C liquidation preference amounts will be distributed to the holders of
the Series A, Series B and Series C preferred stock and common stock pro rata
based on the number of shares held by each, assuming conversion of all such
preferred stock into common
F-14
<PAGE> 86
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
stock until the Series A, Series B and Series C preferred stockholders have
received an aggregate of $2.00, $3.67 and $5.00 per share, respectively. Any
remaining amounts available will be distributed ratably among the holders of
common stock.
A consolidation or merger of the Company with or into any other corporation
or corporations, acquisition by any other corporation or corporations, or a sale
of all or substantially all of the assets or voting control of the Company, in
which the prior stockholders of the Company do not own a majority of the
outstanding shares of the surviving corporation is deemed to be a liquidation.
NOTE 7 -- STOCKHOLDERS' DEFICIT:
COMMON STOCK
Each share of common stock is entitled to one vote. The holders of common
stock are also entitled to receive dividends whenever funds are legally
available and when declared by the Board of Directors, subject to the prior
rights of holders of all classes of stock outstanding having priority rights as
to dividends. There have been no dividends declared to date.
Of the shares issued to date, 7,289,850 shares of the Company's common
stock have been issued under restricted stock purchase agreements, under which
the Company has the option to repurchase issued shares of common stock. Under
these agreements, 25% of the Company's repurchase rights lapse after one year.
The remaining rights lapse evenly over the following three years. At December
31, 1999, 1,935,296 outstanding common shares were subject to repurchase.
STOCK OPTION PLAN
The Company has reserved 7,398,000 shares of its common stock under its
1996 Stock Option Plan (the "Plan") for issuance of nonstatutory and incentive
stock options to employees and consultants. The Plan expires in 2006. Options to
purchase the Company's common stock may be granted at a price not less than 85%
of fair market value in the case of nonstatutory stock options, and at a price
not less than fair market value in the case of incentive stock options. Fair
market value is determined by the Board of Directors. Options become exercisable
as determined by the Board of Directors but in no case at a rate less than 20%
per annum over five years from the grant date. Options expire as determined by
the Board of Directors but not more than ten years after the date of grant.
F-15
<PAGE> 87
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Activity under the Plan is as follows (in thousands):
<TABLE>
<CAPTION>
WEIGHTED
SHARES NUMBER AVERAGE
AVAILABLE OF EXERCISE EXERCISE AGGREGATE
FOR GRANT SHARES PRICE PRICE PRICE
--------- ------ ------------- -------- ---------
<S> <C> <C> <C> <C> <C>
Shares reserved at Plan
inception................... 5,074
Options granted................ (2,741) 2,741 $ 0.07 $0.07 $ 182
Options exercised.............. -- (45) 0.07 0.07 (3)
Options canceled............... 35 (35) 0.07 0.07 (2)
------ ------ ------------- ----- ------
Balances, December 31, 1997...... 2,368 2,661 0.07 0.07 177
Options granted................ (1,910) 1,910 0.07 - 0.30 0.15 294
Options exercised.............. -- (1,799) 0.07 - 0.15 0.07 (121)
Options canceled............... 582 (582) 0.07 - 0.30 0.09 (53)
------ ------ ------------- ----- ------
Balances, December 31, 1998...... 1,040 2,190 0.07 - 0.30 0.14 297
Shares authorized.............. 2,324 --
Options granted................ (1,976) 1,976 0.50 - 3.67 2.09 4,135
Options exercised.............. -- (1,308) 0.07 - 2.67 0.71 (933)
Options canceled............... 286 (286) 0.07 - 2.33 0.43 (122)
------ ------ ------------- ----- ------
Balances, December 31, 1999...... 1,674 2,572 $0.07 - $3.67 $1.31 $3,377
====== ====== ============= ===== ======
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AT DECEMBER 31, 1999 OPTIONS EXERCISABLE
- ------------------------------------------------- AT DECEMBER 31, 1999
WEIGHTED --------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OF SHARES LIFE (YEARS) PRICE OF SHARES PRICE
-------- --------- ------------ -------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.07 452 8.05 $0.07 330 $0.07
0.15 192 8.60 0.15 27 0.15
0.30 356 8.91 0.30 323 0.30
0.50 - 0.67 158 9.11 0.58 14 0.50
1.33 404 9.37 1.33 11 1.33
2.00 - 2.67 872 9.68 2.38 38 2.67
3.67 138 9.88 3.67 1 3.67
----- ---
$0.07 - $3.67 2,572 9.13 $1.31 744 $0.33
===== ===
</TABLE>
The Company has agreements with certain key employees whereby options
granted become immediately exercisable, subject to repurchase by the Company.
The repurchase rights lapse over the options vesting period of four years. Of
the options exercisable at December 31, 1999, 470,156 would be subject to
repurchase if exercised.
FAIR VALUE DISCLOSURES
Pro forma information regarding net loss and net loss per share is required
by SFAS No. 123, which also requires that the information be determined as if
the Company has accounted for its
F-16
<PAGE> 88
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
employee stock options granted under the fair value method. The fair value for
these options was estimated using the Black-Scholes option pricing model.
The Company calculated the fair value of each option grant on the date of
grant using the Black-Scholes option pricing model as prescribed by SFAS 123
using the following assumptions:
<TABLE>
<S> <C>
Risk-free interest rate..................................... 4.54% - 5.99%
Expected life (in years).................................... 3
Dividend yield.............................................. 0%
Expected volatility......................................... 0%
</TABLE>
As the determination of fair value of all options granted after such time
as the Company becomes a public entity will include an expected volatility
factor in addition to the factors described in the preceding paragraph, the
above results may not be representative of future periods.
The weighted average grant date fair value of options granted during the
years ended December 31, 1997, 1998 and 1999 was $0.01, $0.02 and $5.47,
respectively.
Had compensation costs been determined based upon the fair value at the
grant date, consistent with the methodology prescribed under SFAS No. 123, the
Company's pro forma net loss and pro forma basic and diluted net loss per share
under SFAS No. 123 would have been (in thousands, except per share data):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Net loss -- as reported............................. $(2,401) $(5,022) $(6,621)
------- ------- -------
Net loss -- pro forma............................... $(2,405) $(5,041) $(6,846)
------- ------- -------
Net loss per share -- basic and diluted as
reported.......................................... $ (6.52) $ (2.05) $ (1.37)
------- ------- -------
Net loss per share -- basic and diluted pro forma... $ (6.54) $ (2.06) $ (1.41)
------- ------- -------
</TABLE>
STOCK-BASED COMPENSATION
In connection with certain stock option grants the Company recorded
deferred stock-based compensation costs totaling $9,109,000 being the difference
between the exercise price and the deemed fair value at the date of grant which
is being recognized over the vesting period of the related options of generally
four years. Amortization expense associated with deferred stock-based
compensation totaled $1,700,000 for the year ended December 31, 1999. Future
amortization of deferred stock-based compensation expense is estimated to be
approximately $4.5 million, $1.9 million, $0.8 million and $0.2 million in the
years ended December 31, 2000, 2001, 2002 and 2003, respectively.
Stock-based compensation expense is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1999
------------
<S> <C>
Cost of revenues............................................ $ 252
Research and development.................................... 1,151
Sales and marketing......................................... 83
General and administrative.................................. 214
------
$1,700
======
</TABLE>
F-17
<PAGE> 89
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
There was no stock-based compensation expense in 1997 and 1998.
Stock-based compensation expense related to stock options granted to
non-employees is recognized as earned. At each reporting date, the Company
revalues the stock-based compensation for the unearned element using the
Black-Scholes option pricing model. As a result, the stock-based compensation
expense will fluctuate as the fair market value of the Company's common stock
fluctuates. In connection with the grant of stock options to non-employees, the
Company recorded stock-based compensation expense of $341,000 for the year ended
December 31, 1999. As of December 31, 1999, the Company expects to amortize
deferred stock-based compensation expense of $440,000 over future periods
assuming no change in the underlying value of the Company's common stock.
NOTES RECEIVABLE FROM STOCKHOLDERS
In January 1998 and November 1999, certain officers of the Company entered
into full recourse promissory notes payable to the Company for $109,000 and
$700,000 for the exercise of 1,638,750 and 262,500 common stock options,
respectively. The notes bear interest at the minimum rate allowable by the
Internal Revenue Service (approximately 6% at December 31, 1999) and are
collateralized by the common stock purchased. The interest on the 1998 note is
forgiven annually as long as the officer is an employee of the Company. The
interest on the 1999 note is due in full on the due date of the note. The notes
are due 5 years after the respective notes' inception or 90 days after the
officer's termination of employment with the Company, whichever is earlier. In
addition, the proceeds from the sale of any shares of common stock of the
Company by the holder will be applied to repay the note.
NOTE 8 -- 401(k) SAVINGS PLAN:
The Company has a savings plan that qualifies as a deferred salary
arrangement under Section 401(k) of the Internal Revenue Code (the "Plan").
Contributions made by the Company are determined annually by the Board of
Directors. No contributions have been made to the Plan by the Company.
NOTE 9 -- INCOME TAXES:
At December 31, 1999, the Company has federal and state net operating loss
carryforwards of approximately $11,426,000 and $9,561,000, respectively,
available to offset future regular and alternative minimum taxable income. The
Company has approximately $501,000 and $393,000 respectively of federal and
state credits to offset future taxes payable. The operating loss carryforwards
and credits will expire between 2004 and 2019, if not utilized.
The Tax Reform Act of 1986 limits the use of net operating loss and tax
credit carryforwards in certain situations where changes occur in the stock
ownership of a company. If the Company should have an ownership change, as
defined by the tax law, utilization of the carryforwards could be restricted.
F-18
<PAGE> 90
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Temporary differences which give rise to significant portions of deferred
tax assets and liabilities as of December 31, 1998 and 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
<S> <C> <C>
Net operating loss carryforwards............................ $ 2,900 $ 4,443
Research and development tax credits........................ 342 894
Accrual and other........................................... 110 306
------- -------
3,352 5,643
Less valuation allowance.................................... (3,352) (5,643)
------- -------
Net deferred tax assets..................................... $ -- $ --
======= =======
</TABLE>
Due to uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a 100% valuation
allowance against its net deferred tax assets. At such time as it is determined
that it is more likely than not that the deferred tax assets are realizable, the
valuation allowance will be reduced.
NOTE 10 -- COMMITMENTS AND CONTINGENCIES:
The Company relies on a single contract manufacturer, Pemstar, to
manufacture their products. The Company does not have a written agreement with
Pemstar. Manufacturing forecasts and purchase orders are issued to Pemstar each
quarter by the Company based on the Company's sales forecasts. As actual sales
may vary from forecasts, or if the arrangement is terminated, the Company may be
obligated to purchase excess inventory. To date no such situation has occurred.
NOTE 11 -- SEGMENT INFORMATION:
The Company identifies its operating segments based on business activities,
management responsibility and geographical location. For all periods presented,
the Company operated in a single business segment, primarily in the United
States.
Net revenue information by geographic area is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ------ ------
<S> <C> <C> <C>
United States............................................ $71 $ 851 $5,241
Canada................................................... -- 370 1,153
Switzerland.............................................. -- -- 1,061
Other.................................................... -- 35 1,063
--- ------ ------
Total.................................................. $71 $1,256 $8,518
=== ====== ======
</TABLE>
As of December 31, 1999, the Company maintains approximately $66,000 and
$5,000 of long-lived assets in Canada and the United Kingdom, respectively.
NOTE 12 -- SUBSEQUENT EVENTS:
In February 2000, the Company entered into a ten year, non-cancellable
lease for office space commencing in July 2000. The Company is obligated to make
monthly payments totaling approximately $1.5 million per year. In February 2000,
in connection with the lease commitment, the Company issued to the lessor
warrants to purchase 15,000 shares of Common Stock. The warrants are exercisable
at $8.67 per share and expire at the earlier of the Company's initial public
offering or
F-19
<PAGE> 91
SKYSTREAM NETWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
February 2005. Using the Black-Scholes model, the fair value of these warrants
was estimated to be approximately $200,000. This balance will be deferred and
recognized as additional rent expense over the term of the lease.
From January to March 2000, the Company granted options to purchase
1,748,500 shares of common stock to existing and new employees at a weighted
average exercise price of $7.55 per share. In connection with these grants, the
Company expects to recognize approximately $14.7 million in deferred stock-based
compensation that will be recognized over the related vesting period.
In January and February 2000, in connection with executive officers and
founders' purchase of 1,215,000 shares of the Company common stock pursuant to
restricted stock purchase agreements, the Company loaned $8,500,000 under full
recourse promissory notes with interest. The interest on certain notes is
forgiven as long as the employee remains with the Company.
F-20
<PAGE> 92
APPENDIX
DESCRIPTIONS OF ARTWORK
Inside Front Cover
The graphic reads "SKYSTREAM NETWORKS" "Building the Broadcast Internet" across
the top. Text describes that SkyStream Networks develops and sells a new
category of networking equipment and software that enables Internet content to
be delivered over broadcast networks. Below the text, a diagram depicts "TV
Content" and "Internet Content" being combined using a SkyStream source media
router and being transmitted to television viewers and personal computer users.
At the bottom of the page are photos of a SkyStream source media router and a
SkyStream edge media router. To the right of the pictures is the sentence:
"SkyStream's media routers and Broadcast Internet management software enable
broadcast service providers, Internet service providers, telecommunications
service providers and content distribution providers to deliver new digital
content and high-demand Internet-based services to any television set top or
personal computer."
Page 31
The graphic consists of three circles in a row linked by arrows. The first
circle contains the words "Traditional Content" accompanied by a listing of
examples of the same. The second circle contains the words "Service Providers"
accompanied by examples of the same. The third circle contains the words "End
Users" accompanied by examples of the same. Beneath the arrows connecting the
circles appear the terms "Congestion Points." The three circles partially rest
inside a shaded band that contains the phrase "Transaction Internet."
Page 33
The graphic consists of a rectangular background in the upper portion of the
graphic at the top of which appears the words "Broadcast Internet." Beneath
these words appears a circle that contains the terms "Broadcast Service
Providers" along with examples of the same. Underneath this circle appears a
pill-shaped figure and two circles in a row connected by two-way arrows. The
pill-shaped figure contains the words "Emerging Content" with examples of the
same underneath. Beneath these examples appears a horizontal line under which
appears the words "Traditional Content" and examples of the same. The circle to
the right of the pill-shaped figure contains the words "Service Providers" with
examples of the same underneath. The last circle in the row of figures contains
the words "End Users" with examples of the same. A one-way arrow runs from the
pill-shaped figure to the circle at the top of the graphic. A two-way arrow
connects the circle at the top of the graphic with the circle in the middle of
the row of figures. An arrow runs from the circle at the top of the graphic to
the circle on the far right of the row of figures. The words "Transaction
Internet" appear beneath the graphic.
Page 36
The graphic consists of a shaded square connected to each of four panels in an
upright rectangular figure by arrows running from a satellite. The shaded square
contains the term "Network Location Source" in the lefthand corner and
"SKYSTREAM SMR" in the righthand corner. An oval containing the words
"Television Programming" appears inside the square. An arrow runs from the oval
to a graphic of SkyStream's source media router with the initials "SMR" on it
which is connected to a graphic depicting a satellite dish. An arrow runs from a
cloud-shaped figure containing a network of computers and the word "Internet" to
the graphic of the SkyStream source media router. The upright rectangular figure
contains the words "Network Edge Location" at the top. It is divided into four
panels each of which contain a phrase and a graphic. Three of the graphics in
the panels consist of an edge media router, a computer with the term "cache"
next to it, a cloud figure with the term "data" in it and a graphic of
SkyStream's source media router. The top panel contains a graphic of a router
with the term "Router" above it rather than the source media router. The panels
are labeled as follows from top to bottom: "Internet Service Providers," "Cable
Operators," "Satellite TV Providers" and "Digital TV Providers." Each of the
panels in the upright rectangular figure is connected to a portion of another
graphic on the right of the page. The graphic on the right of the page is a
columnar figure labeled "Home/Businesses." The top two panels of the upright
rectangular figure are connected to a house and a building in the columnar
figure. The third panel in the upright rectangular figure is connected to a
satellite dish that has an arrow running from it to a satellite. Arrows from the
satellite run to a building and a house in the columnar figure. The last panel
in the upright rectangular figure is connected to a television antenna. A
graphic depicting waves runs from the top of the antenna to a building and a
house in the columnar figure.
Page 37
The graphic is a table. Written vertically on the right side of the table
appears the phrase "Source Media Router Type." The first column in the table is
labeled "Function." Underneath that term appears three rows labeled "Data
Encapsulation," "Data Injection" and "Data and Conditional Access Injection."
The next column is entitled "Series." The three rows in the column contain
pictures of SkyStream routers, each having the term "Data In" and a downward
pointing arrow above them. On the right side of each router appears an outward
facing arrow and the phrase "MPEG Transport Stream Out." The routers in the
second and third rows in the column have the phrase "MPEG Transport Stream In"
and an downward facing arrow on the left side of the router. Beneath the router
in the last row appears an upward pointing arrow next to a key and the phrase
"Conditional Access System (CAS) (DVB Simulcrypt)." The last column in the
figure is entitled "Market Segment Served." The column is divided into three
parts labeled "Satellite," "Digital Television" and "Cable." Through the use of
bullet and asterisk symbols, the graphic depicts which market segment the
particular router indicated serves and which it is planned to serve both
nationally and internationally.
Inside Back Cover
The graphic reads "SKYSTREAM NETWORKS" "Building the Broadcast Internet" across
the top. Beneath a paragraph that describes a couple of SkyStream's achievements
is a table with two columns and three rows. The columns are entitled "Features"
and "Customer Benefits." The rows are entitled "Integration of Internet content
into broadcast streams," "Scalable and predictable content delivery," "Seamless
interoperability with existing equipment" and "Bandwidth optimization." The
table describes the benefits to SkyStream's customers of the features. Beneath
the table appears a graphic containing a coaxial cable, satellite dish and a
television antenna. To the right of the three circles is the sentence:
"SkyStream Networks sells its technology and services to cable, satellite and
digital television broadcasters."
<PAGE> 93
SkyStream
[ART WORK]
<PAGE> 94
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary................... 1
Risk Factors......................... 5
Note Regarding Forward-Looking
Statements......................... 17
Use of Proceeds...................... 17
Dividend Policy...................... 17
Capitalization....................... 18
Dilution............................. 19
Selected Consolidated Financial
Data............................... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 21
Business............................. 29
Management........................... 45
Related Party Transactions........... 54
Principal Stockholders............... 58
Description of Capital Stock......... 61
Shares Eligible for Future Sale...... 65
Underwriting......................... 67
Legal Matters........................ 69
Experts.............................. 69
Where You May Find Additional
Information........................ 69
Index to Consolidated Financial
Statements......................... F-1
</TABLE>
----------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotment or subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
---------------------- Shares
SKYSTREAM NETWORKS
Common Stock
----------------------
[SkyStream Logo]
----------------------
GOLDMAN, SACHS & CO.
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 95
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 SkyStream Networks 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........................................ $ 24,592
NASD filing fee............................................. 9,815
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving costs................................ 300,000
Legal fees and expenses..................................... 550,000
Accounting fees and expenses................................ 300,000
Blue Sky fees and expenses.................................. 5,000
Transfer Agent and Registrar fees........................... 10,000
Miscellaneous expenses...................................... 205,593
Total............................................. $1,500,000
</TABLE>
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.
Article 6 of SkyStream Networks' Restated Certificate of Incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.
Article 8 of SkyStream Networks' Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of SkyStream Networks if
such person acted in good faith and in a manner reasonably believed to be in and
not opposed to the best interest of SkyStream Networks, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his or her conduct was unlawful.
SkyStream Networks has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
SkyStream Networks' 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 our incorporation in February 1996, 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 SkyStream Networks, to
information about SkyStream Networks.
1. In July 1996, we issued and sold 4,676,100 shares of common stock to our
founders for an aggregate purchase price of $40,000.
II-1
<PAGE> 96
2. In February 1997 we issued and sold 6,637,500 shares of Series A
Preferred Stock to six investors for an aggregate purchase price of
$4,425,000.
3. In October and November 1997, we and sold issued four warrants to
purchase an aggregate of 53,078 shares of our Series B Preferred Stock
to four investors at an exercise price of $1.083 per share.
4. In March 1998 we issued and sold 3,366,670 shares of Series B Preferred
Stock to eight investors for an aggregate purchase price of
$5,050,003.50.
5. In August 1998, we issued and sold 113,115 shares of our common stock to
one investor for aggregate consideration of $16,967.25.
6. Between February 1999 and June 1999 we issued and sold 5,256,000 shares
of Series C Preferred Stock to twelve investors for an aggregate
purchase price of $17,520,000.
7. In February 2000, we issued and sold a warrant to purchase 15,000 shares
of our common stock at an exercise price of $8.67 per share.
8. Pursuant to our 1996 Stock Plan, from inception to December 31,1999 we
issued and sold an aggregate of 3,152,154 shares of common stock to
certain employees, officers, directors and consultants.
II-2
<PAGE> 97
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1+ Form of Underwriting Agreement
2.1 Merger Agreement between SkyStream Networks Corporation, a
Delaware corporation, and SkyStream Networks Corporation, a
California Corporation
3.1 Certificate of Incorporation of SkyStream Networks
Corporation
3.1.1 Certificate of Amendment of Certificate of Incorporation of
SkyStream Networks Corporation
3.1.2 Form of Certificate of Incorporation of SkyStream Networks
Corporation to be in effect after the closing of the
offering made under this Registration Statement
3.2 Bylaws of SkyStream Networks Corporation
4.1+ Form of Common Stock Certificate
4.2 Second Amended and Restated Rights Agreement dated as of
February 5, 1999 between SkyStream Corporation and certain
stockholders of SkyStream Corporation
4.2.1 First Amendment to Second Amended and Restated Rights
Agreement dated as of March 22, 1999 between SkyStream
Corporation and certain stockholders of SkyStream
Corporation
4.2.2 Second Amendment to Second Amended and Restated Rights
Agreement dated as of June 9, 1999 between SkyStream
Corporation and certain stockholders of SkyStream
Corporation
4.3 Form of Warrant to Purchase Preferred Stock of SkyStream
Corporation issued to William Kirsch, David Campbell, Helen
E. McLaughlin O'Rourke and Glen Wallace McLaughlin
4.4 Warrant to Purchase Common Stock of SkyStream Networks
Corporation issued to the David Dollinger Living Trust
4.5 Form of Restricted Stock Purchase Agreement entered into as
of July 10, 1996 between SkyStream Corporation and each of
Regis Gratacap, Robert S. Robinett, William Slattery and
Simon Wong
4.5.1 Form of Amendment to Restricted Stock Purchase Agreement
entered into as of February 7, 1997 between SkyStream
Corporation and each of Regis Gratacap, Robert S. Robinett,
William Slattery and Simon Wong
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1 Form of Indemnification Agreement between SkyStream Networks
Inc. and each of its directors and executive officers
10.2 1996 Stock Option Plan, as amended
10.2.1 Form of Option Agreement under the 1996 Stock Option Plan
10.2.2 Form of Exercise Notice and Restricted Stock Purchase
Agreement under the 1996 Stock Option Plan
10.3 2000 Employee Stock Purchase Plan and forms of agreement
thereunder
10.4 2000 Director Option Plan
10.4.1 Form of Option Agreement under the 2000 Director Option Plan
10.5 Employment Offer Letter dated June 12, 1997 from SkyStream
Corporation to James D. Olson
10.6 Employment Offer Letter dated September 8, 1997 from
SkyStream Corporation to Susan Ketcham
10.7 Employment Offer Letter dated January 30, 1998 from
SkyStream Corporation to Chandy Nilakantan
10.8 Employment Offer Letter dated April 17, 1998 from SkyStream
Corporation to Clint Chao
10.9 Employment Offer Letter dated November 1, 1998 from
SkyStream Corporation to Dan Riordan
</TABLE>
II-3
<PAGE> 98
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.10 Employment Offer Letter dated October 17, 1999 from
SkyStream Corporation to David Olson
10.11 Employment Offer Letter dated January 28, 2000 from
SkyStream Networks to Roger E. George
10.12 Sublease Agreement dated December 31, 1999 between SkyStream
Networks and ARCADIS Geraghy & Miller, Inc. (formerly,
Acurex Corporation)
10.13 Lease dated October 23, 1976 between Richard N. Moseman,
Bonnie Moseman Miller and Properties International, allrent,
Inc. and Acurex Corporation ("Master Lease") and related
agreements
10.14 Lease dated February 8, 2000 between SkyStream Networks and
De Guigne Ventures, a California Limited Liability
Corporation and Addendum thereto
10.15++ Nonexclusive International Value Added Reseller Agreement
dated May 16, 1999 between SkyStream Networks and Miralite
Communications
10.16++ International Marketing, Distribution and Support Agreement
dated April 18, 1999 between SkyStream Networks and Harris
Corporation
10.17++ Nonexclusive International Value Added Reseller Agreement
dated December 1, 1999 between SkyStream Networks and
International Datacasting Corporation
10.18 Loan and Security Agreement dated as of August 31, 1998
between Lighthouse Capital Partners II, L.P. and SkyStream
Corporation
21.1 List of Subsidiaries of SkyStream Networks Inc.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
27.1 Financial Data Schedule
</TABLE>
- ---------------
+ To be filed by amendment.
++ Confidential treatment requested.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
II-4
<PAGE> 99
ITEM 17. UNDERTAKINGS
SkyStream 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 SkyStream for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of SkyStream pursuant to the provisions referenced in Item 14 of this
registration statement or otherwise, SkyStream 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 SkyStream of expenses incurred or paid by
a director, officer, or controlling person of SkyStream 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,
SkyStream 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.
SkyStream 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 SkyStream Networks 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-5
<PAGE> 100
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, STATE OF
CALIFORNIA, ON THE 8TH DAY OF MARCH, 2000.
SKYSTREAM NETWORKS, INC.
By /s/ JAMES D. OLSON
------------------------------------
Name: James D. Olson
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, James D.
Olson and Susan Ketcham, and each of them, as his or her attorney-in-fact, with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments to this registration statement (including post-effective
amendments), and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this registration statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said registration statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JAMES D. OLSON President, Chief Executive March 8, 2000
- -------------------------------------------------------- Officer and Director
James D. Olson (Principal Executive Officer)
/s/ SUSAN KETCHAM Vice President, Finance and March 8, 2000
- -------------------------------------------------------- Chief Financial Officer
Susan Ketcham (Principal Accounting
Officer)
/s/ WENDELL G. VAN AUKEN Director March 8, 2000
- --------------------------------------------------------
Wendell G. Van Auken
/s/ GEOFFREY Y. YANG Director March 8, 2000
- --------------------------------------------------------
Geoffrey Y. Yang
/s/ JAMES RAMO Director March 8, 2000
- --------------------------------------------------------
James Ramo
</TABLE>
II-6
<PAGE> 101
REPORT OF FINANCIAL ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
Our report on the consolidated financial statements of SkyStream Networks
Inc. has been included in this Form S-1 on page F-2. In connection with our
audit of such financial statements, we have also audited the related financial
statement schedule listed in the index page II-2 of this Form S-1. In our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly the
information required to be included therein.
PricewaterhouseCoopers LLP
San Jose, California
March 7, 2000
II-7
<PAGE> 102
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE
BEGINNING CHARGED CREDITED AT END
DESCRIPTION OF PERIOD TO EXPENSES TO EXPENSES OF PERIOD
----------- ---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable:
Fiscal year ended December 31,
1997.......................... $ -- $ -- $ -- $ --
Fiscal year ended December 31,
1998.......................... -- 30 -- 30
Fiscal year ended December 31,
1999.......................... $ 30 $ 164 $ 11 $ 183
Deferred tax valuation allowance:
Fiscal year ended December 31,
1997.......................... $ -- $1,393 $ -- $1,393
Fiscal year ended December 31,
1998.......................... 1,393 1,959 -- 3,352
Fiscal year ended December 31,
1999.......................... $3,352 $2,291 $ -- $5,643
</TABLE>
II-8
<PAGE> 103
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1+ Form of Underwriting Agreement
2.1 Merger Agreement between SkyStream Networks Corporation, a
Delaware corporation, and SkyStream Networks Corporation, a
California Corporation
3.1 Certificate of Incorporation of SkyStream Networks
Corporation
3.1.1 Certificate of Amendment of Certificate of Incorporation of
SkyStream Networks Corporation
3.1.2 Form of Certificate of Incorporation of SkyStream Networks
Corporation to be in effect after the closing of the
offering made under this Registration Statement
3.2 Bylaws of SkyStream Networks Corporation
4.1+ Form of Common Stock Certificate
4.2 Second Amended and Restated Rights Agreement dated as of
February 5, 1999 between SkyStream Corporation and certain
stockholders of SkyStream Corporation
4.2.1 First Amendment to Second Amended and Restated Rights
Agreement dated as of March 22, 1999 between SkyStream
Corporation and certain stockholders of SkyStream
Corporation
4.2.2 Second Amendment to Second Amended and Restated Rights
Agreement dated as of June 9, 1999 between SkyStream
Corporation and certain stockholders of SkyStream
Corporation
4.3 Form of Warrant to Purchase Preferred Stock of SkyStream
Corporation issued to William Kirsch, David Campbell, Helen
E. McLaughlin O'Rourke and Glen Wallace McLaughlin
4.4 Warrant to Purchase Common Stock of SkyStream Networks
Corporation issued to the David Dollinger Living Trust
4.5 Form of Restricted Stock Purchase Agreement entered into as
of July 10, 1996 between SkyStream Corporation and each of
Regis Gratacap, Robert S. Robinett, William Slattery and
Simon Wong
4.5.1 Form of Amendment to Restricted Stock Purchase Agreement
entered into as of February 7, 1997 between SkyStream
Corporation and each of Regis Gratacap, Robert S. Robinett,
William Slattery and Simon Wong
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
10.1 Form of Indemnification Agreement between SkyStream Networks
Inc. and each of its directors and executive officers
10.2 1996 Stock Option Plan, as amended
10.2.1 Form of Option Agreement under the 1996 Stock Option Plan
10.2.2 Form of Exercise Notice and Restricted Stock Purchase
Agreement under the 1996 Stock Option Plan
10.3 2000 Employee Stock Purchase Plan and forms of agreement
thereunder
10.4 2000 Director Option Plan
10.4.1 Form of Option Agreement under the 2000 Director Option Plan
10.5 Employment Offer Letter dated June 12, 1997 from SkyStream
Corporation to James D. Olson
10.6 Employment Offer Letter dated September 8, 1997 from
SkyStream Corporation to Susan Ketcham
10.7 Employment Offer Letter dated January 30, 1998 from
SkyStream Corporation to Chandy Nilakantan
10.8 Employment Offer Letter dated April 17, 1998 from SkyStream
Corporation to Clint Chao
10.9 Employment Offer Letter dated November 1, 1998 from
SkyStream Corporation to Dan Riordan
10.10 Employment Offer Letter dated October 17, 1999 from
SkyStream Corporation to David Olson
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.11 Employment Offer Letter dated January 28, 2000 from
SkyStream Networks to Roger E. George
10.12 Sublease Agreement dated December 31, 1999 between SkyStream
Networks and ARCADIS Geraghy & Miller, Inc. (formerly,
Acurex Corporation)
10.13 Lease dated October 23, 1976 between Richard N. Moseman,
Bonnie Moseman Miller and Properties International, allrent,
Inc. and Acurex Corporation ("Master Lease") and related
agreements
10.14 Lease dated February 8, 2000 between SkyStream Networks and
De Guigne Ventures, a California Limited Liability
Corporation and Addendum thereto
10.15++ Nonexclusive International Value Added Reseller Agreement
dated May 16, 1999 between SkyStream Networks and Miralite
Communications
10.16++ International Marketing, Distribution and Support Agreement
dated April 18, 1999 between SkyStream Networks and Harris
Corporation
10.17++ Nonexclusive International Value Added Reseller Agreement
dated December 1, 1999 between SkyStream Networks and
International Datacasting Corporation
10.18 Loan and Security Agreement dated as of August 31, 1998
between Lighthouse Capital Partners II, L.P. and SkyStream
Corporation
21.1 List of Subsidiaries of SkyStream Networks Inc.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see page II-6)
27.1 Financial Data Schedule
</TABLE>
- ---------------
+ To be filed by amendment.
++ Confidential treatment requested.
<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
OF SKYSTREAM NETWORKS CORPORATION
A DELAWARE CORPORATION
AND
SKYSTREAM CORPORATION
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of January 31, 2000, (the
"Agreement") is between SkyStream Networks Corporation, a Delaware corporation
("SkyStream-Delaware") and SkyStream Corporation, a California corporation
("SkyStream-California"). SkyStream-Delaware and SkyStream-California are
sometimes referred to herein as the "Constituent Corporations."
R E C I T A L S
A. SkyStream-Delaware is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital of 85,508,831
shares, 75,000,000 of which are designated "Common Stock", $0.001 par value, and
10,508,831 of which are designated "Preferred Stock", $0.001 par value. Of such
authorized shares of Preferred Stock, 4,425,000 shares are designated "Series A
Preferred Stock," 2,279,831 shares are designated "Series B Preferred Stock" and
3,804,000 shares are designated "Series C Preferred Stock." As of the date of
this Agreement of Merger, 1,000 shares of Common Stock are issued and
outstanding, all of which were held by SkyStream-California. No shares of
Preferred Stock are outstanding.
B. SkyStream-California is a corporation duly organized and existing
under the laws of the State of California and has an authorized capital of
30,508,831 shares, 20,000,000 of which are designated "Common Stock", no par
value and 10,508,831 of which are designated "Preferred Stock", no par value. Of
such authorized shares of Preferred Stock, 4,425,000 shares are designated
"Series A Preferred Stock," and 2,279,831 shares are designated "Series B
Preferred Stock" and 3,804,000 shares are designated "Series C Preferred Stock."
As of the record date of the solicitation of the consent of shareholders at
which this Agreement of Merger was approved, 5,321,433 shares of Common Stock,
4,425,000 shares of Series A Preferred Stock, 2,244,446 shares of Series B
Preferred Stock and 3,504,000 shares of Series C Preferred Stock were issued and
outstanding.
C. The Board of Directors of SkyStream-California has determined that,
for the purpose of effecting the reincorporation of SkyStream-California in the
State of Delaware, it is advisable and in the best interests of
SkyStream-California that SkyStream-California merge with and into
SkyStream-Delaware upon the terms and conditions herein provided.
D. The respective Boards of Directors of SkyStream-Delaware and
SkyStream-California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, SkyStream-Delaware and SkyStream-California hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
SkyStream-California shall be merged with and into SkyStream-Delaware (the
"Merger"), the separate existence of SkyStream-California shall cease and
SkyStream-Delaware shall be, and is herein sometimes referred as, the "Surviving
Corporation", and the name of the Surviving Corporation shall be SkyStream
Networks Corporation.
1.2 Filing and Effectiveness. The Merger shall be completed when the
following actions shall have been completed:
(a) This Agreement and Merger was adopted and approved by the
stockholders of each Constituent Corporation in accordance with the requirements
of the Delaware General Corporation Law and the California General Corporation
Law on January 3, 2000 and January 3, 2000, respectively;
(b) All of the conditions precedent to the consummation of the
Merger specified in this Agreement shall have been satisfied or duly waived by
the party entitled to satisfaction thereof;
(c) An executed Agreement and Plan of Merger meeting the
requirements of the Delaware General Corporation Law shall have been filed with
the Secretary of State of the State of Delaware; and
(d) An executed Certificate of Merger or an executed, acknowledged
and certified counterpart of this Agreement meeting the requirements of the
California Corporations Code shall have been filed with the Secretary of State
of the State of California.
Pursuant to Section 251 of the Delaware General Corporation Law and
Section 1168 of the California Corporations Code, the date and time when the
Merger shall become effective, shall be the date upon which subsections (a), (b)
and (c) of this Section 1.2 are satisfied and as to SkyStream-California on the
day subsection (d) is satisfied, is herein called the "Effective Date of the
Merger."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of SkyStream-California shall cease and SkyStream-Delaware,
as the Surviving Corporation, (i) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date of the Merger, (ii) shall be subject to all actions previously taken by its
and SkyStream-California's Board of Directors, (iii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of
SkyStream-California in the manner more fully set forth in Section 259 of the
Delaware General Corporation Law, (iv) shall continue to be subject to all of
the debts, liabilities and obligations of SkyStream-Delaware as constituted
immediately prior to the Effective Date of the Merger, and (v) shall succeed,
without other transfer, to all of the debts,
<PAGE> 3
liabilities and obligations of SkyStream-California in the same manner as if
SkyStream-Delaware had itself incurred them, all as more fully provided under
the applicable provisions of the Delaware General Corporation Law and the
California Corporations Code.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
SkyStream-Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of SkyStream-Delaware as in effect immediately
prior to the Effective Date of the Merger shall continue in full force and
effect as the Bylaws of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of
SkyStream-California immediately prior to the Effective Date of the Merger shall
be the directors and officers of the Surviving Corporation until their
successors shall have been duly elected and qualified or until as otherwise
provided by law, the Certificate of Incorporation of the Surviving Corporation
or the Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 SkyStream-California Common Shares. Upon the Effective Date of the
Merger, each share of SkyStream-California Common Stock, no par value, issued
and outstanding immediately prior thereto shall by virtue of the Merger and
without any action by the Constituent Corporations, the holder of such shares or
any other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation. No fractional share interests of Surviving Corporation Common Stock
shall be issued. In lieu thereof, any fractional share interests to which a
holder would otherwise be entitled shall be aggregated.
3.2 SkyStream-California Preferred Shares.
(a) Upon the Effective Date of the Merger, each share of Series A
Preferred, Series B Preferred, and Series C Preferred Stock of
SkyStream-California, no par value, issued and outstanding immediately prior to
the Merger, which shares are convertible into such number of shares of
SkyStream-California Common Stock as set forth in the SkyStream-California
Restated Articles of Incorporation, as amended, shall by virtue of the Merger
and without any action by the Constituent Corporations, the holder of such
shares or any other person, be converted into or exchanged for one fully paid
and nonassessable share of Series A Preferred, Series B Preferred and Series C
Preferred Stock of the Surviving Corporation, $0.001 par value, respectively,
having such rights, preferences and privileges as set forth in the Certificate
of Incorporation of the Surviving Corporation, which share of Preferred Stock
shall be convertible into the same number of shares of the Surviving
Corporation's Common Stock, $0.001 par value, as such share of
SkyStream-California Preferred Stock was so convertible into immediately prior
to the Effective Date of the Merger, subject to adjustment pursuant to the terms
of the Certificate of Incorporation of the Surviving Corporation.
<PAGE> 4
3.3 SkyStream-California Options, Warrants, Stock Purchase Rights and
Convertible Securities.
(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume the obligations of SkyStream-California under, and continue, the
1996 Stock Option Plan ("Stock Option Plan"),and all other employee benefit
plans of SkyStream-California. Each outstanding and unexercised option, warrant,
other right to purchase, or security convertible into, SkyStream-California
Common Stock or SkyStream-California Preferred Stock (a "Right") shall become,
subject to the provisions in paragraph (c) hereof, an option, warrant, right to
purchase or a security convertible into the Surviving Corporation's Common Stock
or Preferred Stock, respectively, on the basis of one share of the Surviving
Corporation's Common Stock or Preferred Stock, as the case may be, for each one
share of SkyStream-California Common Stock or Preferred Stock, as the case may
be, issuable pursuant to any such Right, on the same terms and conditions and at
an exercise price equal to the exercise price applicable to any such
SkyStream-California Right at the Effective Date of the Merger. This paragraph
3.3(a) shall not apply to SkyStream-California Common Stock or Preferred Stock.
Such Common Stock and Preferred Stock are subject to paragraph 3.1 and 3.2,
respectively, hereof.
(b) A number of shares of the Surviving Corporation's Common Stock
and Preferred Stock shall be reserved for issuance upon the exercise of options,
warrants, stock purchase rights and convertible securities equal to the number
of shares of SkyStream-California Common Stock and SkyStream-California
Preferred Stock so reserved immediately prior to the Effective Date of the
Merger.
(c) The assumed Rights shall not entitle any holder thereof to a
fractional share upon exercise or conversion (unless the holder was entitled to
a fractional interest immediately prior to the Merger). In lieu thereof, any
fractional share interests to which a holder of an assumed Right (other than an
option issued pursuant to SkyStream-California's 1996 Stock Option Plan) would
otherwise be entitled upon exercise or conversion shall be aggregated (but only
with other similar Rights which have the same per share terms). To the extent
that after such aggregation, the holder would still be entitled to a fractional
share with respect thereto upon exercise or conversion, the holder shall be
entitled upon the exercise or conversion of all such assumed Rights pursuant to
their terms (as modified herein), to one full share of Common Stock or Preferred
Stock in lieu of such fractional share. With respect to each class of such
similar Rights, no holder will be entitled to more than one full share in lieu
of a fractional share upon exercise or conversion.
Notwithstanding the foregoing, with respect to options issued under
the SkyStream-California 1996 Stock Option Plan that are assumed in the Merger,
the number of shares of Common Stock to which the holder would be otherwise
entitled upon exercise of each such assumed option following the Merger shall be
rounded down to the nearest whole number and the exercise price shall be rounded
up to the nearest whole cent. In addition, no "additional benefits" (within the
meaning of Section 424(a)(2) of the Internal Revenue Code of 1986, as amended)
shall be accorded to the optionees pursuant to the assumption of their options.
3.4 SkyStream-Delaware Common Stock. Upon the Effective Date of the
Merger, each share of Common Stock, $.001 par value, of SkyStream-Delaware
issued and outstanding immediately prior thereto shall, by virtue of the Merger
and without any action by SkyStream-
<PAGE> 5
Delaware, the holder of such shares or any other person, be canceled and
returned to the status of authorized but unissued shares.
3.5 Exchange of Certificates. After the Effective Date of the Merger,
each holder of an outstanding certificate representing shares of
SkyStream-California Common Stock or Preferred Stock may be asked to surrender
the same for cancellation to an exchange agent, whose name will be delivered to
holders prior to any requested exchange (the "Exchange Agent"), and each such
holder shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of the Surviving Corporation's
Common Stock or Preferred Stock, as the case may be, into which the surrendered
shares were converted as herein provided. Until so surrendered, each outstanding
certificate theretofore representing shares of SkyStream-California Common Stock
or Preferred Stock shall be deemed for all purposes to represent the number of
shares of the Surviving Corporation's Common Stock or Preferred Stock,
respectively, into which such shares of SkyStream-California Common Stock or
Preferred Stock, as the case may be, were converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of Common Stock or
Preferred Stock of the Surviving Corporation represented by such outstanding
certificate as provided above.
Each certificate representing Common Stock or Preferred Stock of the
Surviving Corporation so issued in the Merger shall bear the same legends, if
any, with respect to the restrictions on transferability as the certificates of
SkyStream-California so converted and given in exchange therefore, unless
otherwise determined by the Board of Directors of the Surviving Corporation in
compliance with applicable laws.
If any certificate for shares of the Surviving Corporation's stock
is to be issued in a name other than that in which the certificate surrendered
in exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of issuance of
such new certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
IV. GENERAL
4.1 Covenants of SkyStream-Delaware. SkyStream-Delaware covenants and
agrees that it will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably appoint an agent for service
of process as required under the provisions of Section 2105 of the California
General Corporation Law.
<PAGE> 6
(b) File any and all documents with the California Franchise Tax
Board necessary for the assumption by SkyStream-Delaware of all of the franchise
tax liabilities of SkyStream-California.
(c) Take such other actions as may be required by the California
General Corporation Law.
4.2 Further Assurances. From time to time, as and when required by
SkyStream-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of SkyStream-California such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
actions as shall be appropriate or necessary in order to vest or perfect in or
conform of record or otherwise by SkyStream-Delaware the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of SkyStream-California and otherwise to carry out the
purposes of this Agreement, and the officers and directors of SkyStream-Delaware
are fully authorized in the name and on behalf of SkyStream-California or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger,
this Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either SkyStream-California or of
SkyStream-Delaware, or of both, notwithstanding the approval of this Agreement
by the shareholders of SkyStream-California or by the sole stockholder of
SkyStream-Delaware, or by both.
4.4 Amendment. The Boards of Directors of the Constituent Corporations
may amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of this
Agreement by the stockholders of either Constituent Corporation shall not: (1)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation, (2) alter
or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of any
Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving
Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County
of New Castle, DE 19801 and The Corporation Trust Company is the registered
agent of the Surviving Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 555 Clyde Avenue,
Suite B, Mountain View, California 94043, and copies thereof will be furnished
to any stockholder of either Constituent Corporation, upon request and without
cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
<PAGE> 7
4.8 FIRPTA Notification.
(a) On the Effective Date of the Merger, SkyStream-California shall
deliver to SkyStream-Delaware, as agent for the shareholders of
SkyStream-California, a properly executed statement (the "Statement")
substantially in the form attached hereto as Exhibit A. SkyStream-Delaware shall
retain the Statement for a period of not less than seven years and shall, upon
request, provide a copy thereof to any person that was a shareholder of
SkyStream-California immediately prior to the Merger. In consequence of the
approval of the Merger by the shareholders of SkyStream-California, (i) such
shareholders shall be considered to have requested that the Statement be
delivered to SkyStream-Delaware as their agent and (ii) SkyStream-Delaware shall
be considered to have received a copy of the Statement at the request of the
SkyStream-California shareholders for purposes of satisfying
SkyStream-Delaware's obligations under Treasury Regulation Section
1.1445-2(c)(3).
(b) SkyStream-California shall deliver to the Internal Revenue
Service a notice regarding the Statement in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2).
<PAGE> 8
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of SkyStream-Delaware and
SkyStream-California is hereby executed on behalf of each of such two
corporations and attested by their respective officers thereunto duly
authorized.
SKYSTREAM CORPORATION
a California corporation
By: /s/ JAMES D. OLSON
-------------------------------------
James D. Olson, President
and Chief Executive Officer
ATTEST:
/s/ SUSAN KETCHAM
- ------------------------------
Susan Ketcham
Secretary
SKYSTREAM NETWORKS CORPORATION
a Delaware corporation
By: /s/ JAMES D. OLSON
-------------------------------------
James D. Olson, President
and Chief Executive Officer
ATTEST:
/s/ SUSAN KETCHAM
- ------------------------------
Susan Ketcham
Secretary
<PAGE> 9
EXHIBIT A
January 31, 2000
TO THE SHAREHOLDERS OF SKYSTREAM NETWORKS CORPORATION:
In connection with the reincorporation (the "Reincorporation") in
Delaware of SkyStream Corporation, a California corporation (the "Company"),
pursuant to the Agreement and Plan of Merger (the "Agreement") dated as of
January 31, 2000 between the Company and SkyStream Networks Corporation, a
Delaware corporation and wholly-owned subsidiary of the Company
("SkyStream-Delaware"), your shares of Company stock will be replaced by shares
of stock in SkyStream-Delaware.
In order to establish that (i) you will not be subject to tax under
Section 897 of the Internal Revenue Code of 1986, as amended (the "Code"), in
consequence of the Reincorporation and (ii) SkyStream-Delaware will not be
required under Section 1445 of the Code to withhold taxes from the
SkyStream-Delaware stock that you will receive in connection therewith, the
Company hereby represents to you that, as of the date of this letter, shares of
Company stock do not constitute a "United States real property interest" within
the meaning of Section 897(c) of the Code and the regulations issued thereunder.
A copy of this letter will be delivered to SkyStream-Delaware pursuant
to Section 4.8 of the Agreement.
Under penalties of perjury, the undersigned officer of the Company
hereby declares that, to the best knowledge and belief of the undersigned, the
facts set forth herein are true and correct.
Sincerely,
-------------------------------------
James D. Olson, President and
Chief Executive Officer
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
SKYSTREAM NETWORKS CORPORATION
FIRST. The name of the corporation is SkyStream Networks Corporation.
SECOND. The address of the corporation's registered office in the State
of Delaware, is 1209 Orange Street, City of Wilmington, County of Newcastle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH. This corporation is authorized to issue two classes of shares to
be designated respectively Common Stock and Preferred Stock. The total number of
shares of Common Stock this corporation shall have authority to issue is
75,000,000, $0.001 par value per share, and the total number of shares of
Preferred Stock this corporation shall have authority to issue is 10,508,831,
$0.001 par value per share, 4,425,000 of which shares of Preferred Stock shall
be designated Series A Preferred Stock ("Series A Preferred"), 2,279,831 of
which shares of Preferred Stock shall be designated Series B Preferred Stock
("Series B Preferred") and 3,804,000 of which shares of Preferred Stock shall be
designated Series C Preferred Stock ("Series C Preferred").
The relative rights, preferences, privileges and restrictions granted to
or imposed upon the respective classes of the shares of capital stock or the
holders thereof are as follows:
1. Dividends.
The holders of the Series A Preferred, Series B Preferred and Series C
Preferred shall be entitled to receive, when and as declared by the Board of
Directors, dividends out of funds legally available therefore, prior and in
preference to any declaration or payment of any dividend (payable other than in
Common Stock or other securities and rights convertible into or entitling the
holder thereof to receive, directly or indirectly, additional shares of Common
Stock of this corporation) on the Common Stock of this corporation, at the rate
of $.08, $.225 and $.50 per share, per annum, respectively. Such dividends shall
not be cumulative and no right to such dividends shall accrue to holders of
Preferred Stock unless declared by the Board of Directors. No dividends or other
distributions shall be made with respect to the Common Stock, other than
dividends payable solely in Common Stock, unless at the same time an equivalent
dividend with respect to the Preferred Stock has been made.
<PAGE> 2
2. Liquidation Preference.
In the event of any liquidation, dissolution, or winding up of the
corporation ("Liquidation"), either voluntary or involuntary, distributions to
the shareholders of the corporation shall be made in the following manner:
(a) The holders of the Preferred shall be entitled to receive, prior
and in preference to any distribution of any assets or property of the
corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of $1.00 per share for each share of Series A Preferred,
$2.25 per share for each share of Series B Preferred or $5.00 per share for each
share of Series C Preferred, respectively, then held by them, adjusted for any
combinations, consolidations, stock distributions or dividends, or
recapitalizations with respect to such shares and, in addition, an amount equal
to all declared but unpaid dividends, if any, on the Series A Preferred, Series
B Preferred or Series C Preferred, respectively. If the assets and property thus
distributed among the holders of the Series A Preferred, Series B Preferred and
Series C Preferred shall be insufficient to permit the payment to such holders
of the full preferential amount, then the entire assets and property of the
corporation legally available for distribution shall be distributed ratably
according to their respective liquidation preferences among the holders of the
Series A Preferred, Series B Preferred and Series C Preferred in proportion to
the number of shares of Series A, Series B Preferred and Series C Preferred held
by each holder.
After payment has been made to the holders of the Series A
Preferred, Series B Preferred and Series C Preferred of the full amounts to
which they shall be entitled as aforesaid, the remaining assets of the
corporation available for distribution to the shareholders shall be distributed
ratably among the holders of Series A Preferred, Series B Preferred, Series C
Preferred and Common Stock based on the number of shares of Common Stock held by
each (assuming conversion of all such Series A Preferred, Series B Preferred and
Series C Preferred) until such time as (i) the holders of Series A Preferred
shall have received, inclusive of the $1.00 per share provided for in the
immediately prior paragraph, an aggregate of $3.00 per share for each share of
Series A Preferred then held by them adjusted for any combinations,
consolidations, stock distributions or dividends, or recapitalizations with
respect to such shares and, in addition, an amount equal to all declared but
unpaid dividends, if any, on the Series A Preferred, (ii) the holders of Series
B Preferred shall have received, inclusive of the $2.25 per share provided in
the immediately prior paragraph, an aggregate of $5.50 per share for each share
of Series B Preferred then held by them adjusted for any combinations,
consolidations, stock distributions or dividends, or recapitalizations with
respect to such shares and, in addition, an amount equal to all declared but
unpaid dividends, if any, on the Series B Preferred and (iii) the holders of
Series C Preferred shall have received, inclusive of the $5.00 per share
provided in the immediately prior paragraph, an aggregate of $7.50 per share for
each share of Series C Preferred then held by them adjusted for any
combinations, stock distributions or dividends, or recapitalizations with
respect to such shares and, in addition, an amount equal to all declared but
unpaid dividends, or recapitalizations with respect to such shares and, in
addition, an amount equal to all declared but unpaid dividends, if any, on the
Series C Preferred. After payment has been made to the holders of the Series A
Preferred of an aggregate of $3.00 per share for each
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<PAGE> 3
share of Series A Preferred then held by them, to the holders of the Series B
Preferred of an aggregate of $5.50 per share for each share of Series B
Preferred then held by them and to the holders of the Series C Preferred of an
aggregate of $7.50 per share for each share of Series C Preferred then held by
them, the remaining assets and property of this corporation legally available
for distribution shall be distributed ratably among the holders of Common Stock.
(b) For purposes of this Section 2, a liquidation, dissolution or
winding up of the corporation shall be deemed to be occasioned by, or to
include, (i) the acquisition of the corporation by another entity or the
acquisition of another entity or entities by the corporation by means of any
transaction or series of related transactions (including, without limitation,
any reorganization, merger or consolidation, but excluding any merger effected
exclusively for the purpose of changing the domicile of the corporation); or
(ii) a sale of all or substantially all of the assets of the corporation, unless
the corporation's shareholders of record as constituted immediately prior to
such acquisition or sale will, immediately after such acquisition or sale (by
virtue of securities issued as consideration for the corporation's acquisition
or sale or otherwise) hold at least 50% of the voting power of the surviving or
acquiring entity in approximately the same relative percentages after such
acquisition or sale as before such acquisition or sale.
(c) Any securities to be delivered to the holders of Preferred Stock
pursuant to Section 2(a) above shall be valued as follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability:
(1) If traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid or sale prices (whichever are
applicable) over the 30-day period ending three (3) days prior to the closing;
and
(3) If there is no active public market, the value shall be
the fair market value thereof, as mutually determined by the corporation and the
holders of Preferred Stock which are entitled to receive such securities and
which Preferred Stock represents at least a majority of the voting power of all
then outstanding shares of such Preferred Stock.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability shall be to make an
appropriate discount from the market value determined as above in subsections
2(c)(i)(1), (2) or (3) to reflect the approximate fair market value thereof, as
mutually determined by the corporation and the holders of Preferred Stock which
would be entitled to receive such securities and which represent at least a
majority of the voting power of all then outstanding shares of such Preferred
Stock.
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<PAGE> 4
(d) In the event the requirements of Section 2(c) are not complied
with, the corporation shall forthwith either:
(i) cause such closing to be postponed until such time as the
requirements of this Section 2 have been complied with, or
(ii) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Preferred Stock shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section 4(h) hereof.
(e) The liquidation preference of holders of Preferred Stock
provided herein shall not be deemed to be impaired by distributions made by the
Corporation in connection with the repurchase of shares of Common Stock at the
lower of fair market value or the original issue price from former employees or
consultants upon termination of their employment or services pursuant to stock
restriction agreements between the Corporation and such persons approved by the
Corporation's Board of Directors, and such holders shall be deemed to have
consented to such repurchases.
3. Voting Rights.
(a) Vote Other Than for Directors. Holders of the Preferred Stock
shall have full voting rights and powers equal to the voting rights and powers
of the holders of Common Stock, and shall be entitled to vote, together with the
holders of Common Stock, with respect to any questions upon which holders of
Common Stock have the right to vote. Except as otherwise required by law or by
Section 3(b) hereof, the holder of each share of Common Stock issued and
outstanding shall have one vote and the holder of each share of Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which such share of Preferred Stock could be converted at the record
date for determination of the shareholders entitled to vote on such matters, or,
if no such record date is established, at the date such vote is taken or any
written consent of shareholders is solicited, such votes to be counted together
with all other shares of stock of the corporation having general voting power
and not separately as a class. Fractional votes by the holders of Preferred
Stock shall not, however, be permitted and any fractional voting rights shall
(after aggregating all shares into which shares of Preferred Stock held by each
holder could be converted) be rounded to the nearest whole number. Holders of
Common Stock and Preferred Stock shall be entitled to notice of any
shareholders' meeting in accordance with the Bylaws of the corporation.
(b) Voting for Directors. At any such time as at least 3,000,000
shares of Preferred Stock are outstanding (as adjusted for combinations,
consolidations, stock distributions or dividends, or recapitalizations), the
holders of the shares of Preferred Stock voting as a class on an as-converted
basis shall be entitled to elect two (2) directors. The holders of Common Stock
voting
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<PAGE> 5
as a separate class shall be entitled to elect one (1) director. The remaining
directors shall be elected by the holders of the Preferred Stock and Common
Stock voting as provided in Section 3(a). At any such time as less than
3,000,000 shares of Preferred Stock are outstanding (as adjusted for
combinations, consolidations, stock distributions or dividends, or
recapitalizations), then directors shall be elected by the holders of the
Preferred Stock and Common Stock voting as provided in Section 3(a). A vacancy
on the Board of Directors occurring because of the death, resignation or removal
of a director elected by the holders of Preferred Stock voting as a separate
class shall be filled by the vote or written consent of the holders of a
majority of the Preferred Stock. Any vacancy occurring because of the death,
resignation or removal of a director elected by the holders of Common Stock
voting as a separate class shall be filled by the vote or written consent of the
holders of a majority of the Common Stock. Any vacancy occurring because of the
death, resignation or removal of a director elected by the holders of the
Preferred Stock and Common Stock voting together as a single class shall be
filled by the vote or written consent of the holders of a majority of the
Preferred Stock and Common Stock voting as provided in Section 3(a). A director
may be removed from the Board of Directors with or without cause by the vote or
consent of the holders of the outstanding class or series with voting power
entitled to elect him in accordance with this Section 3(b) and the General
Corporation Law of the State of Delaware.
(c) Cumulative Voting. The holders of Common Stock and the holders
of Preferred Stock shall be entitled to cumulative voting rights as to the
directors to be elected by each class or the combined classes (as provided in
Section 3(b) above), in accordance with the provisions of Section 214 of the
General Corporation Law of the State of Delaware.
4. Conversion.
The holders of Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the corporation or any transfer agent
for the Preferred Stock. Each share of Preferred Stock shall be convertible into
such number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Conversion Price (as hereinafter defined) per share
in effect for the applicable series of Preferred Stock into the per share
Conversion Value (as hereinafter defined) of such series.
The Conversion Price per share of Series A Preferred shall be $1.00
and the per share Conversion Value of Series A Preferred shall be $1.00. The
Conversion Price per share of Series B Preferred shall be $2.25 and the per
share Conversion Value of Series B Preferred shall be $2.25. The Conversion
Price per share of Series C Preferred shall be $5.00 and the per share
Conversion Value of Series C Preferred shall be $5.00. The Conversion Price of
Series A, Series B and Series C Preferred shall be subject to adjustment from
time to time as provided below. The number of shares
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<PAGE> 6
of Common Stock to which a share of Preferred is convertible is hereinafter
referred to as the Conversion Rate of such share.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate upon the earlier of (i) the date specified by written consent or
agreement of the holders of a majority of the then-outstanding Preferred Stock
(on an as-converted basis) or (ii) the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the corporation with an aggregate per share offering price to
the public of not less than Seven Dollars and Fifty Cents ($7.50) (as adjusted
for combinations, consolidations, stock distributions or dividends, or
recapitalizations) and an aggregate offering price of not less than Fifteen
Million Dollars ($15,000,000). In the event of the automatic conversion of the
Preferred Stock upon a public offering as aforesaid, the person(s) entitled to
receive the Common Stock issuable upon such conversion of Preferred Stock shall
not be deemed to have converted such Preferred Stock until immediately prior to
the closing of such sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the then effective Conversion
Price. Before any holder of Preferred Stock shall be entitled to convert the
same into full shares of Common Stock and to receive certificates therefor, he
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the corporation or of any transfer agent for the Preferred Stock, and
shall give written notice to the corporation at such office that he elects to
convert the same; provided, however, that in the event of an automatic
conversion pursuant to Section 4(b), the outstanding shares of Preferred Stock
shall be converted automatically without any further action by the holders of
such shares and whether or not the certificates representing such shares are
surrendered to the corporation or its transfer agent, and provided further that
the corporation shall not be obligated to issue certificates evidencing the
shares of Common Stock issuable upon such automatic conversion unless the
certificates evidencing such shares of Preferred Stock are either delivered to
the corporation or its transfer agent as provided above, or the holder notifies
the corporation or its transfer agent that such certificates have been lost,
stolen or destroyed and executes an agreement satisfactory to the corporation to
indemnify the corporation from any loss incurred by it in connection with such
certificates. The corporation shall, as soon as practicable after such delivery,
or such agreement and indemnification in the case of a lost certificate, issue
and deliver at such office to such holder of Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, or in the case of automatic conversion on the
date of closing of the offering, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.
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<PAGE> 7
(d) Adjustments for Certain Splits and Combinations.
(i) Adjustments for Subdivisions, Combinations or Stock
Dividends of Common Stock. In the event the outstanding shares of Common Stock
shall be subdivided (by stock split, or otherwise), into a greater number of
shares of Common Stock, or the corporation at any time or from time to time
after the date on which the first shares of Preferred Stock were issued (the
"Original Issue Date") shall declare or pay any dividend on the Common Stock
payable in Common Stock, the Conversion Price then in effect shall, concurrently
with the effectiveness of such subdivision or stock dividend, be proportionately
decreased based on the ratio of (i) the number of shares of Common Stock
outstanding immediately after such subdivision or stock dividend to (ii) the
number of shares of Common Stock outstanding immediately prior to such
subdivision or stock dividend. In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or consolidation,
be proportionately increased on the same basis.
(ii) Adjustments for Other Distributions. In the event the
corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in (A) securities of the corporation or other entities
(other than shares of Common Stock and other than as otherwise adjusted in this
Section 4 or as otherwise provided in Section 1), or (B) evidences of
indebtedness issued by the corporation or other persons, or (C) assets
(excluding cash dividends) or options or rights, then and in each such event
provision shall be made so that the holders of Preferred Stock shall receive
upon conversion thereof, in addition to the number of shares of Common Stock
receivable thereupon, the amount of such distribution which they would have
received had their Preferred Stock been converted into Common Stock on the date
of such event and had they thereafter, during the period from the date of such
event to and including the date of conversion, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 4 with respect to
the rights of the holders of Preferred Stock.
(iii) Adjustments for Recapitalization, Reclassification,
Exchange and Substitution. If at any time or from time to time the Common Stock
issuable upon conversion of the Preferred Stock shall be changed into the same
or a different number of shares of any other class or classes of stock, whether
by recapitalization, capital reorganization, reclassification or otherwise
(other than a subdivision, combination of shares or merger or sale of assets
transaction provided for above or in Section 2(b)), the Conversion Rate then in
effect shall, concurrently with the effectiveness of such recapitalization,
reorganization or reclassification, be proportionately adjusted such that the
Preferred Stock shall be convertible into, in lieu of the number of shares of
Common Stock which the holders would otherwise have been entitled to receive, a
number of shares of such other class or classes of stock equivalent to the
number of shares of Common Stock that would have been subject to receipt by the
holders upon conversion of the Preferred Stock immediately before that change.
In addition, to the extent applicable in any reorganization or recapitalization,
provision
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<PAGE> 8
shall be made so that the holders of the Preferred Stock shall thereafter be
entitled to receive upon conversion of the Preferred Stock the number of shares
of stock or other securities or property of the Company or otherwise, to which a
holder of Common Stock deliverable upon conversion would have been entitled on
such reorganization or recapitalization.
(e) No Impairment. Except as provided in Section 6, the corporation
will not, by amendment of its Articles of Incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price or the Conversion Rate
pursuant to this Section 4, the corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price and the Conversion Rate at the time
in effect, and (iii) the number of shares of Common Stock and the amount, if
any, of other property which at the time would be received upon the conversion
of Preferred Stock.
(g) Reservation of Stock Issuable Upon Conversion. This corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
corporation will take such corporate action as may, in the opinion of counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purposes.
(h) Notices of Record Date. In the event that this corporation shall
propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
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<PAGE> 9
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock;
(iv) (A) the acquisition of the corporation by another entity or
the acquisition of another entity or entities by the corporation by means of any
transaction or series of related transactions (including, without limitation,
any reorganization, merger or consolidation, but excluding any merger effected
exclusively for the purpose of changing the domicile of the corporation ); or
(B) a sale of all or substantially all of the assets of the corporation, unless
the corporation's shareholders of record as constituted immediately prior to
such acquisition or sale will, immediately after such acquisition or sale (by
virtue of securities issued as consideration for the corporation's acquisition
or sale or otherwise) hold at least 50% of the voting power of the surviving or
acquiring entity in approximately the same relative percentages after such
acquisition or sale as before as such acquisition or sale; or
(v) to liquidate, dissolve or wind up;
then, in connection with each such event, this corporation shall send to the
holders of Preferred Stock:
(1) at least 20 days' prior written notice of the date on
which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto and the amount and character of such dividend, distribution or
right) or for determining rights to vote in respect of the matters referred to
in (iii), (iv) and (v) above; and
(2) in the case of the matters referred to in (iii), (iv)
and (v) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event or the record date for
the determination of such holders if such record date is earlier).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Preferred Stock at
the address for each such holder as shown on the books of this corporation.
5. Redemption. The Preferred Stock shall not be redeemable.
6. Covenants.
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<PAGE> 10
In addition to any other rights provided by law, this corporation
shall not, without first obtaining the affirmative vote or written consent of
the holders of more than fifty percent (50%) of the outstanding shares of
Preferred Stock, voting together as a single class on an as-converted basis:
(a) amend or repeal any provision of, or add any provision to, this
corporation's Certificate of Incorporation or Bylaws if such action would amend
or waive, alter or change the preferences, rights, privileges or powers of, or
the restrictions provided for the benefit of the Preferred Stock;
(b) authorize or issue shares of any series or class of stock, or
reclassify any outstanding shares into any series or class of stock, having any
preference or priority superior to or on a parity with any such preference or
priority of any series of Preferred Stock, or authorize shares of stock of any
class or any bonds, debentures, notes or other obligations convertible into or
exchangeable for, or having option rights to purchase, any shares of stock of
this corporation having any preference or priority superior to or on a parity
with any such preference or priority of the Preferred Stock;
(c) effect in any transaction or series of transactions (i) a sale
or other conveyance of all or substantially all of the assets of the corporation
or any of its subsidiaries, or (ii) any consolidation, reorganization or merger
involving the corporation or any of its subsidiaries, unless the corporation's
or subsidiary's (as the case may be) shareholders of record as constituted
immediately prior to such consolidation, reorganization or merger will,
immediately after such consolidation, reorganization or merger (by virtue of
securities issued in the consolidation, reorganization or merger or otherwise)
hold at least 50% of the voting power of the surviving or acquiring entity in
approximately the same relative percentages after such consolidation,
reorganization or merger as before such consolidation, reorganization or merger,
or (iii) any sale of more than 50% of the corporation's capital stock; or
(d) pay or declare any dividend on any Common Stock (except
dividends payable solely in shares of Common Stock) while the Preferred Stock
remains outstanding, or apply any of its assets to the redemption, retirement,
purchase or acquisition directly or indirectly, through subsidiaries or
otherwise, of any of its capital stock, except from officers, directors or
employees of or consultants to this corporation upon termination of employment,
directorship or consulting relationship pursuant to the terms of stock purchase
agreements or restricted stock purchase agreements entered into with such
officers, directors, employees or consultants;
(e) increase or decrease the authorized number of shares of
Preferred Stock.
FIFTH. The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
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<PAGE> 11
SIXTH. The Corporation is to have perpetual existence.
SEVENTH. Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the Corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
Indemnification. The corporation may indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
Amendments. Neither any amendment nor repeal of this Article
SEVENTH, nor the adoption of any provision of the corporation's Certificate of
Incorporation inconsistent with this Article SEVENTH, shall eliminate or reduce
the effect of this Article SEVENTH, in respect of any matter occurring, or any
action or proceeding accruing or arising or that, but for this Article SEVENTH,
would accrue or arise, prior to such amendment, repeal, or adoption of an
inconsistent provision.
EIGHTH.In the event any shares of Preferred shall be redeemed or
converted pursuant to the terms hereof, the shares so converted or redeemed
shall not revert to the status of authorized but unissued shares, but instead
shall be canceled and shall not be re-issuable by the corporation.
NINTH. For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and
regulations of the powers of the corporation, of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided
that notwithstanding the provisions of Article FOURTH, Section 3 above,
effective upon the closing of a Qualified Public Offering (as defined below) and
at such time as the corporation is no longer subject to Section 2115 of the
California Corporations Code:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted from time to time by the Board of
Directors.
The Board of Directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the closing of a Qualified Public Offering and at
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<PAGE> 12
such time as the corporation is no longer subject to Section 2115 of the
California Corporations Code, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years. At
the second annual meeting of stockholders following the closing of Qualified
Public Offering and at such time as the corporation is no longer subject to
Section 2115 of the California Corporations Code, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the closing of a Qualified Public Offering and at such time as the corporation
is no longer subject to Section 2115 of the California Corporations Code, the
term of office of the Class III directors shall expire and Class III directors
shall be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of three
years to succeed the directors of the class whose terms expire at such annual
meeting. Each holder of voting stock or of any class or series thereof shall be
entitled to cumulative voting rights as to the directors to be elected by each
series or class or the combined classes in accordance with the provisions of
Section 214 of the Delaware General Corporation Law.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his or her successor is duly elected and qualified or
until his or her death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall be filled by
either (i) the affirmative vote of the holders of a majority of the voting power
of the then outstanding shares of voting stock of the corporation entitled to
vote generally in the election of directors (the "Voting Stock") voting together
as a single class; or (ii) by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Newly created directorships resulting from any increase in the
number of directors shall, unless the Board of Directors determines by
resolution that any such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote of the directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
2. The directors of the corporation need not be elected by written
ballot unless a stockholder demands election by written ballot at the meeting
and before voting begins, or unless the Bylaws so provide.
3. The affirmative vote of sixty-six and two-thirds percent
(66-2/3%) of the voting power of the then outstanding shares of Voting Stock,
voting together as a single class, shall be required for the adoption, amendment
or repeal of the following sections of the corporation's Bylaws by the
stockholders of this corporation: 2.3 (Annual Meeting) and 2.4 (Special
Meeting).
4. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of the stockholders called in accordance
with the Bylaws and no action shall be taken by the stockholders by written
consent.
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<PAGE> 13
5. Advance notice of stockholder nomination for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
6. Any director, or the entire Board of Directors, may be removed
from office at any time (i) with cause by the affirmative vote of the holders of
at least a majority of the voting power of all of the then-outstanding shares of
the Voting Stock, voting together as a single class; or (ii) without cause by
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
Voting Stock.
"Qualified Public Offering" as used in this Certificate of
Incorporation shall mean the corporation's initial firm commitment underwritten
public offering pursuant to an effective registration under the Securities Act
of 1933, as amended, covering the offer and sale of Common Stock for the account
of the corporation to the public.
TENTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
ELEVENTH. Following a Qualified Public Offering and at such time as the
corporation is no longer subject to Section 2115 of the California Corporations
Code, notwithstanding any other provision in this Certificate of Incorporation
or in any provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative voting of the holders of any particular
class or series of the Voting Stock required by law, this Certificate of
Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty six and two-thirds percent (66-2/3%) of the voting
power of all of the then outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Article NINTH or
this Article ELEVENTH.
TWELFTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter described by statute, except as provided in Article
ELEVENTH of this Certificate, and all rights conferred upon the stockholders
herein are granted subject to this right.
THIRTEENTH. Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside of the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws of the Corporation.
FOURTEENTH. The name and mailing address of the incorporator are:
Marianne Stark Bradley
Senior Legal Assistant
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<PAGE> 14
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
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<PAGE> 15
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is the act and deed of such incorporator and that
the facts stated therein are true.
Dated: December __, 1999
/s/ MARIANNE STARK BRADLEY
----------------------------------
Incorporator
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<PAGE> 1
EXHIBIT 3.1.1
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
SKYSTREAM NETWORKS CORPORATION
SkyStream Networks Corporation, a corporation organized and existing
under the laws of Delaware (the "Company"), pursuant to the provisions of the
General Corporation Law of the State of Delaware (the "DGCL"), DOES HEREBY
CERTIFY as follows:
FIRST. The Certificate of Incorporation of the Company is hereby amended
by deleting the first paragraph of ARTICLE FIRST thereof in its present form and
substituting therefor a new ARTICLE FIRST in the following form:
"FIRST. The name of this corporation is SkyStream Networks Inc."
SECOND. The Certificate of Incorporation of the Company is hereby
amended by deleting the first paragraph of ARTICLE FOURTH thereof in its present
form and substituting therefor a new first paragraph of ARTICLE FOURTH in the
following form:
"FOURTH. This corporation is authorized to issue two classes of
shares to be designated respectively Common Stock and Preferred Stock.
The total number of shares of Common Stock this corporation shall have
authority to issue is 75,000,000, $0.001 par value per share, and the
total number of shares of Preferred Stock this corporation shall have
authority to issue is 15,313,248, $0.001 par value per share, 6,637,500
of which shares of Preferred Stock shall be designated Series A
Preferred Stock ("Series A Preferred"), 3,419,748 of which shares of
Preferred Stock shall be designated Series B Preferred Stock ("Series B
Preferred") and 5,256,000 of which shares of Preferred Stock shall be
designated Series C Preferred Stock ("Series C Preferred").
Upon the filing of this Certificate of Amendment, each outstanding
share of Common Stock of this corporation shall be split up and
converted into one and one-half (1.5) shares of Common Stock, each
outstanding share of Series A Preferred Stock shall be split up and
converted into one and one-half (1.5) shares of Series A Preferred
Stock, each share of Series B Preferred Stock shall be split up and
converted into one and one-half (1.5) shares of Series B Preferred Stock
and each share of Series C Preferred Stock shall be split up and
converted into one and one-half (1.5) shares of Series C Preferred
Stock. No fractional shares will be issued upon such stock split; any
fractional shares will be rounded to the nearest whole share."
<PAGE> 2
THIRD. The Certificate of Incorporation of the Company is hereby amended
by deleting the Section 1 of ARTICLE FOURTH thereof in its present form and
substituting therefor a new Section 1 of ARTICLE FOURTH in the following form:
"1. Dividends.
The holders of the Series A Preferred, Series B Preferred and Series
C Preferred shall be entitled to receive, when and as declared by the
Board of Directors, dividends out of funds legally available therefore,
prior and in preference to any declaration or payment of any dividend
(payable other than in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of this corporation) on
the Common Stock of this corporation, at the rate of $0.0533, $0.15 and
$0.33 per share, per annum, respectively. Such dividends shall not be
cumulative and no right to such dividends shall accrue to holders of
Preferred Stock unless declared by the Board of Directors. No dividends
or other distributions shall be made with respect to the Common Stock,
other than dividends payable solely in Common Stock, unless at the same
time an equivalent dividend with respect to the Preferred Stock has been
made."
FOURTH. The Certificate of Incorporation of the Company is hereby
amended by deleting the Section 2(a) of ARTICLE FOURTH thereof in its present
form and substituting therefor a new Section 2(a) of ARTICLE FOURTH in the
following form:
"2(a) The holders of the Preferred shall be entitled to receive,
prior and in preference to any distribution of any assets or property of
the corporation to the holders of the Common Stock by reason of their
ownership thereof, the amount of $0.6666 per share for each share of
Series A Preferred, $1.50 per share for each share of Series B Preferred
or $3.333 per share for each share of Series C Preferred, respectively,
then held by them, adjusted for any combinations, consolidations, stock
distributions or dividends, or recapitalizations with respect to such
shares and, in addition, an amount equal to all declared but unpaid
dividends, if any, on the Series A Preferred, Series B Preferred or
Series C Preferred, respectively. If the assets and property thus
distributed among the holders of the Series A Preferred, Series B
Preferred and Series C Preferred shall be insufficient to permit the
payment to such holders of the full preferential amount, then the entire
assets and property of the corporation legally available for
distribution shall be distributed ratably according to their respective
liquidation preferences among the holders of the Series A Preferred,
Series B Preferred and Series C Preferred in proportion to the number of
shares of Series A, Series B Preferred and Series C Preferred held by
each holder.
After payment has been made to the holders of the Series A
Preferred, Series B Preferred and Series C Preferred of the full amounts
to which they shall be entitled as aforesaid, the remaining assets of
the corporation available for distribution to the shareholders shall be
distributed ratably among the holders of Series A Preferred, Series
2
<PAGE> 3
B Preferred, Series C Preferred and Common Stock based on the number of
shares of Common Stock held by each (assuming conversion of all such
Series A Preferred, Series B Preferred and Series C Preferred) until
such time as (i) the holders of Series A Preferred shall have received,
inclusive of the $0.6666 per share provided for in the immediately prior
paragraph, an aggregate of $2.00 per share for each share of Series A
Preferred then held by them adjusted for any combinations,
consolidations, stock distributions or dividends, or recapitalizations
with respect to such shares and, in addition, an amount equal to all
declared but unpaid dividends, if any, on the Series A Preferred, (ii)
the holders of Series B Preferred shall have received, inclusive of the
$1.50 per share provided in the immediately prior paragraph, an
aggregate of $3.6667 per share for each share of Series B Preferred then
held by them adjusted for any combinations, consolidations, stock
distributions or dividends, or recapitalizations with respect to such
shares and, in addition, an amount equal to all declared but unpaid
dividends, if any, on the Series B Preferred and (iii) the holders of
Series C Preferred shall have received, inclusive of the $3.333 per
share provided in the immediately prior paragraph, an aggregate of $5.00
per share for each share of Series C Preferred then held by them
adjusted for any combinations, stock distributions or dividends, or
recapitalizations with respect to such shares and, in addition, an
amount equal to all declared but unpaid dividends, or recapitalizations
with respect to such shares and, in addition, an amount equal to all
declared but unpaid dividends, if any, on the Series C Preferred. After
payment has been made to the holders of the Series A Preferred of an
aggregate of $2.00 per share for each share of Series A Preferred then
held by them, to the holders of the Series B Preferred of an aggregate
of $3.666 per share for each share of Series B Preferred then held by
them and to the holders of the Series C Preferred of an aggregate of
$5.00 per share for each share of Series C Preferred then held by them,
the remaining assets and property of this corporation legally available
for distribution shall be distributed ratably among the holders of
Common Stock.
FIFTH. The Certificate of Incorporation of the Company is hereby amended
by deleting the Section 3(b) of ARTICLE FOURTH thereof in its present form and
substituting therefor a new Section 3(b)) of ARTICLE FOURTH in the following
form:
"(b) Voting for Directors. At any such time as at least 4,500,000
shares of Preferred Stock are outstanding (as adjusted for combinations,
consolidations, stock distributions or dividends, or recapitalizations),
the holders of the shares of Preferred Stock voting as a class on an
as-converted basis shall be entitled to elect two (2) directors. The
holders of Common Stock voting as a separate class shall be entitled to
elect one (1) director. The remaining directors shall be elected by the
holders of the Preferred Stock and Common Stock voting as provided in
Section 3(a). At any such time as less than 4,500,000 shares of
Preferred Stock are outstanding (as adjusted for combinations,
consolidations, stock distributions or dividends, or recapitalizations),
then directors shall be elected by the holders of the Preferred Stock
and Common Stock voting as provided in Section 3(a). A vacancy on the
Board of Directors occurring because of the death, resignation or
removal of a director elected by the holders of Preferred Stock
3
<PAGE> 4
voting as a separate class shall be filled by the vote or written
consent of the holders of a majority of the Preferred Stock. Any vacancy
occurring because of the death, resignation or removal of a director
elected by the holders of Common Stock voting as a separate class shall
be filled by the vote or written consent of the holders of a majority of
the Common Stock. Any vacancy occurring because of the death,
resignation or removal of a director elected by the holders of the
Preferred Stock and Common Stock voting together as a single class shall
be filled by the vote or written consent of the holders of a majority of
the Preferred Stock and Common Stock voting as provided in Section 3(a).
A director may be removed from the Board of Directors with or without
cause by the vote or consent of the holders of the outstanding class or
series with voting power entitled to elect him in accordance with this
Section 3(b) and the General Corporation Law of the State of Delaware."
(c) Cumulative Voting. The holders of Common Stock and the holders
of Preferred Stock shall be entitled to cumulative voting rights as to the
directors to be elected by each class or the combined classes (as provided in
Section 3(b) above), in accordance with the provisions of Section 214 of the
General Corporation Law of the State of Delaware.
SIXTH. The Certificate of Incorporation of the Company is hereby amended
by deleting the Section 4(a) of ARTICLE FOURTH thereof in its present form and
substituting therefor a new Section 4(a) of ARTICLE FOURTH in the following
form:
"(a) Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the
date of issuance of such share at the office of the corporation or any
transfer agent for the Preferred Stock. Each share of Preferred Stock
shall be convertible into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Conversion Price
(as hereinafter defined) per share in effect for the applicable series
of Preferred Stock into the per share Conversion Value (as hereinafter
defined) of such series.
The Conversion Price per share of Series A Preferred shall be
$0.6666 and the per share Conversion Value of Series A Preferred shall
be $0.6666. The Conversion Price per share of Series B Preferred shall
be $1.50 and the per share Conversion Value of Series B Preferred shall
be $1.50. The Conversion Price per share of Series C Preferred shall be
$3.333 and the per share Conversion Value of Series C Preferred shall be
$3.333. The Conversion Price of Series A, Series B and Series C
Preferred shall be subject to adjustment from time to time as provided
below. The number of shares of Common Stock to which a share of
Preferred is convertible is hereinafter referred to as the Conversion
Rate of such share.
SEVENTH. The Certificate of Incorporation of the Company is hereby
amended by deleting the Section 4(b) of ARTICLE FOURTH thereof in its present
form and substituting therefor a new Section 4(b) of ARTICLE FOURTH in the
following form:
4
<PAGE> 5
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then
effective Conversion Rate upon the earlier of (i) the date specified by
written consent or agreement of the holders of a majority of the
then-outstanding Preferred Stock (on an as-converted basis) or (ii) the
closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of
the corporation with an aggregate per share offering price to the public
of not less than Five Dollars and 00 Cents ($5.00) (as adjusted for
combinations, consolidations, stock distributions or dividends, or
recapitalizations) and an aggregate offering price of not less than
Fifteen Million Dollars ($15,000,000). In the event of the automatic
conversion of the Preferred Stock upon a public offering as aforesaid,
the person(s) entitled to receive the Common Stock issuable upon such
conversion of Preferred Stock shall not be deemed to have converted such
Preferred Stock until immediately prior to the closing of such sale of
securities.
EIGHTH: The amendment of the Certificate of Incorporation of the Company
set forth in this Certificate of Amendment has been duly adopted in accordance
with the provisions of Section 242 of the DGCL by (a) the Board of Directors of
the Company having duly adopted a resolution setting forth such amendment and
declaring its advisability and submitting it to its stockholders for approval
and (b) the stockholders of the Company having duly adopted such amendment by
written consent.
IN WITNESS WHEREOF, the Company has caused this Certificate of Amendment
to be signed by James D. Olson, its President and Chief Executive Officer, and
attested by Susan Ketcham, its Secretary, this ________ day of February, 2000.
SKYSTREAM NETWORKS CORPORATION
By
-------------------------------------
James D. Olson
President and Chief Executive Officer
ATTEST:
- --------------------------------
Susan Ketcham
President
5
<PAGE> 1
EXHIBIT 3.1.2
RESTATED CERTIFICATE OF INCORPORATION
OF
SKYSTREAM NETWORKS CORPORATION
SkyStream Networks Corporation, a corporation organized and existing
under laws of the State of Delaware, hereby certifies as follows:
1. The name of the Corporation is SkyStream Networks Corporation. The
original Certificate of Incorporation of the Corporation was filed with the
Secretary of State of the state of Delaware on December 17, 1999 and was amended
on March __, 2000.
2. Pursuant to Sections 228, 242 and 245 of the General Corporation Laws
of the State of Delaware, this Restated Certificate of Incorporation restates
and integrates and further amends the provisions of the Certificate of
Incorporation of this corporation.
3. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby amended and restated to read in its entirety as follows:
FIRST: The name of this corporation is SkyStream Networks Corporation.
SECOND: The address of the corporation's registered office in the State
of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
State of Delaware. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of this corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: This corporation is authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is 360,000,000
shares. 350,000,000 shares shall be Common Stock, par value $.001 per share, and
10,000,000 shares shall be Preferred Stock, par value $.001 per share.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of any
series of Preferred Stock and to determine the designation of any such series.
The Board of Directors is also authorized to determine and alter the powers,
rights, preferences and privileges and the qualifications, limitations and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and within the limitations or restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not below the number of
shares of such series then outstanding) the number of shares of any series
subsequent to the issue of shares of that series, to determine the designation
of any series, and to fix the number of shares of any series. In case the number
of shares of any series shall be so decreased, the share constituting such
decrease shall resume
<PAGE> 2
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
FIFTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
SIXTH. The Corporation is to have perpetual existence.
SEVENTH. Limitation of Liability. To the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, a director of the Corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
Indemnification. The corporation may indemnify to the fullest
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the corporation, or any predecessor of
the corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the corporation or any predecessor to the
corporation.
Amendments. Neither any amendment nor repeal of this Article
SEVENTH, nor the adoption of any provision of the corporation's Certificate of
Incorporation inconsistent with this Article SEVENTH, shall eliminate or reduce
the effect of this Article SEVENTH, in respect of any matter occurring, or any
action or proceeding accruing or arising or that, but for this Article SEVENTH,
would accrue or arise, prior to such amendment, repeal, or adoption of an
inconsistent provision.
EIGHTH. For the management of the business and for the conduct of the
affairs of the corporation, and in further definition, limitation and
regulations of the powers of the corporation, of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided
that effective upon the closing of a Qualified Public Offering (as defined
below) and at such time as the corporation is no longer subject to Section 2115
of the California Corporations Code:
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted from time to time by the Board of
Directors.
The Board of Directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the date hereof, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the date hereof, the term of office of
the Class II directors shall expire and Class II directors shall be elected for
a full term of three years. At the third annual meeting of stockholders
following the date
<PAGE> 3
hereof, the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting. Each holder of voting stock or of any class or series thereof
shall be entitled to cumulative voting rights as to the directors to be elected
by each series or class or the combined classes in accordance with the
provisions of Section 214 of the Delaware General Corporation Law.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his or her successor is duly elected and qualified or
until his or her death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall be filled by
either (i) the affirmative vote of the holders of a majority of the voting power
of the then outstanding shares of voting stock of the corporation entitled to
vote generally in the election of directors (the "Voting Stock") voting together
as a single class; or (ii) by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Newly created directorships resulting from any increase in the
number of directors shall, unless the Board of Directors determines by
resolution that any such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote of the directors then in
office, even though less than a quorum of the Board of Directors. Any director
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified.
2. The directors of the corporation need not be elected by written
ballot unless a stockholder demands election by written ballot at the meeting
and before voting begins, or unless the Bylaws so provide.
3. The affirmative vote of sixty-six and two-thirds percent
(66-2/3%) of the voting power of the then outstanding shares of Voting Stock,
voting together as a single class, shall be required for the adoption, amendment
or repeal of the following sections of the corporation's Bylaws by the
stockholders of this corporation: 2.3 (Annual Meeting) and 2.4 (Special
Meeting).
4. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of the stockholders called in accordance
with the Bylaws and no action shall be taken by the stockholders by written
consent.
5. Advance notice of stockholder nomination for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
6. Any director, or the entire Board of Directors, may be removed
from office at any time (i) with cause by the affirmative vote of the holders of
at least a majority of the voting power of all of the then-outstanding shares of
the Voting Stock, voting together as a single class; or (ii) without cause
<PAGE> 4
by the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the voting power of all of the then-outstanding shares of
the Voting Stock.
"Qualified Public Offering" as used in this Certificate of
Incorporation shall mean the corporation's initial firm commitment underwritten
public offering pursuant to an effective registration under the Securities Act
of 1933, as amended, covering the offer and sale of Common Stock for the account
of the corporation to the public.
NINTH. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
TENTH. Notwithstanding any other provision in this Certificate of
Incorporation or in any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative voting of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty six and two-thirds percent (66-2/3%) of the voting
power of all of the then outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Article EIGHTH or
this Article TENTH.
ELEVENTH. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter described by statute, except as provided in Article
TENTH of this Certificate, and all rights conferred upon the stockholders herein
are granted subject to this right.
TWELFTH. Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept (subject to any provision contained in the statutes) outside of the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the Bylaws of the Corporation.
The foregoing Restated Certificate of Incorporation has been duly
approved by the Board of Directors.
The foregoing Restated Certificate of Incorporation has been duly
approved by the required vote of stockholders in accordance with Section 228 of
the Delaware General Corporation Law. The total number of outstanding shares of
the Corporation is __________ shares of Common Stock. The number of shares
voting in favor of the amendment equaled or exceeded the vote required. The
percentage vote required was more than 50% of the Common Stock.
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IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed this ____ day of May, 2000.
SKYSTREAM NETWORKS CORPORATION
By:
---------------------------------------
James D. Olson
President and Chief Executive Officer
ATTEST:
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Susan Ketcham, Secretary
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
SKYSTREAM NETWORKS CORPORATION
ARTICLE 1
OFFICES
Section 1.1. Registered Office. The registered office of the Corporation
which is required by the state of Delaware to be maintained in the state of
Delaware shall be the registered office named in the charter documents of the
Corporation, or such other office as may be designated from time to time by the
Board of Directors in the manner provided by law.
Section 1.2. Other Offices. The Corporation may also have offices at
such other places both within and without the state of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require .
ARTICLE 2
STOCKHOLDERS
Section 2.1. Place of Meetings. All meetings of the stockholders shall
be held at the principal office of the Corporation, or at such other place
within or without the state of Delaware as shall be specified or fixed in the
notices or waivers of notice thereof.
Section 2.2. Quorum; Adjournment of Meetings. Unless otherwise required
by law or provided in the charter documents of the Corporation or these Bylaws,
(i) the holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at any meeting of stockholders for the transaction of business, (ii) in
all matters other than election of directors, the affirmative vote of the
holders of a majority of such stock so present or represented at any meeting of
stockholders at which a quorum is present shall constitute the act of the
stockholders, and (iii) where a separate vote by a class or classes is required,
a majority of the outstanding shares of such class or classes, present in person
or represented by proxy shall constitute a quorum entitled to take action with
respect to that vote on that matter and the affirmative vote of the majority of
the shares of such class or classes present in person or represented by proxy at
the meeting shall be the act of such class. The stockholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum, subject to the provisions of clauses (ii) and (iii) above.
Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors.
<PAGE> 2
Notwithstanding the other provisions of the charter documents of the
Corporation or these Bylaws, the chairman of the meeting or the holders of a
majority of the issued and outstanding stock, present in person or represented
by proxy and entitled to vote thereat, at any meeting of stockholders, whether
or not a quorum is present, shall have the power to adjourn such meeting from
time to time, without any notice other than announcement at the meeting of the
time and place of the holding of the adjourned meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at such meeting. At such
adjourned meeting at which a quorum shall be present or represented any business
may be transacted which might have been transacted at the meeting as originally
called.
Section 2.3. Annual Meeting.
(a) An annual meeting of the stockholders, for the election of
directors to succeed those whose terms expire and for the transaction of such
other business as may properly come before the meeting, shall be held at such
place (within or without the state of Delaware), on such date, and at such time
as the Board of Directors shall fix and set forth in the notice of the meeting,
which date shall be within thirteen (13) months subsequent to the last annual
meeting of stockholders.
(b) At an annual meeting of stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than one hundred twenty
(120) calendar days in advance of the date specified in the corporation's proxy
statement released to stockholders in connection with the previous year's annual
meeting of stockholders; provided, however, that in the event that no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) days from the date contemplated at the time of
the previous year's proxy statement, notice by the stockholder to be timely must
be so received a reasonable time before the solicitation is made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these
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<PAGE> 3
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of Directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 2.2. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a Director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for
elections of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the 1934 Act (including without limitation such person's
written consent to being named in the proxy statement, if any, as a nominee and
to serving as a Director if elected); and (ii) as to such stockholder giving
notice, the information required to be provided pursuant to paragraph (b) of
this Section 2.2. At the request of the Board of Directors, any person nominated
by a stockholder for election as a Director shall furnish to the Secretary of
the corporation that information required to be set forth in the stockholder's
notice of nomination which pertains to the nominee. No person shall be eligible
for election as a Director of the corporation unless nominated in accordance
with the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrants, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
Section 2.4. Special Meetings. Special meetings of stockholders may be
called at any time by a majority of the Board of Directors, by the Chairman of
the Board, the Chief Executive Officer or by the holders of at least 10% of the
shares of the corporation's capital stock entitled to vote at such meeting, but
such special meetings may not be called by any other person or persons;
provided, however, that effective upon closing of the Corporation's initial
public offering of shares of its Common Stock pursuant to an effective
registration statement filed with the Securities and Exchange Commission (the
"IPO") and the corporation is no longer subject to Section 2115 of the
California Corporation Code, special meetings of stockholders may be called at
any time by a majority of the
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<PAGE> 4
Board of Directors, by the Chairman of the Board, by the Chief Executive Officer
or by the holders of at least 50% of the shares of the corporation's capital
stock entitled to vote at such meeting, but such special meetings may not be
called by any other person or persons.
Section 2.5. Record Date. For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors of the Corporation may fix a date as
the record date for any such of stockholders, which record date shall not
precede the date on which the resolutions fixing the record date are adopted and
which record date shall not be more than sixty (60) days nor less than ten (10)
days before the date of such meeting of stockholders, nor more than sixty (60)
days prior to any other action to which such record date relates.
If the Board of Directors does not fix a record date for any meeting of
the stockholders, the record date for determining stockholders entitled to
notice of or to vote at such meeting shall be at the close of business on the
day next preceding the day on which notice is given, or, in accordance with
Article 7, Section 7.3 of these Bylaws notice is waived, at the close of
business on the day next preceding the day on which the meeting is held. The
record date for determining stockholders for any other purpose (other than the
consenting to corporate action in writing without a meeting) shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
For the purpose of determining the stockholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If the
Board of Directors does not fix the record date, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is necessary, shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation at its registered office
in the state of incorporation of the Corporation or at its principal place of
business. If the Board of Directors does not fix the record date, and prior
action by the Board of Directors is necessary, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
Section 2.6. Notice of Meetings. Written notice of the place, date and
hour of all meetings, and, in case of a special meeting, the purpose or purposes
for which the meeting is called, shall be given by or at the direction of the
President, the Secretary or the other person(s) calling the meeting to each
stockholder entitled to vote thereat not less than ten (10) nor more than sixty
(60) days before the date of the meeting. Such notice may be delivered either
personally or by mail.
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If mailed, notice is given when deposited in the United States mail, postage
prepaid, directed to the stockholder at such stockholder's address as it appears
on the records of the Corporation.
Section 2.7. Stockholder List. A complete list of stockholders entitled
to vote at any meeting of stockholders, arranged in alphabetical order for each
class of stock and showing the address of each such stockholder and the number
of shares registered in the name of such stockholder, shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The stockholder list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 2.8. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to a corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy. Proxies for use at any meeting of stockholders shall be filed with the
Secretary, or such other officer as the Board of Directors may from time to time
determine by resolution, before or at the time of the meeting. All proxies shall
be received and taken charge of and all ballots shall be received and canvassed
by the secretary of the meeting, who shall decide all questions touching upon
the qualification of voters, the validity of the proxies, and the acceptance or
rejection of votes, unless an inspector or inspectors shall have been appointed
by the chairman of the meeting, in which event such inspector or inspectors
shall decide all such questions.
No proxy shall be valid after three (3) years from its date, unless the
proxy provides for a longer period. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power.
Should a proxy designate two or more persons to act as proxies, unless
such instrument shall provide the contrary, a majority of such persons present
at any meeting at which their powers thereunder are to be exercised shall have
and may exercise all the powers of voting or giving consents thereby conferred,
or if only one be present, then such powers may be exercised by that one; or, if
an even number attend and a majority do not agree on any particular issue, each
proxy so attending shall be entitled to exercise such powers in respect of such
portion of the shares as is equal to the reciprocal of the fraction equal to the
number of proxies representing such shares divided by the total number of shares
represented by such proxies.
Section 2.9. Voting; Election; Inspectors. Unless otherwise required by
law or provided for in the charter documents of the Corporation, each
stockholder shall on each matter submitted to a vote at a meeting of
stockholders have one vote for each share of the stock entitled to vote which is
registered in his name on the record date for the meeting. For the purposes
hereof, each election to fill a directorship shall constitute a separate matter.
Shares registered in the name of another corporation, domestic or foreign, may
be voted by such officer, agent or proxy as the bylaws (or comparable body) of
such corporation may determine. Shares registered in the name of a deceased
person may be voted by the executor or administrator of such person's estate,
either in person or by proxy.
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All voting, except as required by the charter documents of the
Corporation or where otherwise required by law, may be by a voice vote;
provided, however, upon request of the chairman of the meeting or upon demand
therefor by stockholders holding a majority of the issued and outstanding stock
present in person or by proxy at any meeting a stock vote shall be taken. Every
stock vote shall be taken by written ballots, each of which shall state the name
of the stockholder or proxy voting and such other information as may be required
under the procedure established for the meeting. The directors of the
corporation need not be elected by written ballot unless a stockholder demands
election by written ballot at the meeting and before voting begins, or unless
the Bylaws so provide.
At any meeting at which a vote is taken by written ballots, the chairman
of the meeting may appoint one or more inspectors; each of whom shall subscribe
an oath or affirmation to execute faithfully the duties of inspector at such
meeting with strict impartiality and according to the best of such inspector's
ability. Such inspector shall receive the written ballots, count the votes, and
make and sign a certificate of the result thereof. The chairman of the meeting
may appoint any person to serve as inspector, except no candidate for the office
of director shall be appointed as an inspector.
Each holder of voting stock or of any class or series thereof shall be
entitled to cumulative voting rights as to the directors to be elected by each
series or class or the combined classes in accordance with the provisions of
Section 214 of the Delaware General Corporation Law.
Section 2.10. Conduct of Meetings. The meetings of the stockholders
shall be presided over by the President, or, if the President is not present, by
a chairman elected at the meeting. The Secretary of the Corporation, if present,
shall act as secretary of such meetings, or, if the Secretary is not present, an
Assistant Secretary shall so act; if neither the Secretary of or Assistant
Secretary is present, then a secretary shall be appointed by the chairman of the
meeting.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to the chairman in order.
Section 2.11. Treasury Stock. The Corporation shall not vote, directly
or indirectly, shares of its own stock owned by it and such shares shall not be
counted for quorum purposes. Nothing in this Section 2.11 shall be construed as
limiting the right of the Corporation to vote stock, including but not limited
to its own stock, held by it in a fiduciary capacity.
Section 2.12. Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action which may be taken at any annual or
special meeting of stockholders may be taken without a meeting and without prior
notice, if a consent in writing, setting forth the action so taken, is signed by
the holders of outstanding shares having not less than the minimum number of
votes that would be necessary to authorize or take that action at a meeting at
which all shares entitled to vote on that action were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under
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any section of the General Corporation Law of Delaware if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
Effective upon the closing of the Corporation's IPO and the date that
the Corporation is no longer subject to Section 2115 of the California
Corporations Code, no action of stockholders shall be taken by the stockholders
except at an annual or special meeting of stockholders called in accordance with
the notice requirements of Section 2.6 above and no action of the stockholders
shall be taken by written consent.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1. Power; Number; Term of Office. The business and affairs of
the Corporation shall be managed by or under the direction of the Board of
Directors, and, subject to the restrictions imposed by law or the charter
documents of the Corporation, the Board of Directors may exercise all the powers
of the Corporation.
Notwithstanding anything contained in these Bylaws to the contrary, at
any time that a valid agreement among the stockholders is in force with respect
to the nomination, election and removal of directors or similar matters, such
agreement is hereby recognized and directors shall be nominated, elected and
removed in accordance therewith.
The number of directors which shall constitute the whole Board of
Directors shall be determined from time to time by the Board of Directors
(provided that no decrease in the number of directors which would have the
effect of shortening the term of an incumbent director may be made by the Board
of Directors). Each director shall hold office for the term for which such
director is elected, and until such director's successor shall have been elected
and qualified or until such director's earlier death, resignation or removal.
Unless otherwise provided in the charter documents of the Corporation,
directors need not be stockholders nor resident of the state of Delaware.
Section 3.2. Classes of Directors. Effective upon the closing of the
Corporation's IPO and the date that the Corporation is no longer subject to
Section 2115 of the California Corporations Code, the Directors shall be divided
into three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the IPO, the term of office of the Class I
Directors shall expire and Class I Directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the closing
of the IPO, the term of office of the Class II Directors shall expire and Class
II Directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class III Directors shall expire and Class
III Directors shall be elected for a full term of three years. At each
succeeding annual meeting
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of stockholders, Directors shall be elected for a full term of three years to
succeed the Directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each Director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation or removal. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
Section 3.3. Quorum; Voting. Unless otherwise provided in the charter
documents of the Corporation, a majority of the number of directors then in
office shall constitute a quorum for the transaction of business of the Board of
Directors and the vote of a majority of the directors present at a meeting at
which a quorum is present shall be the act of the Board of Directors.
Section 3.4. Place of Meetings; Order of Business. The directors may
hold their meetings and may have an office and keep the books of the
Corporation, except as otherwise provided by law, in such place or places,
within or without the state of incorporation of the Corporation, as the Board of
Directors may from time to time determine. At all meetings of the Board of
Directors business shall be transacted in such order as shall from time to time
be determined by the President or by the Board of Directors.
Section 3.5. First Meeting. Each newly elected Board of Directors may
hold its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as the
annual meeting of the stockholders. Notice of such meeting shall not be
required. At the first meeting of the Board of Directors in each year at which a
quorum shall be present, held after the annual meeting of stockholders, the
Board of Directors shall elect the officers of the Corporation.
Section 3.6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as shall be designated from
time to time by the President, or in the President's absence, by another officer
of the Corporation. Notice of such regular meetings shall not be required.
Section 3.7. Special Meetings. Special meetings of the Board of
Directors may be called by the President, or on the written request of any
director, by the Secretary, in each case on at least twenty-four (24) hours'
personal, written, telegraphic, cable or wireless notice to each director. Such
notice, or any waiver thereof pursuant to Article 7, Section 7.3 hereof, need
not state the purpose or purposes of such meeting, except as may otherwise be
required by law or provided for in the charter documents of the Corporation or
these Bylaws. Meetings may be held at any time without notice if all the
directors are present or if those not present waive notice of the meeting in
writing.
Section 3.8. Removal. Any director or the entire Board of Directors may
be removed as set forth in the Certificate of Incorporation of the corporation,
as amended from time to time.
Section 3.9. Vacancies; Increases in the Number of Directors. Any
director may resign effective on giving written notice to the chairman of the
board, the president, the secretary or the board of directors, unless the notice
specifies a later time for that resignation to become effective. If
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the resignation of a director is effective at a future time, the board of
directors may elect a successor to take office when the resignation becomes
effective.
Unless otherwise provided in the Certificate of Incorporation or these
bylaws, vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the stockholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the stockholders and until a
successor has been elected and qualified. Notwithstanding the foregoing,
however, effective upon the closing of the Corporation's IPO and the date that
the Corporation is no longer subject to Section 2115 of the California
Corporations Code, the number of directors which shall constitute the whole
Board of Directors shall be fixed exclusively by one or more resolutions adopted
from time to time by the Board of Directors.
Unless otherwise provided in the Certificate of Incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
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<PAGE> 10
Section 3.10. Compensation. Directors and members of standing committees
may receive such compensation as the Board of Directors from time to time shall
determine to be appropriate, and shall be reimbursed for all reasonable expenses
incurred in attending and returning from meetings of the board of Directors.
Section 3.11. Action Without a Meeting: Telephone Conference Meeting.
Unless otherwise restricted by the charter documents of the Corporation, any
action required or permitted to be taken at any of the Board of Directors or any
committee designated by the Board of Directors may be taken without a meeting if
all members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee. Such consent shall have the
same force and effect as a unanimous vote at a meeting, and may be stated as
such in any document or instrument filed with the Secretary of State of the
state of incorporation of the Corporation.
Unless otherwise restricted by the charter documents of the Corporation,
subject to the requirement for notice of meetings, members of the Board of
Directors, or members of any committee designated by the Board of Directors, may
participate in a meeting of such Board of Directors or committee, as the case
may be, by means of a conference telephone connection or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in such a meeting shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.
Section 3.12. Approval or Ratification of Acts or Contracts by
Stockholders. The Board of Directors in its discretion may submit any act or
contract for approval or ratification at any annual meeting of the stockholders,
or at any special meeting of the stockholders called for the purpose of
considering any such act or contract, and any act or contract that shall be
approved or be ratified by the vote of the stockholders holding a majority of
the issued and outstanding shares of stock of the Corporation entitled to vote
and present in person or by proxy at such meeting (provided that a quorum is
present) shall be as valid and as binding upon the Corporation and upon all the
stockholders as if it has been approved or ratified by every stockholder of the
Corporation. In addition, any such act or contract may be approved or ratified
by the written consent of stockholders holding a majority of the issued and
outstanding shares of capital stock of the Corporation entitled to vote, and
such consent shall be as valid and binding upon the Corporation and upon all the
stockholders as if it had been approved or ratified by every stockholder of the
Corporation.
ARTICLE 4
COMMITTEES
Section 4.1. Designation; Powers. The Board of Directors may, by
resolution passed by a majority of the board, designate one or more committees,
including, if they shall so determine, an executive committee and a compensation
committee, with each such committee to consist of one or more of the directors
of the Corporation. Any such designated committee shall have and may exercise
such of the powers and authority of the Board of Directors in the management of
the business and affairs of the Corporation as may be provided in such
resolution, except that no such committee shall have the power or authority of
the Board of Directors in reference of amending the
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<PAGE> 11
charter documents of the Corporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution of the Corporation, or amending, altering or repealing these Bylaws
or adopting new bylaws for the Corporation. Any such designated committee may
authorize the seal of the Corporation to be affixed to all papers which may
require it. In addition to the above, such committee or committees shall have
such other powers and limitations of authority as may be determined from time to
time by the Board of Directors.
Section 4.2. Procedure; Meetings; Quorum. Any committee designated
pursuant to this Article 4 shall keep regular minutes of its actions and
proceedings in a book provided for that purpose and report the same to the Board
of Directors at its meeting next succeeding such action, shall fix its own rules
or procedures, and shall meet at such times and at such place or places as may
be provided by such rules, or by such committee or the board of Directors.
Should a committee fail to fix its own rules, the provisions of these Bylaws,
pertaining to the calling of meetings and conduct of business by the Board of
Directors, shall apply as nearly as may be possible. At every meeting of any
such committee, the presence of a majority of all the members thereof shall
constitute a quorum, except as provided in Section 4.3 of this Article 4 and the
affirmative vote of a majority of the members present shall be necessary for the
adoption by it of any resolution.
Section 4.3. Substitution and Removal of Members: Vacancies. The Board
of Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
such committee. In the absence or disqualification of a member of a committee,
the member or members present at any meeting and not disqualified from voting,
whether or not constituting a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of the absent or
disqualified member. The Board of Directors shall have the power at any time to
remove any member(s) of a committee and to appoint other directors in lieu of
the person(s) so removed and shall also have the power to fill vacancies in a
committee.
ARTICLE 5
OFFICERS
Section 5.1. Number, Titles, and Term of Office. The officers of the
Corporation shall be a President, Treasurer, a Secretary, and such other
officers as the Board of Directors may from time to time elect or appoint
(including, but not limited to, a Chairman of the Board, and or more Vice
Presidents, (anyone or more of whom may be designated Executive Vice President
or Senior Vice President) Vice Chairman of the Board, one or more Assistant
Secretaries and one or more Assistant Treasurers). Each officer shall hold
office until such officer's successor shall be duly elected and shall qualify or
until such officer's death or until such officer shall resign or shall have been
removed. Any number of offices may be held by the same person, unless the
Articles of Incorporation of the Corporation provide otherwise. Except for the
Chairman of the Board and the Vice Chairman of the Board, no officer need be a
director.
Section 5.2. Powers and Duties of the President. The President shall be
the chief executive officer of the Corporation. Subject to the control of the
Board of Directors and the Executive
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<PAGE> 12
Committee (if any), the President shall have general executive charge,
management and control of the properties, business and operations of the
Corporation with all such powers as may be reasonably incident to such
responsibilities; may agree upon and execute all leases, contracts, evidences of
indebtedness and other obligations in the name of the Corporation and may sign
all certificates for shares of capital stock of the Corporation; and shall have
such other powers and duties as designated to the President by the Board of
Directors. The President shall preside at all meetings of the stockholders and
of the Board of Directors.
Section 5.3. Vice Presidents. Each Vice President shall at all times
possess power to sign all certificates, contracts and other instruments of the
Corporation, except as otherwise limited in writing by the Chairman of the
Board, the President or the Vice Chairman of the Board of the Corporation. Each
Vice President shall have such other powers and duties as from time to time may
be assigned to such Vice President by the Board of Directors, the Chairman of
the Board, the President or the Vice Chairman of the Board.
Section 5.4. Secretary. The Secretary shall keep the minutes of all
meetings of the Board of Directors, committees of the Board of Directors and the
stockholders, in books provided for that purpose; shall attend to the giving and
serving of all notices; may in the name of the Corporation affix the seal of the
Corporation to all contracts and attest the affixation of the seal of the
Corporation thereto; may sign with the other appointed officers all certificates
for shares of capital stock of the Corporation; shall have charge of the
certificate books, transfer books and stock ledgers, and such other books and
papers as the Board of Directors may direct, all of which shall at all
reasonable times be open to inspection of any director upon application at the
office of the Corporation during business hours; shall have such other powers
and duties as designated in these Bylaws and as from time to time may be
assigned to the Secretary by the Board of Directors, the Chairman of the Board,
the President or the Vice Chairman of the Board; and shall in general perform
all acts incident of the office of Secretary, subject to the control of the
Board of Directors, the Chairman of the Board, the President or the Vice
Chairman of the Board.
Section 5.5. Assistant Secretaries. Each Assistant Secretary shall have
the usual powers and duties pertaining to such offices, together with such other
powers and duties as designated in these Bylaws and as from time to time may be
assigned to an Assistant Secretary by the board of directors, the President, or
the Secretary. The Assistant Secretaries shall exercise the powers of the
Secretary during that officer's absence or inability or refusal to act.
Section 5.6. Treasurer. The Treasurer shall have responsibility for the
custody and control of all the funds and securities of the Corporation, and
shall have such other powers and duties as designated in these Bylaws and as
from time to time may be assigned to the Treasurer by the Board of Directors or
the President. The Treasurer shall perform all acts incident to the position of
Treasurer, subject to the control of the Board of Directors or the President;
and the Treasurer shall, if required by the Board of Directors, give such bond
for the faithful discharge of the Treasurer's duties in such form as the Board
of Directors may require.
Section 5.7. Assistant Treasurers. Each Assistant Treasurer shall have
the usual powers and duties pertaining to such office, together with such other
powers and duties as designated in
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<PAGE> 13
these Bylaws and as from time to time may be assigned to each Assistant
Treasurer by the Board of Directors, the President, or the Treasurer. The
Assistant Treasurers shall exercise the powers of the Treasurer during that
officer's absence or inability or refusal to act.
Section 5.8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President, together
with the Secretary or any Assistant Secretary shall have power to vote and
otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of security holders of or with respect to any action of security holders
of any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other corporation.
Section 5.9. Delegation. For any reason that the Board of Directors may
deem sufficient, the Board of Directors may, except where otherwise provided by
statute, delegate the powers or duties of any officer to any other person, and
may authorize any officer to delegate specified duties of such office to any
other person. Any such delegation or authorization by the Board shall be
effected from time to time by resolution of the Board of Directors.
ARTICLE 6
CAPITAL STOCK
Section 6.1. Certificates of Stock. The certificates for shares of the
capital stock of the Corporation shall be in such form, not inconsistent with
that required by law and the charter documents of the Corporation, as shall be
approved by the Board of Directors. Every holder of stock represented by
certificates shall be entitled to have a certificate signed by or in the name of
the Corporation by the President or a Vice President and the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer of the
Corporation representing the number of shares (and, if the stock of the
Corporation shall be divided into classes or series, certifying the class and
series of such shares) owned by such stockholder which are registered in
certified form; provided, however, that any of or all the signatures on the
certificate may be facsimile. The stock record books and the blank stock
certificate books shall be kept by the Secretary or at the office of such
transfer agent or transfer agents as the Board of Directors may from time to
time determine. In case any officer, transfer agent or registrar who shall have
signed or whose facsimile signature or signatures shall have been placed upon
any such certificate or certificates shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued by the
Corporation, such certificate may nevertheless be issued by the Corporation with
the same effect as if such person were such officer, transfer agent or registrar
at the date of issue. The stock certificates shall be consecutively numbered and
shall be entered in the books of the Corporation as they are issued and shall
exhibit the holder's name and number of shares.
Section 6.2. Transfer of Shares. The shares of stock of the Corporation
shall be transferable only on the books of the Corporation by the holders
thereof in person or by their duly authorized attorneys or legal representatives
upon surrender and cancellation of certificates for a like number of shares.
Upon surrender to the Corporation or a transfer agent of the Corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or
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<PAGE> 14
authority to transfer, it shall be the duty of the Corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 6.3. Ownership of Shares. The Corporation shall be entitled to
treat the holder of record of any share or shares of capital stock of the
Corporation as the holder in fact thereof and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in such share or shares
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the state of
Delaware.
Section 6.4. Regulations Regarding Certificates. The Board of Directors
shall have the power and authority to make all such rules and regulations as
they may deem expedient concerning the issue, transfer and registration or the
replacement of certificates for shares of capital stock of the Corporation.
Section 6.5. Lost or Destroyed Certificates. The Board of Directors may
determine the conditions upon which the Corporation may issue a new certificate
of stock in place of a certificate theretofore issued by it which is alleged to
have been lost, stolen or destroyed and may require the owner of such
certificate or such owner's legal representative to give bond, with surety
sufficient to indemnify the Corporation and each transfer agent and registrar
against any and all losses or claims which may arise by reason of the alleged
loss, theft or destruction of any such certificate or the issuance of such new
certificate in the place of the one so lost, stolen destroyed.
ARTICLE 7
MISCELLANEOUS PROVISIONS
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of January of each year.
Section 7.2. Corporate Seal. The corporate seal shall be circular in
form and shall have inscribed thereon the name of the Corporation and the state
of its incorporation, which seal shall be in the charge of the Secretary and
shall be affixed to certificates of stock, debentures, bonds and other
documents, in accordance with the direction of the Board of Directors or a
committee thereof, and as may be required by law; however, the Secretary may, if
the Secretary deems it expedient, have a facsimile of the corporate seal
inscribed on any such certificates of stock, debentures, bonds, contract or
other documents. Duplicates of the seal may be kept for use by any Assistant
Secretary.
Section 7.3. Notice and Waiver of Notice. Whenever any notice is
required to be given by law, the charter documents of the Corporation or under
the provisions of these Bylaws, said notice shall be deemed to be sufficient if
given (i) by telegraphic, cable or wireless transmission (including by telecopy
or facsimile transmission) or (ii) by deposit of the same in a post office box
or by delivery to an overnight courier service company in a sealed prepaid
wrapper addressed to the person entitled thereto at such person's post office
address, as it appears on the records of the Corporation, and such notice shall
be deemed to have been given on the day of such transmission or mailing or
delivery to courier, as the case may be.
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<PAGE> 15
Whenever notice is required to be given by law, the charter documents of
the Corporation or under any of the provisions of these Bylaws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person, including without limitation a director, at meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice unless
so required by the charter documents of the Corporation or these Bylaws.
Section 7.4. Facsimile Signature. In addition to the provisions for the
use of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors.
Section 7.5. Reliance upon Books, Reports and Records. A member of the
Board of Directors, or a member of any committee designated by the Board of
Directors, shall, in the performance of such person's duties, be protected to
the fullest extent permitted by law in relying upon the records of the
Corporation and upon information, opinion, reports or statements presented to
the Corporation.
Section 7.6. Application of Bylaws. In the event that any provisions of
these Bylaws is or may be in conflict with any law of the United States, of the
state of Delaware, or of any other governmental body or power having
jurisdiction over this Corporation, or over the subject matter to which such
provision of these Bylaws applies, or may apply, such provision of these Bylaws
shall be inoperative to the extent only that the operation thereof unavoidably
conflicts with such law, and shall in all other respects be in full force and
effect.
ARTICLE 8
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 8.1. Indemnification. The corporation shall, to the maximum
extent and in the manner permitted by the General Corporation Law of Delaware,
indemnify each of its directors and officers against expenses (including
attorneys' fees), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding, arising by reason of the
fact that such person is or was an agent of the corporation. For purposes of
this Section 6.1, a "director" or "officer" of the corporation includes any
person (i) who is or was a director or officer of the corporation, (ii) who is
or was serving at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
Section 8.2. Indemnification of Others. The corporation shall have the
power, to the maximum extent and in the manner permitted by the General
Corporation Law of Delaware, to indemnify each of its employees and agents
(other than directors and officers) against expenses (including attorneys'
fees), judgments, fines, settlements and other amounts actually and reasonably
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<PAGE> 16
incurred in connection with any proceeding, arising by reason of the fact that
such person is or was an agent of the corporation. For purposes of this Section
6.2, an "employee" or "agent" of the corporation (other than a director or
officer) includes any person (i) who is or was an employee or agent of the
corporation, (ii) who is or was serving at the request of the corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, or (iii) who was an employee or agent of a corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
Section 8.3. Insurance. The corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liability under the provisions of the
General Corporation Law of Delaware.
ARTICLE 9
AMENDMENTS
Section 9.1. Amendments. The Board of Directors shall have the power to
adopt, amend and repeal from time to time Bylaws of the Corporation, subject to
the right of the stockholders entitled to vote with respect thereto to amend or
repeal such Bylaws as adopted or amended by the Board of Directors
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<PAGE> 1
EXHIBIT 4.2
SKYSTREAM CORPORATION
SECOND AMENDED AND RESTATED
RIGHTS AGREEMENT
February 5, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
SECTION 1 Restrictions on Transferability; Registration Rights...............1
1.1 Certain Definitions............................................1
1.2 Restrictions...................................................3
1.3 Restrictive Legend.............................................3
1.4 Notice of Proposed Transfers...................................4
1.5 Requested Registration.........................................4
1.6 Company Registration...........................................6
1.7 Registration on Form S-3.......................................7
1.8 Limitations on Subsequent Registration Rights..................8
1.9 Expenses of Registration.......................................8
1.10 Registration Procedures........................................8
1.11 Indemnification................................................9
1.12 Information by Holder.........................................11
1.13 Rule 144 Reporting............................................11
1.14 Transfer of Registration Rights...............................11
1.15 Standoff Agreement............................................12
1.16 Termination of Rights.........................................12
SECTION 2 Right of Participation............................................12
2.1 Purchasers' Right of Participation............................12
2.2 Termination of Participation Right............................14
SECTION 3 Miscellaneous.....................................................14
3.1 Assignment....................................................14
3.2 Third Parties.................................................14
3.3 Governing Law.................................................15
3.4 Counterparts..................................................15
3.5 Notices.......................................................15
3.6 Severability..................................................15
3.7 Amendment and Waiver..........................................15
3.8 Effect of Amendment or Waiver.................................15
3.9 Rights of Holders.............................................15
3.10 Delays or Omissions...........................................16
3.11 Restatement of Former Agreement...............................16
</TABLE>
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<PAGE> 3
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
THIS SECOND AMENDED AND RESTATED RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 5th day of February, 1999 by and among SkyStream
Corporation, a California corporation (the "Company"), the persons and
institutions listed on Exhibit A (the "Existing Shareholders") and the investors
listed on Exhibit B hereto (the "Purchasers").
RECITALS
WHEREAS, the Company and the Existing Shareholders are parties to an
Amended and Restated Rights Agreement dated March 25, 1998 (the "Former
Agreement").
WHEREAS, the parties to the Former Agreement desire to amend and restate
the agreement to read as set forth below and to include the Purchasers as set
forth on Exhibit B hereto.
WHEREAS, the Company and the Purchasers are entering into a Series C
Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"), pursuant to which the Company shall sell, and the Purchasers shall
acquire, shares of the Company's Series C Preferred Stock (the "Preferred
Shares").
WHEREAS, in order to induce the Company to enter into the Purchase
Agreement and to induce the Purchasers to invest funds in the Company, the
parties desire that the Purchasers be granted registration rights and rights of
participation with respect to the Preferred Shares.
WHEREAS, the parties understand the Purchasers on Exhibit B represent
the participants in the first closing under the Purchase Agreement and that
additional participants may invest in one or more second closings to be held no
later than 60 days thereafter; provided, however, that the aggregate number of
shares of Series C Preferred sold to the Purchasers shall not exceed 2,000,000
shares. The Existing Shareholders agree that such additional Purchasers shall be
treated as Purchasers hereunder upon such party's execution of a supplemental
signature page to this Agreement and the addition of such person's name to
Exhibit B hereto. Thereafter, the participants in closings after the first
closing, but not later than 60 days thereafter, shall be Purchasers for purposes
of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
SECTION 1
Restrictions on Transferability;
Registration Rights
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the following respective meanings:
<PAGE> 4
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable upon
conversion of the Preferred Shares as defined herein.
"Holder" shall mean any Purchaser holding Registrable Securities and
any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean Holders in the aggregate of not less
than forty percent (40%) of the Registrable Securities.
"Preferred Shares" shall mean the Series A Preferred Stock, the
Series B Preferred Stock and the Series C Preferred Stock of the Company.
The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"Registrable Securities" means (i) the Conversion Shares; and (ii)
any Common Stock of the Company issued or issuable in respect of the Conversion
Shares or other securities issued or issuable with respect to the Conversion
Shares upon any stock split, stock dividend, recapitalization, or similar event,
or any Common Stock otherwise issued or issuable with respect to the Conversion
Shares: provided, however, that shares of Common Stock or other securities shall
only be treated as Registrable Securities if and so long as they have not been
(A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act under Section 4(l) thereof so that all transfer restrictions and
restrictive legends with respect thereto are removed upon the consummation of
such sale.
"Restricted Securities" shall mean the securities of the Company
required to bear the legend set forth in Section 1.3 of this Agreement.
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<PAGE> 5
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.9).
1.2 Restrictions. The Preferred Shares and the Conversion Shares
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. The Purchasers will cause any
proposed purchaser, assignee, transferee or pledgee of the Preferred Shares, or
the Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3 Restrictive Legend. Each certificate representing (i) the
Preferred Shares, (ii) the Conversion Shares, and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with legends in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY ACCEPTABLE TO
IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
Each Purchaser and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
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1.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities, unless there is in
effect a registration statement under the Securities Act covering the proposed
transfer, the holder thereof shall give written notice to the Company of such
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied at such holder's expense by either (i) an unqualified written
opinion of legal counsel who shall be, and whose legal opinion shall be,
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a "no action" letter from the
Commission to the effect that the transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. The Company will not require such a legal opinion or "no action" letter
(a) in any transaction in compliance with Rule 144, (b) in any transaction in
which a Purchaser which is a corporation distributes Restricted Securities after
six (6) months after the purchase thereof solely to its majority-owned
subsidiaries or affiliates for no consideration, or (c) in any transaction in
which a Purchaser which is a partnership distributes Restricted Securities after
six (6) months after the purchase thereof solely to partners thereof for no
consideration, provided that each transferee agrees in writing to be subject to
the terms of this Section 1.4. Each certificate evidencing the Restricted
Securities transferred as above provided shall bear, except if such transfer is
made pursuant to Rule 144, the appropriate restrictive legend set forth in
Section 1.3 above, except that such certificate shall not bear such restrictive
legend if, in the opinion of counsel for such holder and the Company, such
legend is not required in order to establish compliance with any provisions of
the Securities Act.
1.5 Requested Registration.
(a) Request for Registration. In case the Company shall receive from
Initiating Holders a written request that the Company effect any qualification,
compliance or registration (which, in connection with the Company's initial
public offering, must be for at least 20% of their Registrable Securities or
such lesser percentage which would reasonably anticipate an aggregate price to
the public net of underwriting discounts and commissions, exceeding $5,000,000):
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation, the
execution of an undertaking to file post-effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would
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<PAGE> 7
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 1.5:
(1) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) Prior to the earlier of (i) six (6) months following the
Company's initial public offering or (ii) February 7, 2001.
(3) During the period ending on the date three (3) months
immediately following the effective date of, any registration statement
pertaining to securities of the Company (other than a registration of securities
in a Rule 145 transaction or with respect to an employee benefit plan);
(4) After the Company has effected two (2) such
registrations pursuant to this subparagraph 1.5(a), such registrations have been
declared or ordered effective and the securities offered pursuant to such
registrations have been sold; or
(5) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed ninety (90) days from the date of receipt of written request from
the Initiating Holders.
Subject to the foregoing clauses (1) through (5), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of the request or requests of
the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute
their securities through
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such underwriting) enter into an underwriting agreement in customary form with
the managing underwriter selected for such underwriting by a majority in
interest of the Initiating Holders (which managing underwriter shall be
reasonably acceptable to the Company). Notwithstanding any other provision of
this Section 1.5, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders of Registrable
Securities and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Holders thereof in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement; provided, that the number of shares of Registrable
Securities to be included in such underwriting shall not be reduced unless all
other securities are first entirely excluded from the underwriting. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. To
facilitate the allocation of shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration.
1.6 Company Registration.
(a) Notice of Registration. If at any time or from time to time, the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved in
such registration, all the Registrable Securities specified in a written request
or requests made within twenty (20) days after receipt of such written notice
from the Company by any Holder, but only to the extent that such inclusion will
not diminish the number of securities included by the Company or by holders of
the Company's securities who have demanded such registration.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided
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<PAGE> 9
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the managing underwriter selected for such underwriting
by the Company (or by the holders who have demanded such registration).
Notwithstanding any other provision of this Section 1.6, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration or exclude them entirely. The
Company shall so advise all Holders and the other holders distributing their
securities through such underwriting pursuant to piggyback registration rights
similar to this Section 1.6, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be first allocated among all Purchasers in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Purchasers at the time of filing the registration statement, and after
satisfaction of the requirements of the Purchasers, the remaining shares that
may be included in the registration and underwriting shall be allocated among
the officers, directors and other shareholders of the Company in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such officers and directors of the Company at the time of filing of the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7 Registration on Form S-3.
(a) If the Initiating Holder requests that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities, the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form; provided,
however, that the Company shall not be required to effect more than two
registrations pursuant to this Section 1.7 in any twelve (12) month period. The
Company will (i) promptly give written notice of the proposed registration to
all other Holders, and (ii) as soon as practicable, use its best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the
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<PAGE> 10
Company. The substantive provisions of Section 1.5(b) shall be applicable to
each registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any particular
jurisdiction in which the Company would be required to execute a general consent
to service of process in effecting such registration, qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as may be required by the Securities Act, (ii) during the period
ending on a date three (3) months following the effective date of, a
registration statement (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities), or (iii) if the Company shall furnish to such Holder a certificate
signed by the President of the Company stating that, in the good faith judgment
of the Board of Directors, it would be seriously detrimental to the Company or
its shareholders for registration statements to be filed in the near future,
then the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a single period not to exceed ninety (90) days
from the receipt of the request to file such registration by such Holder or
Holders.
1.8 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights with respect to such securities unless such holder derives its rights as
an additional Holder hereunder, or such shares or securities are entitled to be
included in registrations only to the extent that the inclusion of such
securities will not diminish the amount of Registrable Securities that are
included.
1.9 Expenses of Registration. All Registration Expenses incurred in
connection with any registration pursuant to Section 1.5, 1.6 or 1.7 and the
reasonable fees and expenses (up to $30,000) of one special legal counsel to
represent all of the Holders together in any such registration shall be borne by
the Company, provided that the Company shall not be required to pay the
Registration Expenses of any registration proceeding begun pursuant to Section
1.5, the request of which has been subsequently withdrawn by the Initiating
Holders. In such case, the Holders of Registrable Securities to have been
registered shall bear all such Registration Expenses pro rata on the basis of
the number of shares to have been registered unless the Holders of a majority of
the Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.5. Notwithstanding the foregoing, however, if
at the time of the withdrawal, the Holders have learned of a material adverse
change in the condition, business or prospects of the Company from that known to
the Holders at the time of their request, and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of said
Registration Expenses or to forfeit the right to one demand registration.
1.10 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in
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<PAGE> 11
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
eighty (180) days or until the distribution described in the registration
statement has been completed; and
(b) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
1.11 Indemnification.
(a) The Company will indemnify each Holder, each of its officers and
directors and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any of
the foregoing incurred in settlement of any litigation, commenced or threatened,
arising out of or based on (i) any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or (ii)
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or (iii) any violation by
the Company of the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), any state securities law or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state securities
law applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors, and each person controlling such Holder,
each such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such Holder,
controlling person or underwriter and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the
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Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and each person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and will reimburse the Company, such
Holders, such directors, officers, persons, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to the
Company by an instrument duly executed by such Holder and stated to be
specifically for use therein; provided, however, that the liability of a Holder
for indemnification under this Section 1.11(b) shall not exceed the net proceeds
from the offering received by such Holder.
(c) Each party entitled to indemnification under this Section 1.11
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 1 unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
(d) If the indemnification provided for in this Section 1.11 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result such loss, liability, claim, damage or expense in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations;
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provided, that, in no event shall any contribution by a Holder under this
Subsection 1.11(d) exceed the net proceeds from the offering received by such
Holder. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the Indemnifying Party or by
the Indemnified Party and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement or omission.
1.12 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.13 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Restricted Securities to the public without registration, after such
time as a public market exists for the Common Stock of the Company, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) So long as a Purchaser owns any Restricted Securities, to
furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents of the Company and other information in the possession of or
reasonably obtainable by the Company as a Purchaser may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
1.14 Transfer of Registration Rights. The rights to cause the Company to
register Registrable Securities granted under this Section 1 may be assigned by
a Holder to a transferee or assignee who acquires (i) at least 500,000 of the
Registrable Securities held by such Holder or, if less, (ii) all of the
Registrable Securities then held by such Holder, provided in either case, the
Company is, within a reasonable time prior to such transfer, furnished with
written notice of the
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name and address of such proposed transferee or assignee and the securities with
respect to which such registration rights are being assigned; provided further
that such assignment shall be effective only if the transferee enters into a
written agreement providing that such transferee shall be bound by the
provisions of Section 1 of this Agreement. Notwithstanding the foregoing or any
other provision contained herein to the contrary, the right to cause the Company
to register Registerable Securities may be assigned by a Holder to any
constituent partner of a partnership Holder and any subsidiary or parent of a
corporate Holder provided that such transferee agrees in writing to be bound by
the terms and conditions of this Agreement.
1.15 Standoff Agreement. Each Holder agrees in connection with the
initial registration of the Company's securities that, upon request of the
Company or the underwriters managing any underwritten initial public offering of
the Company's securities, not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Registrable Securities
(other than those included in the registration) without the prior written
consent of the Company or such underwriters, as the case may be, for such period
of time (not to exceed one hundred eighty (180) days from the effective date of
such registration, or such longer period as may be agreed to by the holders of a
majority of the outstanding Registrable Securities) as may be requested by the
Company or such managing underwriters; provided, however, that all officers and
directors of the Company, all one-percent securityholders, and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements with respect to securities of the Company held by them.
1.16 Termination of Rights. No Holder shall be entitled to exercise any
right provided for in this Section 1:
(a) after five (5) years following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the initial firm commitment underwritten offering of its
securities to the general public, or
(b) on or after the closing of a public offering of the Common Stock
of the Company, initiated by the Company, when all shares of the Holder's
Registrable Securities may be sold under Rule 144 during any 90-day period.
SECTION 2
Right of Participation
2.1 Purchasers' Right of Participation.
(a) Right of Participation. Subject to the terms and conditions
contained in this Section 2.1, the Company hereby grants to each Purchaser who
is the Holder of not less than 1,500,000 shares of Registrable Securities, the
right of participation to purchase its Pro Rata Portion
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of any New Securities (as defined in subsection 2.1(b)) which the Company may,
from time to time, propose to sell and issue. A Holder's "Pro Rata Portion" for
purposes of this Section 2.1 is the ratio that (x) the sum of the number of
shares of the Company's Common Stock then held by such Purchaser and the number
of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then held by such Holder, bears to (y) the sum of the total
number of shares of the Company's Common Stock then outstanding and the number
of shares of the Company's Common Stock issuable upon conversion of the then
outstanding Preferred Stock.
(b) Definition of New Securities. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether authorized or not, and rights, options
or warrants to purchase said shares of Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible into said
shares of Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) the Preferred Shares or the Conversion Shares,
(ii) securities offered to the public generally pursuant to a registration
statement under the Securities Act, (iii) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or shares or other reorganization whereby the
Company or its shareholders own not less than a majority of the voting power of
the surviving or successor corporation, (iv) shares of the Company's Common
Stock or related options or warrants convertible into or exercisable for such
Common Stock issued to employees, officers and directors of, and consultants to,
the Company, pursuant to any arrangement approved by the Board of Directors of
the Company, (v) shares of the Company's Common Stock or related options
convertible into or exercisable for such Common Stock issued to banks,
commercial lenders, lessors and other financial institutions in connection with
the borrowing of money or the leasing of equipment by the Company approved by
the Board of Directors of the Company, (vi) stock issued pursuant to any rights
or agreements, including, without limitation, convertible securities, options
and warrants, provided that the Company shall have complied with the rights of
participation established by this Section 2.1 with respect to the initial sale
or grant by the Company of such rights or agreements, or (vii) stock issued in
connection with any stock split, stock dividend or recapitalization by the
Company.
(c) Notice of Right. In the event the Company proposes to undertake
an issuance of New Securities, it shall give each Purchaser written notice of
its intention, describing the type of New Securities and the price and terms
upon which the Company proposes to issue the same. Each Purchaser shall have
twenty (20) days from the date of receipt of any such notice to agree to
purchase shares of such New Securities (up to the amount referred to in
subsection 2.1(a)), for the price and upon the terms specified in the notice, by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(d) Exercise of Right. If any Purchaser exercises its right of
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within ninety (90) calendar days after the Purchaser gives notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations. Upon exercise of such right of participation,
the Company and the Purchaser shall be
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<PAGE> 16
legally obligated to consummate the purchase contemplated thereby and shall use
their best efforts to secure any approvals required in connection therewith.
(e) Lapse and Reinstatement of Right. In the event a Purchaser fails
to exercise the right of participation provided in this Section 2.1 within said
twenty (20) day period, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the date
of said agreement) to sell the New Securities not elected to be purchased by
such Purchaser at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to sell the New Securities within said ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within sixty (60) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the Purchasers in
the manner provided above.
(f) Assignment. The right of the Purchasers to purchase any part of
the New Securities may be assigned in whole or in part to any partner,
subsidiary, affiliate or shareholder of a Purchaser, or other persons or
organizations who acquire the lesser of (i) 20% or more shares of Registrable
Securities (as adjusted for stock splits and the like) or (ii) all of the
Restricted Securities then owned by such Purchaser.
2.2 Termination of Participation Right. The rights of participation
granted under Section 2.1 of this Agreement shall terminate on and be of no
further force or effect upon the earlier of (i) the consummation of the
Company's sale of its Common Stock in an underwritten public offering pursuant
to an effective registration statement filed under the Securities Act
immediately subsequent to which the Company shall be obligated to file annual
and quarterly reports with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act or (ii) the registration by the Company of a class of its equity
securities under Section 12(b) or 12(g) of the Exchange Act.
SECTION 3
Miscellaneous
3.1 Assignment. Except as otherwise provided in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
3.2 Third Parties. Nothing in this Agreement, express or implied, is
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
-14-
<PAGE> 17
3.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of California in the United States of America
without giving effect to the conflicts of laws principles thereof.
3.4 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
3.5 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be sent by prepaid registered or certified mail return
receipt requested, or otherwise delivered by hand or by messenger addressed to
the other party at the address shown below or at such other address for which
such party gives notice under this Agreement. Such notice shall be deemed to
have been given when delivered if delivered personally, or, if sent by mail, at
the earlier of its receipt or three (3) days after deposit in the mail.
3.6 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, portions of such provisions, or such
provisions in their entirety, to the extent necessary, shall be severed from
this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7 Amendment and Waiver. Any provision of this Agreement may be amended
or waived with the written consent of the Company and the Holders of at least a
majority of the outstanding shares of the Registrable Securities, so long as the
effect is to treat all Holders equally. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each Holder of Registrable
Securities and the Company. In addition, the Company may waive performance of
any obligation owing to it, as to some or all of the Holders of Registrable
Securities, or agree to accept alternatives to such performance, without
obtaining the consent of any Holder of Registrable Securities. In the event that
an underwriting agreement is entered into between the Company and any Holder,
and such underwriting agreement contains terms differing from this Agreement, as
to any such Holder the terms of such underwriting agreement shall govern.
3.8 Effect of Amendment or Waiver. The Purchasers and their successors
and assigns acknowledge that by the operation of Section 3.7 of this Agreement
the holders of a majority of the outstanding Registrable Securities, acting in
conjunction with the Company, will have the right and power to diminish or
eliminate any or all rights or increase any or all obligations pursuant to this
Agreement.
3.9 Rights of Holders. Each holder of Registrable Securities shall have
the absolute right to exercise or refrain from exercising any right or rights
that such holder may have by reason of this Agreement, including, without
limitation the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
-15-
<PAGE> 18
3.10 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement, upon any breach or
default of the other party, shall impair any such right, power or remedy of such
non-breaching party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
3.11 Restatement of Former Agreement. Through their execution of this
Agreement, the Company and all of the Existing Shareholders agree to terminate
the Former Agreement and restate the terms thereof through this Agreement, with
the result that this Agreement shall constitute the sole agreement among the
parties hereto with respect to the registration of Registrable Securities.
-16-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
COMPANY: EXISTING SHAREHOLDERS:
SKYSTREAM CORPORATION MAYFIELD VIII,
a California corporation A CALIFORNIA LIMITED
PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ JAMES D. OLSON By: /s/ W. VAN AUKEN
------------------------------ -----------------------------------
James D. Olson, President Wendell Van Auken,
Managing Member
MAYFIELD ASSOCIATES FUND III,
A CALIFORNIA LIMITED
PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ W. G. VAN AUKEN
----------------------------------
Wendell Van Auken,
Managing Member
INSTITUTIONAL VENTURE PARTNERS
VII
By Its General Partner
Institutional Venture Management VII
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
General Partner
[Second Amended and Restated Rights Agreement]
<PAGE> 20
INSTITUTIONAL VENTURE
MANAGEMENT VII
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
General Partner
IVP FOUNDERS FUND I, L.P.
By Its General Partner
Institutional Venture Management
VI, L.P.
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
General Partner
WS INVESTMENTS 97A
WS INVESTMENTS 98A
By: /s/ ROBERT P. LATTA
----------------------------------
LATTA FAMILY TRUST
By: /s/ ROBERT P. LATTA
----------------------------------
/s/ MARIANNE S. BRADLEY
--------------------------------------
Marianne S. Bradley
[Second Amended and Restated Rights Agreement]
<PAGE> 21
/s/ WILLIAM KIRSCH
--------------------------------------
William Kirsch
/s/ DAVID CAMPBELL
--------------------------------------
David Campbell
/s/ HELEN E. M.L O'ROURKE
--------------------------------------
Helen E. McLaughlin O'Rourke
--------------------------------------
Glen Wallace McLaughlin
PURCHASERS:
BROADCAST TRUST
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------
Wendell G. & Ethel S. Van Auken, TTEEs,
The Wendell G. & Ethel S. Van Auken
Trust U/D/T 09/17/75
By: /s/ W. G. VAN AUKEN
----------------------------------
[Second Amended and Restated Rights Agreement]
<PAGE> 22
PURCHASERS (continued):
MAYFIELD VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ W. G. Van Auken
----------------------------------
Wendell Van Auken, Managing Member
MAYFIELD ASSOCIATES FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ W. G. Van Auken
----------------------------------
Wendell Van Auken, Managing Member
INSTITUTIONAL VENTURE PARTNERS VII
By Its General Partner
Institutional Venture Management VII
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang, General Partner
INSTITUTIONAL VENTURE
MANAGEMENT VII
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang, General Partner
[Second Amended and Restated Rights Agreement]
<PAGE> 23
PURCHASERS (continued):
IVP BROADBAND FUND I, L.P.
By Its General Partner
IVP Broadband Management, LLC
By Its Managing Director
Institutional Venture Management
VIII, LLC
By: /s/ Geoffrey Y. Yang
----------------------------------
Geoffrey Y. Yang, Managing Director
NORWEST VENTURE PARTNERS VII, LP
By: Itasca VC Partners VII, LLP
Its General Partner
By: /s/ Promod Haque
----------------------------------
Promod Haque, General Partner
LATTA FAMILY TRUST
By: /s/ Robert P. Latta
----------------------------------
Robert P. Latta, Trustee
/s/ T. S. Hollifield
----------------------------------
Ted S. Hollifield
[Second Amended and Restated Rights Agreement]
<PAGE> 24
EXHIBIT A
EXISTING SHAREHOLDERS
Mayfield VIII, a California Limited Partnership
Mayfield Associates Fund III, A California Limited Partnership
Institutional Venture Partners VII
Institutional Venture Management VII
IVP Founders Fund I, L.P.
WS Investments 97A
WS Investments 98A
Latta Family Trust
Marianne S. Bradley
David Campbell*
William Kirsch*
Helen E. McLaughlin O'Rourke*
Glen Wallace McLaughlin*
- ----------------------------------------------------
* Holders of Warrants to purchase Series B Preferred.
<PAGE> 25
EXHIBIT B
PURCHASERS
Broadcast Trust
Wendell G. & Ethel S. Van Auken, TTEEs,
The Wendell G. & Ethel S. Van Auken Trust U/D/T 09/17/75
Mayfield VIII
Mayfield Associates Fund III
Institutional Venture Partners VII
Institutional Venture Management VIII
IVP Broadband Fund I, L.P.
Norwest Venture Partners VII, LP
Latta Family Trust
Ted S. Hollifield
<PAGE> 1
EXHIBIT 4.2.1
SKYSTREAM CORPORATION
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
DATED FEBRUARY 5, 1999
This Amendment is made as of the 22nd day of March, 1999, by and among
SkyStream Corporation, a California corporation (the "Company") and the
undersigned purchasers listed on the signature page hereto under the heading
Purchasers (collectively, the "Purchasers").
WHEREAS, the Company desires to raise additional capital through the
sale of additional shares of Series C Preferred Stock;
WHEREAS, the Company and certain of the Purchasers are parties to the
Second Amended and Restated Rights Agreement dated February 5, 1999 (the
"Agreement") to which the Purchasers of the additional shares of Series C
Preferred Stock shall be granted registration rights and rights of participation
with respect to the Preferred Shares;
IT IS HEREBY AGREED THAT certain sections of the Agreement as set forth
below, are hereby amended:
1. The fifth and sixth paragraphs under the section heading "Recitals" that
currently read as follows:
"WHEREAS, the parties understand the Purchasers on Exhibit B represent
the participants in the first closing under the Purchase Agreement and that
additional participants may invest in one or more second closings to be held no
later than 60 days thereafter; provided, however, that the aggregate number of
shares of Series C Preferred sold to the Purchasers shall not exceed 2,000,000
shares. The Existing Shareholders agree that such additional Purchasers shall be
treated as Purchasers hereunder upon such party's execution of a supplemental
signature page to this Agreement and the addition of such person's name to
Exhibit B hereto. Thereafter, the participants in closings after the first
closing, but not later than 60 days thereafter, shall be Purchasers for purposes
of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:"
are amended to read in their entirety as follows:
"NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
The parties understand the Purchasers on Exhibit B represent the
participants in the first closing under the Purchase Agreement and that
additional participants may invest in one or more second closings to be held on
March 22, 1999 and on or prior to 60 days from March 22, 1999; provided,
however, that the aggregate number of shares of Series C Preferred sold to the
Purchasers shall not exceed 3,415,000 shares. The Existing Shareholders and the
Purchasers agree that such additional Purchasers shall be treated as Purchasers
hereunder upon such party's execution of a supplemental signature page to this
Agreement and the addition of such person's name to Exhibit B hereto.
Thereafter, the participants in closings after the first closing, but not later
than 60 days from March 22, 1999, shall be Purchasers for purposes of this
Agreement."
<PAGE> 2
2. Except as amended as set forth above, the Agreement shall continue in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
The Company: SKYSTREAM CORPORATION
a California corporation
By: /s/ James D. Olson
--------------------------------
James D. Olson, President
The Purchasers: BROADCAST TRUST
By: /s/ George A. Pavlov
--------------------------------
Name: George A. Pavlov
------------------------------
Title: Administrative Trustee
-----------------------------
WENDELL G. & ETHEL S. VAN AUKEN, AUKEN
TTEEs, THE WENDELL G & ETHEL S. VAN
TRUST U/D/T 09/17/75
By: /s/ W. G. Van Auken
----------------------------------
MAYFIELD VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ George A. Pavlov
--------------------------------------
George A. Pavlov, Authorized Signatory
[First Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 3
The Purchasers: (continued) MAYFIELD ASSOCIATES FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ George A. Pavlov
--------------------------------------
George A. Pavlov, Authorized Signatory
INSTITUTIONAL VENTURE PARTNERS VII
By Its General Partner
Institutional Venture Management VII
By: /s/ Geoffrey Y. Yang
----------------------------------
Geoffrey Y. Yang
General Partner
INSTITUTIONAL VENTURE
MANAGEMENT VII
By: /s/ Geoffrey Y. Yang
----------------------------------
Geoffrey Y. Yang
General Partner
IVP FOUNDERS FUND I, L.P.
By Its General Partner
Institutional Venture Management
VI, L.P.
By: /s/ Geoffrey Y. Yang
----------------------------------
Geoffrey Y. Yang
General Partner
[First Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 4
The Purchasers: (continued) IVP BROADBAND FUND I, L.P.
By Its General Partner
IVP Broadband Management, LLC
By Its Managing Director
Institutional Venture Management
VIII, LLC
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
Managing Director
NORWEST VENTURE PARTNERS VII, LP
By: Itasca VC Partners VII, LLP
Its General Partner
By: /s/ PROMOD HAQUE
----------------------------------
Promod Haque
General Partner
WS INVESTMENTS
By: /s/ ROBERT P. LATTA
----------------------------------
LATTA FAMILY TRUST
By: /s/ ROBERT P. LATTA
----------------------------------
Robert P. Latta, Trustee
/s/ T.S. HOLLIFIELD
----------------------------------
Ted S. Hollifield
/s/ MARIANNE S. BRADLEY
----------------------------------
Marianne S. Bradley
[First Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 1
EXHIBIT 4.2.2
SKYSTREAM CORPORATION
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED RIGHTS AGREEMENT
DATED FEBRUARY 5, 1999, AS AMENDED MARCH 22, 1999
This Amendment is made as of the 9th day of June, 1999, by and among
SkyStream Corporation, a California corporation (the "Company") and the
undersigned purchasers listed on the signature page hereto under the heading
Purchasers (collectively, the "Purchasers").
WHEREAS, the Company desires to raise additional capital through the
sale of additional shares of Series C Preferred Stock;
WHEREAS, the Company and certain of the Purchasers are parties to the
Second Amended and Restated Rights Agreement dated February 5, 1999, as amended
(the "Agreement") to which the Purchasers of the additional shares of Series C
Preferred Stock shall be granted registration rights and rights of participation
with respect to the Preferred Shares;
IT IS HEREBY AGREED THAT certain sections of the Agreement as set forth
below, are hereby amended:
1. The fifth and sixth paragraphs under the section heading "Recitals" that
currently read as follows:
"WHEREAS, the parties understand the Purchasers on Exhibit B represent
the participants in the first closing under the Purchase Agreement and that
additional participants may invest in one or more second closings to be held no
later than 60 days thereafter; provided, however, that the aggregate number of
shares of Series C Preferred sold to the Purchasers shall not exceed 2,000,000
shares. The Existing Shareholders agree that such additional Purchasers shall be
treated as Purchasers hereunder upon such party's execution of a supplemental
signature page to this Agreement and the addition of such person's name to
Exhibit B hereto. Thereafter, the participants in closings after the first
closing, but not later than 60 days thereafter, shall be Purchasers for purposes
of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:"
are amended to read in their entirety as follows:
"NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
The parties understand the Purchasers on Exhibit B represent the
participants in the first and second closings under the Purchase Agreement and
that additional participants may invest in a closing to be held on June 9, 1999;
provided, however, that the aggregate number of shares of Series C Preferred
sold to the Purchasers shall not exceed 3,804,000 shares. The Existing
Shareholders and the Purchasers agree that such additional Purchasers shall be
treated as Purchasers hereunder upon such party's execution of a supplemental
signature page to this Agreement and the addition of such person's name to
Exhibit B hereto. Thereafter, the participants in closings after the first and
second closings, but not later than June 9, 1999, shall be Purchasers for
purposes of this Agreement."
<PAGE> 2
2. Section 1.14 of the Agreement shall be amended to read in its entirety
as follows:
"1.14 Transfer of Registration Rights. The rights to cause the Company
to register Registrable Securities granted under this Section 1 may be assigned
by a Holder to a transferee or assignee who acquires (i) at least 300,000 of the
Registrable Securities held by such Holder or, if less, (ii) all of the
Registrable Securities then held by such Holder, provided in either case, the
Company is, within a reasonable time prior to such transfer, furnished with
written notice of the name and address of such proposed transferee or assignee
and the securities with respect to which such registration rights are being
assigned; provided further that such assignment shall be effective only if the
transferee enters into a written agreement providing that such transferee shall
be bound by the provisions of Section 1 of this Agreement. Notwithstanding the
foregoing or any other provision contained herein to the contrary, the right to
cause the Company to register Registerable Securities may be assigned by a
Holder to any constituent partner of a partnership Holder and any subsidiary or
parent of a corporate Holder provided that such transferee agrees in writing to
be bound by the terms and conditions of this Agreement."
3. Section 2.1(a) of the Agreement shall be amended to read in its entirety
as follows:
"(a) Right of Participation. Subject to the terms and conditions
contained in this Section 2.1, the Company hereby grants to each Purchaser who
is the Holder of not less than 300,000 shares of Registrable Securities, the
right of participation to purchase its Pro Rata Portion of any New Securities
(as defined in subsection 2.1(b)) which the Company may, from time to time,
propose to sell and issue. A Holder's "Pro Rata Portion" for purposes of this
Section 2.1 is the ratio that (x) the sum of the number of shares of the
Company's Common Stock then held by such Purchaser and the number of shares of
the Company's Common Stock issuable upon conversion of the Preferred Stock then
held by such Holder, bears to (y) the sum of the total number of shares of the
Company's Common Stock then outstanding and the number of shares of the
Company's Common Stock issuable upon conversion of the then outstanding
Preferred Stock."
4. Except as amended as set forth above, the Agreement shall continue in
full force and effect.
(Remainder of this page intentionally left blank)
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the day and year first above written.
The Company: SKYSTREAM CORPORATION
a California corporation
By: /s/ JAMES D. OLSON
----------------------------------
James D. Olson, President
The Purchasers: BROADCAST TRUST
By: /s/ GEORGE A. PAVLOV
----------------------------------
Name: George A. PaVlov
--------------------------------
Title: Authorized Signatory
--------------------------------
WENDELL G. & ETHEL S. VAN AUKEN,
TTEEs, THE WENDELL G & ETHEL S. VAN
AUKEN TRUST U/D/T 09/17/75
By: /s/ W. G. VAN AUKEN
----------------------------------
MAYFIELD VIII,
A CALIFORNIA LIMITED PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ W. G. VAN AUKEN
----------------------------------
Wendell Van Auken, Managing Member
[Second Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 4
The Purchasers: (continued) MAYFIELD ASSOCIATES FUND III,
A CALIFORNIA LIMITED PARTNERSHIP
By: MAYFIELD VIII MANAGEMENT, L.L.C.
A DELAWARE LIMITED LIABILITY
COMPANY, its General Partner
By: /s/ W. G. VAN AUKEN
----------------------------------
Wendell Van Auken, Managing Member
INSTITUTIONAL VENTURE PARTNERS VII
By Its General Partner
Institutional Venture Management VII
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
General Partner
INSTITUTIONAL VENTURE
MANAGEMENT VII
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
General Partner
IVP FOUNDERS FUND I, L.P.
By Its General Partner
Institutional Venture Management
VI, L.P.
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
General Partner
[Second Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 5
The Purchasers: (continued) IVP BROADBAND FUND I, L.P.
By Its General Partner
IVP Broadband Management, LLC
By Its Managing Director
Institutional Venture Management
VIII, LLC
By: /s/ GEOFFREY Y. YANG
----------------------------------
Geoffrey Y. Yang
Managing Director
NORWEST VENTURE PARTNERS VII, LP
By: Itasca VC Partners VII, LLP
Its General Partner
By: /s/ PROMOD HAQUE
----------------------------------
Promod Haque
General Partner
WS INVESTMENTS
By: /s/ ROBERT P. LATTA
----------------------------------
LATTA FAMILY TRUST
By: /s/ ROBERT P. LATTA
----------------------------------
Robert P. Latta, Trustee
/s/ T. S. HOLLIFIELD
----------------------------------
Ted S. Hollifield
----------------------------------
Marianne S. Bradley
[Second Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 6
INTEL CORPORATION
By: /s/ Satish Rishi
----------------------------------
Satish Rishi
Title: Assistant Treasurer
-------------------------------
[Second Amendment to Second Amended and Restated Rights Agreement]
<PAGE> 1
EXHIBIT 4.3
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
PREFERRED STOCK WARRANT
of
SKYSTREAM CORPORATION
FOR VALUE RECEIVED, SKYSTREAM CORPORATION, a California corporation (the
"Company"), hereby certifies that ______________________ (the "Warrantholder")
is entitled, subject to the provisions of this Warrant, to purchase from the
Company shares of the Company's capital stock consisting either of its Series A
Preferred Stock, no par value per share ("Series A") or Series B Preferred
Stock, no par value per share ("Series B") determined as set forth below. The
number of such shares purchasable hereunder shall be that number determined
pursuant to the formula set forth below which shall not exceed _______ nor be
less than ________ fully paid and non-assessable shares of Series A or Series B,
as the case may be. This Warrant shall be exercisable at a price per share (the
"Warrant Price") of (i) the average of the price per share of the Company's
Series A and Series B financings, not to exceed $1.75 per share, if the Warrant
is exercisable for Series B or (ii) $1.50 per share in the event that the
Warrant is exercisable for Series A.
The capital stock issuable upon exercise of this Warrant shall be Series
B of the Company if (i) the sale of Series B to other investors is closed by
June 30, 1998 and (ii) the total consideration received by the Company from the
sale of Series B by such date is greater than or equal to $3.0 million. In the
event that the requirements of the foregoing sentence are not met, the capital
stock issuable upon exercise of this Warrant shall be the Series A of the
Company.
The number of shares of capital stock to be received upon the exercise
of this Warrant may be adjusted from time to time as hereinafter set forth. In
the event that this Warrant is exercisable for Series A, as determined in the
preceding paragraph, the number of shares for which this Warrant may be
exercised shall be 20,700 shares of Series A. In the event this Warrant is
exercisable for Series B, as determined in the preceding paragraph, the number
of shares of Series B for which this Warrant may be exercised shall be
determined by the following formula rounded to the nearest whole share:
Number of Series B shares = __________/Warrant Price where
Warrant Price equals the lesser of (Series A Price + Series B Price)/2
or $1.75
In any event, however, if the Warrant is exercisable for Series B
shares, the number of Series B shares shall not be less than ________ shares.
<PAGE> 2
Upon delivery of this Warrant, together with payment of the Warrant
Price multiplied by the number of shares of the Preferred thereby purchased, at
the principal office of the Company or at such other office or agency as the
Company may designate by notice in writing to the holder hereof, the holder of
this Warrant shall be entitled to receive a certificate or certificates for the
shares of Preferred so purchased. The date at which the Company receives (i) the
Warrant and (ii) payment for the shares of Preferred, either by payment in cash
or by check, or by notice of the Warrantholder's intent to use the proceeds from
the sale of shares at a Public Offering (as defined below) or notice of intent
to use shares of Preferred as payment, both as described in Section 1 below, or
such later date as such notice shall specify, shall be referred to herein as the
"Exercise Date." All shares of Preferred which may be issued upon the exercise
of this Warrant will, upon issuance, be fully paid and non-assessable and free
from all taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: Subject to the terms and conditions set forth
herein, this Warrant may be exercised in whole or in part, at any time on or
before the lesser of 10 years from the date hereof or two years following the
effective date of the registration statement filed by the Company with the
Securities and Exchange Commission for its initial public offering, by the
surrender of this Warrant together with the "Notice of Exercise" and "Investment
Representation Statement" attached hereto as Exhibits A and C, respectively,
duly completed and executed at the principal office of the Company and by the
payment to the Company, in the manner provided for in the following paragraph,
of the Warrant Price multiplied by the number of the Preferred shares purchased.
The Company shall, within 10 days after such delivery, prepare a certificate for
the shares of Preferred purchased in the name of the holder of this Warrant, or
as such holder may direct (subject to the restrictions upon transfer contained
herein and upon payment by such holder hereof of any applicable transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the sale of shares of Common Stock issued upon
conversion of shares of Preferred issued upon exercise of this Warrant sold by
the Warrantholder pursuant to a Public Offering of an amount equal to the
aggregate Warrant Price multiplied by the number of shares being purchased. In
lieu of exercising this Warrant as described above, the Warrantholder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election (which
notice shall include the number of shares being exercised hereunder), in which
event the Company shall issue to the Warrantholder a number of shares of
Preferred (or Common Stock if the Preferred has been converted into Common
Stock) equal to the quotient obtained by dividing (x) the value of the shares of
Preferred being exercised (the "Exercised Shares") on the Exercise Date, which
value shall be determined by subtracting (A) the aggregate Warrant Price of the
Exercised Shares immediately prior to the exercise of the Warrant from (B) the
aggregate fair market value of the Exercised Shares on the Exercise Date, by (y)
the fair market value of one share of Preferred (or Common Stock if the
Preferred has been converted into Common Stock) as of the Exercise Date. No
fractional shares shall be issuable upon exercise of this Warrant, and if the
number of shares to be issued determined in accordance with the foregoing
formula is other than a whole number, the Company shall pay to the Warrantholder
an amount in cash equal to the fair market value of the resulting fractional
share on the Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing
of a Public Offering, (ii) the closing of any consolidation or merger of the
Company with or into any other unaffiliated corporation, entity or person, or
any other reorganization in which the Company shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (a "Merger"),
or (iii) the sale of all or substantially all of the assets of the Company (a
"Sale"). The Company shall notify the holder if an event or transaction of the
kind
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<PAGE> 3
described in this section is proposed at least fifteen days prior to the closing
of such event or transaction; such notice shall also contain such details of the
proposed event or transaction as are reasonable in the circumstances.
Certificates for the shares issuable upon exercise of this Warrant and,
if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
For purposes of this Section 1, the fair market value of the Preferred
(or Common Stock if the Preferred has been converted into Common Stock) shall be
determined as follows:
(i) If this Warrant is exercised in connection with and contingent upon
a Public Offering, and if the Company's registration statement relating to such
Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value shall be the initial "Price to Public"
specified in the final prospectus with respect to such offering.
(ii) If this Warrant is exercised in connection with a merger,
consolidation or sale of substantially all assets of the Company, then the fair
market value per share shall be equal to the sum of all cash, stock and other
consideration received by the Company, divided by the number of outstanding
shares of the Company's Capital stock.
(iii) If this Warrant is not exercised in connection with and contingent
upon a Public Offering, then the fair market value shall be determined by the
Board of Directors of the Company in good faith in such fashion as is reasonable
and normal for companies in a similar stage of development.
2. Transfer of Warrant. Except in accordance with the conditions
contained in Section 3 hereof, this Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition
to any transfer or exercise of this Warrant that the Company shall have
received, at the time of such transfer or exercise, a representation in writing
that this Warrant (or portion hereof transferred) or the shares of Preferred or
other securities being issued upon such exercise, as the case may be, are being
acquired for investment not with a view to any sale or distribution thereof, or
a statement of the pertinent facts covering any proposed distribution thereof.
It shall be a further condition to any transfer of this Warrant or of any or all
of the shares of Preferred issued upon exercise of this Warrant, or Common Stock
issued upon conversion of the Preferred, other than a transfer registered under
the Act, that the Company shall have received a legal opinion, in form and
substance satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. The
requirement of a legal opinion shall not apply to the transfer of this Warrant
or any part thereof to a partnership of which the Warrantholder is a partner or
to the beneficial owners of such partnership without further consideration, so
long as such transfer is in compliance with applicable securities laws and the
beneficial owners are accredited investors. Each certificate evidencing the
shares of Preferred issued upon exercise of this Warrant, or Common Stock issued
upon conversion of the Preferred, or upon any transfer of such shares (other
than a transfer registered under the Act or any subsequent transfer or shares so
registered) shall, at the option of the Company, contain a legend, in form and
substance satisfactory to the Company and its counsel, restricting the transfer
of such shares to sales or other dispositions exempt from the requirements of
the Act substantially to the following effect: THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, OFFERED FOR
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<PAGE> 4
SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT
TO THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION
IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION.
Upon surrender of this Warrant to the Company, together with the
assignment notice annexed hereto as Exhibit B duly executed for transfer of this
Warrant as an entirety by the Warrantholder, the Company shall issue a new
warrant of the same denomination to the assignee. Upon surrender of this Warrant
to the Company, together with the assignment hereof properly endorsed by the
Warrantholder for transfer with respect to a portion of the shares of Preferred
purchasable hereunder, the Company shall issue a new warrant to the assignee, in
such denomination as shall be requested by the Warrantholder hereof, and shall
issue to such Warrantholder a new warrant covering the number of shares in
respect of which this Warrant shall not have been transferred.
4. Adjustment of Warrant Price and Number of Shares Purchasable
Hereunder. The Warrant Price and the number of shares purchasable hereunder
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Subdivisions or Combinations. In case the Company shall at
any time subdivide the outstanding shares of its Preferred, the Warrant Price in
effect immediately prior to such subdivision shall be proportionately decreased,
and in case the Company shall at any time combine the outstanding shares of its
Preferred, the Warrant Price in effect immediately prior to such combination
shall be proportionately increased, effective at the close of business on the
date of such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time pay a
dividend with respect to Preferred payable in Preferred, then the Warrant Price
in effect immediately prior to the record date for distribution of such dividend
shall be adjusted to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date by a fraction (i) the numerator of
which shall be the total number of shares of Preferred outstanding immediately
prior to such dividend and (ii) the denominator of which shall be the total
number of shares of Preferred outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to
subdivisions (b) or (c) of this Section 4, the registered holder of this Warrant
shall thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Preferred, calculated to the
nearest full share, obtained by multiplying the number of shares of Preferred
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Price.
(d) Reclassification. In case of any reclassification, change or
conversion of securities of the class or series issuable upon exercise of this
Warrant (other than as a result of a merger, subdivision or combination
described above), or in case of any Merger where the successor entity agrees to
assume the obligations of this Warrant, the Company, or such successor or
purchasing corporation, as the case may be, shall duly execute and deliver to
the Warrantholder a new warrant so that the Warrantholder shall have the right
to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of Preferred theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or conversion by a holder of the number of shares
of Preferred then purchasable under this Warrant. Such new
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<PAGE> 5
warrant shall provide for adjustments that shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Section 4. The provisions
of this subparagraph (d) shall similarly apply to successive reclassifications,
changes, and conversions.
(e) Antidilution Rights. The antidilution rights applicable to the
Preferred and the Common Stock of the Company are (or in the case of Series B,
will be) set forth in the Articles of Incorporation (the "Articles"), as amended
from time to time, a true and complete copy in its current form which is
attached hereto as Exhibit C. Such rights shall not be restated, amended or
modified in any manner which effects the Warrantholder differently than the
holders of Series A (or Series B should the Warrant be exercisable for shares of
Series B) without such Warrantholder's prior written consent. The Company shall
promptly provide the Warrantholder hereof with any restatement, amendment or
modification to the Articles promptly after the same has been made.
5. Notices.
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Preferred purchasable upon the exercise of
this Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company which
notice shall state the Warrant Price as adjusted and the increased or decreased
number of shares purchasable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to
effect a public offering of the Company's Common Stock pursuant to an effective
registration statement under the Act, the Company shall send to the
Warrantholder at least twenty days' prior written notice of the date when the
same is anticipated to take place; provided, however, that the failure to give
such notice shall not give the Warrantholder the right to delay or otherwise
restrain or affect the Public Offering. Such written notice may be in lieu of
the notice required under the third paragraph of Section 1 and shall be given by
first class mail, postage prepaid, addressed to the Warrantholder at the address
as shown on the books of the Company for the Warrantholder.
6. Registration. The Warrantholder shall be entitled to the registration
rights as set forth in that certain Rights Agreement dated February 7, 1997
entered into by the Company and certain Investors (the "Registration Rights
Agreement"), provided that the Warrantholder agrees in writing to be bound by
such provisions. The Company shall request that the parties to the Registration
Rights Agreement amend such agreement to make the Warrantholder a party to such
agreement.
7. Representations of Warrantholder. Concurrently with the receipt of
this Warrant and, upon exercise of this Warrant, the Warrantholder shall have
executed the Investment Representation Statement in the form attached hereto as
Exhibit C.
8. Representations, Warranties and Covenants of the Company.
The Company represents and warrants to the Warrantholder, as of the
Effective Date set forth below, as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company, enforceable in
accordance with its terms except as to (i) the effect of
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<PAGE> 6
applicable bankruptcy and similar laws affecting the rights of creditors, and
(ii) the effect of rules of law governing specific performance, injunctive
relief and other equitable remedies.
(b) The Preferred has been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens and changes with respect to the issues of such shares.
(c) In the event that the Warrant is exercisable for Series A,
the rights, preference, privileges and restrictions granted to or imposed upon
the Preferred and the holders thereof are as set forth in the Company's Articles
of Incorporation, as amended to date and the Series A Preferred Stock Purchase
Agreement dated February 7, 1997, a true and complete copy each of which has
been delivered to the Warrantholder.
(d) The execution and delivery of this Warrant is not, and the
issuance of the Preferred upon exercise of this Warrant in accordance with the
terms hereof is not, inconsistent with the Company's Articles of Incorporation,
as amended to date, or Bylaws, does not contravene any law, governmental rule or
regulation, judgment or order applicable to the Company, and does not conflict
with or contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument of which the Company is a
party or by which it is bound or require the consent or approval of, the giving
of notice to, the registration or filing with or the taking of any action in
respect of or by, any federal, state or local government authority or agency or
other person, other than state or federal securities law filings.
(e) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of the issuance upon exercise of this Warrant a sufficient number of
shares of its Preferred to provide for the exercise of this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Preferred into Common Stock.
9. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the Preferred issued or issuable upon the
exercise hereof, and all of the obligations of the Company relating to the
Preferred issuable upon exercise of this Warrant shall survive the exercise of
this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to
vote or receive dividends or be deemed to be a shareholder of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Articles of
Incorporation, as amended to date, or through any other means, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
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<PAGE> 7
(e) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company, or in the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like data and tenor.
(f) This Warrant shall be governed by the internal laws of the
State of California.
(g) So long as this Warrant has not terminated, the
Warrantholder shall be entitled to receive such financial information as the
Warrantholder would be entitled to receive under Section 7 of the Series A
Preferred Stock Purchase Agreement dated February 7, 1997, if Warrantholder were
a party to the agreement and a holder of that number of shares issuable upon
full exercise of this Warrant.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Effective Date of Warrant: ______________, 1997
COMPANY: SKYSTREAM CORPORATION
By:
------------------------------------------
Print Name:
----------------------------------
Title:
---------------------------------------
ACCEPTED AND AGREED:
WARRANTHOLDER:
By:
------------------------------------------
Print Name:
----------------------------------
Title:
---------------------------------------
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<PAGE> 8
EXHIBIT A
NOTICE OF ELECTION
Ladies and Gentlemen:
The undersigned warrantholder (the "Warrantholder") hereby elects to exercise
that certain Preferred Stock Warrant (the "Warrant") by and between the
Warrantholder and the Company, dated ________________, by surrendering the
Warrant at the principal office of the Company, in exchange for ___________
shares of Common Stock of SKYSTREAM CORPORATION.
The Warrantholder hereby confirms and acknowledges the investment
representations and warranties made in Section 7 of the Warrant, a copy of which
is available from the Company, provides herewith the executed Investment
Representation Statement attached to the Warrant as Exhibit C, and accepts such
shares subject to the restrictions of the Warrant.
Dated:
---------------------------------------
WARRANTHOLDER:
(Signature)
(Typed or Printed Name)
(Title)
Address:
<PAGE> 9
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________ hereby sells, assigns and
transfers unto __________________________________________________________ (Name
and Address) the right to purchase shares of Capital Stock represented by this
Warrant to the extent of __________ shares of Preferred Stock of SKYSTREAM
CORPORATION and does hereby irrevocably constitute and appoint
______________________________________________________, attorney, to transfer
the same on the books of the Company with full power of substitution in the
premises.
Dated: , 19
------------------------- --
Signature:
---------------------------
<PAGE> 10
EXHIBIT C
INVESTMENT REPRESENTATION STATEMENT
Warrants to Purchase Shares of Preferred
Stock of SKYSTREAM CORPORATION
In connection with the purchase of the above-listed securities the
undersigned hereby represents to SKYSTREAM CORPORATION (the "Company") as
follows:
Receipt of Information. The undersigned has received all the information
it considers necessary or appropriate for deciding whether to purchase the
Preferred Stock issuable upon exercise of the Warrant dated
________________________ (the "Warrant") issued by the Company to the
undersigned, and it has examined any information furnished to it by the Company
in connection therewith.
Investment Representation.
(a) The shares of the Company's capital stock to be received by the
undersigned upon the exercise of the Warrant (the "Securities") will be acquired
for investment for its own account, not as a nominee or agent, and not with a
view to the sale or distribution of any part thereof, and the undersigned has no
present intention of selling, granting participation in or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of its property shall at all times be within its control. By
executing this Statement, the undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participations to such person or to any third person,
with respect to any Securities issuable upon exercise of the Warrant.
(b) The undersigned understands that the Securities issuable upon
exercise of the Warrant at the time of issuance may not be registered under the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
laws, on the ground that the issuance of such securities is exempt pursuant to
Section 4(2) of the Act and state law exemptions relating to offers and sales
not by means of a public offering, and that the Company's reliance on such
exemptions is predicated on the undersigned's representations set forth herein.
The undersigned is an "Accredited Investor" as such term is defined in Rule 501
promulgated by the Securities and Exchange Commission pursuant to the Act.
(c) The undersigned agrees that in no event will it make a disposition
of any Securities acquired upon the exercise of the Warrant unless and until (i)
it shall have notified the Company of the proposed disposition and shall have
furnished the Company with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished the Company with an
opinion of counsel satisfactory to the Company and the Company's counsel to the
effect that (a) appropriate action necessary for compliance with the
<PAGE> 11
Act and any applicable state securities laws has been taken or an exemption from
the registration requirements of the Act and such laws is available, and (b)
that the proposed transfer will not violate any of said laws.
(d) The undersigned represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The
undersigned is aware that as of the date of this statement the conditions for
resale set forth in Rule 144 have not been satisfied. The Warrantholder
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, a legend prohibiting their transfer without the
consent of the Commissioner of Corporations of the State of California and any
other legend required under applicable state securities laws.
(f) The Warrantholder further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the Securities and Exchange Commission has expressed its opinion, that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
The Warrantholder understands that no assurances can be given that any such
other registration exemption will be available in such event.
Dated:
----------------------------
(Signature)
(Typed or Printed Name)
(Title)
<PAGE> 1
EXHIBIT 4.4
THE SECURITIES EVIDENCED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM
AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
COMMON STOCK WARRANT
of
SKYSTREAM NETWORKS CORPORATION
FOR VALUE RECEIVED, SKYSTREAM NETWORKS CORPORATION, a Delaware
corporation (the "Company"), hereby certifies that the David Dollinger Living
Trust (the "Warrantholder") is entitled, subject to the provisions of this
Warrant, to purchase from the Company 10,000 shares of the Company's common
stock at a purchase price per share of $13.00 ("Purchase Price"). The aggregate
purchase price under this Warrant is $130,000.00 ("Aggregate Purchase Price").
Upon delivery of this Warrant, together with payment of the Warrant
Price multiplied by the number of shares of the Common thereby purchased, at the
principal office of the Company or at such other office or agency as the Company
may designate by notice in writing to the holder hereof, the holder of this
Warrant shall be entitled to receive a certificate or certificates for the
shares of Common so purchased. The date at which the Company receives (i) the
Warrant and (ii) payment for the shares of Common, either by payment in cash or
by check, or by notice of the Warrantholder's intent to use the proceeds from
the sale of shares at a Public Offering (as defined below) or notice of intent
to use shares of Common as payment, both as described in Section 1 below, or
such later date as such notice shall specify, shall be referred to herein as the
"Exercise Date." All shares of Common which may be issued upon the exercise of
this Warrant will, upon issuance, be fully paid and non-assessable and free from
all taxes, liens and charges with respect thereto.
This Warrant is subject to the following terms and conditions:
1. Exercise of Warrant: Subject to the terms and conditions set forth
herein, this Warrant may be exercised in whole or in part, on or before February
9, 2005, by the surrender of this Warrant together with the "Notice of Exercise"
and "Investment Representation Statement" attached hereto as Exhibits A and B,
respectively, duly completed and executed at the principal office of the Company
and by the payment to the Company, in the manner provided for in the following
paragraph, of the Warrant Price multiplied by the number of the Common shares
purchased. The Company shall, within 10 days after such delivery, prepare a
certificate for the shares of Common purchased in the name of the holder of this
Warrant, or as such holder may direct (subject to the restrictions upon transfer
contained herein and upon payment by such holder hereof of any applicable
transfer taxes).
This Warrant may be exercised by the payment to the Company, by cash or
check, or from the proceeds of the sale of shares of Common Stock issued upon
conversion of shares of Common issued upon exercise of this Warrant sold by the
Warrantholder pursuant to a Public Offering of an amount equal to the
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<PAGE> 2
aggregate Warrant Price multiplied by the number of shares being purchased. In
lieu of exercising this Warrant as described above, the Warrantholder may elect
to receive shares equal to the value (as determined below) of this Warrant (or
the portion thereof being canceled) by surrender of this Warrant at the
principal office of the Company together with notice of such election (which
notice shall include the number of shares being exercised hereunder), in which
event the Company shall issue to the Warrantholder a number of shares of Common
(or Common Stock if the Common has been converted into Common Stock) equal to
the quotient obtained by dividing (x) the value of the shares of Common being
exercised (the "Exercised Shares") on the Exercise Date, which value shall be
determined by subtracting (A) the aggregate Warrant Price of the Exercised
Shares immediately prior to the exercise of the Warrant from (B) the aggregate
fair market value of the Exercised Shares on the Exercise Date, by (y) the fair
market value of one share of Common (or Common Stock if the Common has been
converted into Common Stock) as of the Exercise Date. No fractional shares shall
be issuable upon exercise of this Warrant, and if the number of shares to be
issued determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Warrantholder an amount in cash equal to
the fair market value of the resulting fractional share on the Exercise Date.
The exercise of this Warrant may be made contingent upon (i) the closing
of a Public Offering, (ii) the closing of any consolidation or merger of the
Company with or into any other unaffiliated corporation, entity or person, or
any other reorganization in which the Company shall not be the continuing or
surviving entity of such consolidation, merger or reorganization (a "Merger"),
or (iii) the sale of all or substantially all of the assets of the Company (a
"Sale"). The Company shall notify the holder if an event or transaction of the
kind described in this section is proposed at least fifteen days prior to the
closing of such event or transaction; such notice shall also contain such
details of the proposed event or transaction as are reasonable in the
circumstances.
Certificates for the shares issuable upon exercise of this Warrant and,
if applicable, a new warrant evidencing the balance of the shares remaining
subject to this Warrant shall be issued as of the Exercise Date and shall be
delivered to the holder within thirty days following the Exercise Date.
For purposes of this Section 1, the fair market value of the Common (or
Common Stock if the Common has been converted into Common Stock) shall be
determined as follows:
(i) If this Warrant is exercised in connection with and contingent upon
a Public Offering, and if the Company's registration statement relating to such
Public Offering has been declared effective by the Securities and Exchange
Commission, then the fair market value per share shall be the initial "Price to
Public" specified in the final prospectus with respect to such offering.
(ii) If this Warrant is exercised in connection with a merger,
consolidation or sale of substantially all assets of the Company, then the fair
market value per share shall be equal to the sum of all cash, stock and other
consideration received by the Company, divided by the number of outstanding
shares of the Company's Capital stock.
(iii) If this Warrant is not exercised in connection with and contingent
upon a Public Offering, then the fair market value per share shall be determined
by the Board of Directors of the Company in good faith in such fashion as is
reasonable and normal for companies in a similar stage of development.
(iv) If this Warrant is exercised at a time when shares of the Company's
Common Stock are traded on a public market, then the fair market value per share
shall be the closing price of one share of the Company's Common Stock reported
for the business day immediately before Warrantholder delivers its Notice of
Exercise to the Company.
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<PAGE> 3
2. Transfer of Warrant. This Warrant and all rights hereunder are not
transferable.
3. Condition of Transfer or Exercise of Warrant. It shall be a condition
to any exercise of this Warrant that the Company shall have received, at the
time of such exercise, a representation in writing that this Warrant or the
shares of Common or other securities being issued upon such exercise, are being
acquired for investment not with a view to any sale or distribution thereof, or
a statement of the pertinent facts covering any proposed distribution thereof.
It shall be a further condition to any transfer of any or all of the shares of
Common issued upon exercise of this Warrant, or Common Stock issued upon
conversion of the Common, other than a transfer registered under the Act, that
the Company shall have received a legal opinion, in form and substance
satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the prospectus and the registration requirements of the Act. Each
certificate evidencing the shares of Common issued upon exercise of this
Warrant, or Common Stock issued upon conversion of the Common, or upon any
transfer of such shares (other than a transfer registered under the Act or any
subsequent transfer or shares so registered) shall, at the option of the
Company, contain a legend, in form and substance satisfactory to the Company and
its counsel, restricting the transfer of such shares to sales or other
dispositions exempt from the requirements of the Act substantially to the
following effect: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS
REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF
COUNSEL TO THE CORPORATION IS OBTAINED STATING THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
4. Adjustment of Warrant Price and Number of Shares Purchasable
Hereunder. The Warrant Price and the number of shares purchasable hereunder
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Subdivisions or Combinations. In case the Company shall at
any time subdivide the outstanding shares of its Common, the Warrant Price in
effect immediately prior to such subdivision shall be proportionately decreased,
and in case the Company shall at any time combine the outstanding shares of its
Common, the Warrant Price in effect immediately prior to such combination shall
be proportionately increased, effective at the close of business on the date of
such subdivision or combination, as the case may be.
(b) Stock Dividends. In case the Company shall at any time pay a
dividend with respect to Common payable in Common, then the Warrant Price in
effect immediately prior to the record date for distribution of such dividend
shall be adjusted to that price determined by multiplying the Warrant Price in
effect immediately prior to such record date by a fraction (i) the numerator of
which shall be the total number of shares of Common outstanding immediately
prior to such dividend and (ii) the denominator of which shall be the total
number of shares of Common outstanding immediately after such dividend.
(c) Number of Shares. Upon each adjustment pursuant to
subdivisions (b) or (c) of this Section 4, the registered holder of this Warrant
shall thereafter (until another such adjustment) be entitled to purchase, at the
adjusted Warrant Price, the number of shares of Common, calculated to the
nearest full share, obtained by multiplying the number of shares of Common
purchasable hereunder immediately prior to such adjustment by the Warrant Price
in effect prior to such adjustment and dividing the product so obtained by the
adjusted Warrant Price.
-3-
<PAGE> 4
(d) Reclassification. In case of any reclassification, change or
conversion of securities of the class or series issuable upon exercise of this
Warrant (other than as a result of a merger, subdivision or combination
described above), or in case of any Merger where the successor entity agrees to
assume the obligations of this Warrant, the Company, or such successor or
purchasing corporation, as the case may be, shall duly execute and deliver to
the Warrantholder a new warrant so that the Warrantholder shall have the right
to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of Common theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or conversion by a holder of the number of shares
of Common then purchasable under this Warrant. Such new warrant shall provide
for adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 4. The provisions of this subparagraph
(d) shall similarly apply to successive reclassifications, changes, and
conversions.
5. Notices.
(a) Upon any adjustment of the Warrant Price and any increase or
decrease in the number of shares of Common purchasable upon the exercise of this
Warrant, then, and in each such case, the Company, within thirty (30) days
thereafter, shall give written notice thereof to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company which
notice shall state the Warrant Price as adjusted and the increased or decreased
number of shares purchasable upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation of each.
(b) In the event that the Company shall propose at any time to
effect a public offering of the Company's Common Stock pursuant to an effective
registration statement under the Act, the Company shall send to the
Warrantholder at least twenty days' prior written notice of the date when the
same is anticipated to take place; provided, however, that the failure to give
such notice shall not give the Warrantholder the right to delay or otherwise
restrain or affect the Public Offering. Such written notice may be in lieu of
the notice required under the third paragraph of Section 1 and shall be given by
first class mail, postage prepaid, addressed to the Warrantholder at the address
as shown on the books of the Company for the Warrantholder.
6. Representations of Warrantholder. Concurrently with the receipt of
this Warrant and, upon exercise of this Warrant, the Warrantholder shall have
executed the Investment Representation Statement in the form attached hereto as
Exhibit B.
7. Representations, Warranties and Covenants of the Company.
The Company represents and warrants to the Warrantholder, as of
the Effective Date set forth below, as follows:
(a) This Warrant has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company, enforceable in
accordance with its terms except as to (i) the effect of applicable bankruptcy
and similar laws affecting the rights of creditors, and (ii) the effect of rules
of law governing specific performance, injunctive relief and other equitable
remedies.
(b) The Common has been duly authorized and reserved for
issuance by the Company and, when issued in accordance with the terms hereof,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens and changes with respect to the issues of such shares.
-4-
<PAGE> 5
(c) The execution and delivery of this Warrant is not, and the
issuance of the Common upon exercise of this Warrant in accordance with the
terms hereof is not, inconsistent with the Company's Certificate of
Incorporation, as amended to date, or Bylaws, does not contravene any law,
governmental rule or regulation, judgment or order applicable to the Company,
and does not conflict with or contravene any provision of, or constitute a
default under, any indenture, mortgage, contract or other instrument of which
the Company is a party or by which it is bound or require the consent or
approval of, the giving of notice to, the registration or filing with or the
taking of any action in respect of or by, any federal, state or local government
authority or agency or other person, other than state or federal securities law
filings.
(d) During the period within which this Warrant may be
exercised, the Company will at all times have authorized and reserved for the
purpose of the issuance upon exercise of this Warrant a sufficient number of
shares of its Common to provide for the exercise of this Warrant and a
sufficient number of shares of its Common Stock to provide for the conversion of
the Common into Common Stock.
8. Market Stand off Provisions. The Warrantholder agrees in connection
with the initial registration of the Company's securities that, upon request of
the Company or the underwriters managing any underwritten initial public
offering of the Company's securities, not to sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any Registrable
Securities without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days from the effective date of such registration, or such
longer period as may be agreed to by the holders of a majority of the
outstanding Registrable Securities) as may be requested by the Company or such
managing underwriters; provided, however, that all officers and directors of the
Company, all one-percent securityholders, and all other persons with
registration rights (whether or not pursuant to this Agreement) enter into
similar agreements with respect to securities of the Company held by them.
10. Miscellaneous.
(a) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors of the Company and of the holder hereof
and of the Common issued or issuable upon the exercise hereof, and all of the
obligations of the Company relating to the Common issuable upon exercise of this
Warrant shall survive the exercise of this Warrant.
(b) No holder of this Warrant, as such, shall be entitled to
vote or receive dividends or be deemed to be a shareholder of the Company for
any purpose, nor shall anything contained in this Warrant be construed to confer
upon the holder of this Warrant, as such, any rights of a shareholder of the
Company or any right to vote, give or withhold consent to any corporate action,
receive notice of meetings, receive dividends or subscription rights, or
otherwise.
(c) Receipt of this Warrant by the holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
(d) The Company will not, by amendment of its Certificate of
Incorporation, as amended to date, or through any other means, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant, but
will at all times in good faith assist in the carrying out of all such terms and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the holder of this Warrant against impairment.
-5-
<PAGE> 6
(e) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company, or in the
case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like data and tenor.
(f) This Warrant shall be governed by the internal laws of the
State of California.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Effective Date of Warrant: February 9, 2000
COMPANY: SKYSTREAM NETWORKS CORPORATION
By: /s/ Susan Ketcham
--------------------------------------------
Print Name: Susan Ketcham
------------------------------------
Title: CFO, Treasurer & Secretary
-----------------------------------------
ACCEPTED AND AGREED:
WARRANTHOLDER:
DAVID DOLLINGER LIVING TRUST
By: /s/ David Dollinger
--------------------------------------------
Print Name: David Dollinger
------------------------------------
Title: Trustee
-----------------------------------------
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<PAGE> 7
EXHIBIT A
NOTICE OF ELECTION
Ladies and Gentlemen:
The undersigned warrantholder (the "Warrantholder") hereby elects to exercise
that certain Common Stock Warrant (the "Warrant") by and between the
Warrantholder and the Company, dated February 9, 2000, by surrendering the
Warrant at the principal office of the Company, in exchange for ___________
shares of Common Stock of SKYSTREAM NETWORKS CORPORATION.
The Warrantholder hereby confirms and acknowledges the investment
representations and warranties made in Section 7 of the Warrant, a copy of which
is available from the Company, provides herewith the executed Investment
Representation Statement attached to the Warrant as Exhibit B, and accepts such
shares subject to the restrictions of the Warrant.
Dated:
-----------------------------------------
WARRANTHOLDER:
- -----------------------------------------------
(Signature)
- -----------------------------------------------
(Typed or Printed Name)
- -----------------------------------------------
(Title)
Address:
- -----------------------------------------------
- -----------------------------------------------
<PAGE> 8
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
Warrants to Purchase Shares of Common
Stock of SKYSTREAM NETWORKS
CORPORATION
In connection with the purchase of the above-listed securities the
undersigned hereby represents to SKYSTREAM NETWORKS CORPORATION (the "Company")
as follows:
1. Receipt of Information. The undersigned has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Common Stock issuable upon exercise of the Warrant dated
________________________ (the "Warrant") issued by the Company to the
undersigned, and it has examined any information furnished to it by the Company
in connection therewith.
2. Investment Representation.
(a) The shares of the Company's capital stock to be received by
the undersigned upon the exercise of the Warrant (the "Securities") will be
acquired for investment for its own account, not as a nominee or agent, and not
with a view to the sale or distribution of any part thereof, and the undersigned
has no present intention of selling, granting participation in or otherwise
distributing the same, but subject, nevertheless, to any requirement of law that
the disposition of its property shall at all times be within its control. By
executing this Statement, the undersigned further represents that it does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer, or grant participations to such person or to any third person,
with respect to any Securities issuable upon exercise of the Warrant.
(b) The undersigned understands that the Securities issuable
upon exercise of the Warrant at the time of issuance may not be registered under
the Securities Act of 1933, as amended (the "Act"), and applicable state
securities laws, on the ground that the issuance of such securities is exempt
pursuant to Section 4(2) of the Act and state law exemptions relating to offers
and sales not by means of a public offering, and that the Company's reliance on
such exemptions is predicated on the undersigned's representations set forth
herein. The undersigned is an "Accredited Investor" as such term is defined in
Rule 501 promulgated by the Securities and Exchange Commission pursuant to the
Act.
(c) The undersigned agrees that in no event will it make a
disposition of any Securities acquired upon the exercise of the Warrant unless
and until (i) it shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition, and (ii) it shall have furnished the
Company with an opinion of counsel satisfactory to the Company and the Company's
counsel to the effect that (a) appropriate action necessary for compliance with
the Act and any applicable state securities laws has been taken or an exemption
from the registration requirements of the Act and such laws is available, and
(b) that the proposed transfer will not violate any of said laws.
<PAGE> 9
(d) The undersigned represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investments, and has the ability to bear the economic risks
(including the risk of a total loss) of its investment. The undersigned
represents that it has had the opportunity to ask questions of the Company
concerning the Company's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify the Company's disclosures, and has had all questions which have been
asked by it satisfactorily answered by the Company.
(e) The undersigned acknowledges that the Securities issuable upon
exercise of the Warrant must be held indefinitely unless subsequently registered
under the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the Act
which permit limited resale of shares purchased in a private placement subject
to the satisfaction of certain conditions, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through a "broker's transaction" or in transactions directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations. The
undersigned is aware that as of the date of this statement the conditions for
resale set forth in Rule 144 have not been satisfied. The Warrantholder
understands that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company and any other legend required under applicable state
securities laws.
(f) The Warrantholder further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the Securities and Exchange Commission has expressed its opinion, that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
The Warrantholder understands that no assurances can be given that any such
other registration exemption will be available in such event.
Dated:
----------------------------------------
- ----------------------------------------------
(Signature)
- ----------------------------------------------
(Typed or Printed Name)
- ----------------------------------------------
(Title)
-2-
<PAGE> 1
EXHIBIT 4.5
RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement is made as of the 1st day of July, 1996, by and between
SkyStream Corporation, a California corporation (the "Corporation"), and _____
________ ("Purchaser").
In consideration of the mutual covenants and representations herein set
forth, the Corporation and Purchaser agree as follows:
1. PURCHASE AND SALE OF STOCK.
(a) Subject to the terms and conditions of this Agreement, the
Corporation hereby agrees to sell to Purchaser and Purchaser agrees to purchase
from the Corporation on the Closing Date (as herein defined), 1,000,000 shares
of the Corporation's Common Stock (the "Stock") at a price of $.01 per share,
for an aggregate purchase price of $10,000. The purchase price for the Stock
shall be paid in cash as full payment for all of the shares.
2. CLOSING. The purchase and sale of the Stock shall occur at a Closing
to be held at such time and place (the "Closing Date"), as designated by the
Corporation by written notice of at least two business days. The Closing will
take place at the principal office of the Corporation or at such other place as
shall be designated by the Corporation. At the Closing, Purchaser shall deliver
to the Corporation a check payable to the order of the Corporation in the
aggregate amount of the purchase price of the Stock, and the Corporation will
issue, as promptly thereafter as practicable, a certificate representing the
Stock registered in the name of Purchaser.
3. PURCHASE OPTION.
(a) All of the Stock shall be subject to the right and option of the
Corporation to repurchase the Stock ("Purchase Option") as set forth in this
paragraph 3. In the event Purchaser shall cease to be employed by the
Corporation (including a parent or subsidiary of the Corporation) for any reason
or no reason, with or without cause, including disability, death, retirement or
other involuntary termination (a "Termination"), the Purchase Option shall come
into effect. Following a Termination, the Corporation shall have the right, as
provided in Section 4 below, to purchase from the Purchaser or the estate of
Purchaser, as the case may be, at the per share price per share originally paid
as set forth in paragraph 1 hereof (the "Option Price"), a portion of the Stock
as follows:
(i) If the Termination occurs before July 1, 1997, the Purchase
Option shall apply to 100% of the Stock.
(ii) If the Termination occurs after July 1, 1997, the Purchase
Option shall apply to that portion of the Stock which is a fraction of 100% of
the Stock, the numerator of which shall be
<PAGE> 2
a number equal to 48 minus the total number of calendar months of the
Purchaser's Vested Service (as defined below) for the Corporation and the
denominator of which shall be 48. "Vested Service" by the Purchaser for the
Corporation shall be defined as that period of time during which the Purchaser
is employed by the Corporation after July 1, 1996 (the vesting commencement
date) excluding time periods during which Purchaser is on an unpaid leave of
absence from such employment.
(b) Within thirty (30) days following a Termination, the Corporation
shall notify Purchaser by written notice delivered or mailed as provided in
subparagraph 13(c), as to whether it wishes to purchase the Stock pursuant to
exercise of the Purchase Option. If the Corporation elects to purchase the Stock
hereunder, it shall set a date for the closing of the transaction at a place
specified by the Corporation no later than ten (10) days from the date of such
notice. At the closing, the Corporation shall tender payment for the Stock and
the certificates representing the Stock so purchased shall be canceled.
Purchaser hereby authorizes and directs the Secretary or Transfer Agent of the
Corporation to transfer the Stock as to which the Purchase Option has been
exercised from Purchaser to the Corporation. The Option Price may be payable, at
the option of the Corporation, in cancellation of all or a portion of any
outstanding indebtedness of Purchaser to the Corporation or in cash, as set
forth below.
(c) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
4. LEGALITY OF CORPORATE DISTRIBUTIONS. Notwithstanding any other
provision in this Agreement, the Corporation shall not be required to purchase
or pay for any Stock purchasable or purchased by it hereunder, if such purchase
or such payment of all or any part of the purchase price shall be or constitute,
in the good faith determination of the President or Board of Directors of the
Corporation, an unlawful corporate distribution in contravention of the laws of
any state having jurisdiction with respect to the transactions contemplated
hereby. In the event of such determination and due notice thereof to Purchaser,
any transferee of the Stock or their respective estates, as the case may be,
each date of making any such purchase or making any such payment hereunder by
the Corporation, respectively, may be extended from time to time at the option
of the Corporation for up to two (2) years. If any such purchase is not made and
fully paid for within three (3) years after such purchase was to have been made
pursuant to the terms of this Agreement, however, Purchaser or any transferee of
the Stock or their respective estates, as the case may be, shall have the option
to have the transaction rescinded.
5. STOCK SPLITS, ETC. If, from time to time during the term of this
Agreement:
(a) There is any stock dividend or liquidating dividend of cash
and/or property, stock split or other change in the character or amount of any
of the outstanding securities of the Corporation; or
-2-
<PAGE> 3
(b) There is any consolidation, merger or sale of all, or
substantially all, of the assets of the Corporation;
then, in such event, any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of Stock shall be immediately subject to this Agreement
and be included in the word "Stock" for all purposes with the same force and
effect as the shares of Stock presently subject to the terms of this Agreement.
6. RESTRICTION ON TRANSFER. Purchaser shall not sell, transfer, pledge,
hypothecate or otherwise dispose of any shares of the Stock except in accordance
with the terms of this Agreement. Unless prior written consent is obtained from
the Corporation, any transfer, sale, assignment, hypothecation, pledge,
encumbrance, alienation, or other disposition of any of the Stock, or any
interest therein other than according to the terms of this Agreement, shall be
void and shall transfer no right, title, or interest in or to any or all of the
Stock to the purported transferee, buyer, assignee, pledgee, or encumbrance
holder. Notwithstanding any provision of this Agreement to the contrary, under
no circumstances shall any sale or other transfer or disposition of Stock
subject to this Agreement or any interest therein be valid if such sale,
transfer or disposition of Stock will, or could, impair the ability of the
Corporation to be treated as an S corporation under Section 1361 of the Internal
Revenue Code of 1986, as amended (or any successor statute of the same or
similar effect applicable to the Corporation).
The Corporation shall not be required (i) to transfer on its
books any shares of Stock which shall have been disposed of in violation of any
of the provisions set forth in this Agreement, or (ii) to treat as owner of such
shares or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
7. TERMINATION OF AGREEMENT. The provisions of this Agreement shall
terminate on (i) the closing date of an underwritten public offering of Common
Stock of the Corporation (the "IPO") or (ii) the closing date of a sale of
substantially all of the assets of the Corporation, purchase of substantially
all of the outstanding shares of the Corporation or merger of the Corporation
pursuant to which shareholders of this Corporation receive cash and/or
securities of a buyer whose shares are publicly traded (the "Acquisition").
8. LEGENDS. All certificates representing the shares of Stock of the
Corporation subject to the provisions of this Agreement shall have endorsed
thereon the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
-3-
<PAGE> 4
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RIGHTS
OF FIRST REFUSAL CONTAINED IN THE BYLAWS OF THIS CORPORATION AND IN AN AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, COPIES OF WHICH MAY BE
OBTAINED FROM THE SECRETARY OF THE CORPORATION."
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
(d) "THE SECURITIES REPRESENTED HEREBY MAY BE SUBJECT TO RESTRICTIONS
ON TRANSFER FOR A PERIOD OF NOT MORE THAN 180 DAYS FOLLOWING THE EFFECTIVE DATE
OF A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR AN
OFFERING OF THE CORPORATION'S SECURITIES PURSUANT TO THE TERMS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(e) Any legend required to be placed thereon by the California
Commissioner of Corporations or under other applicable state Blue Sky laws.
9. MARKET STANDOFF. Purchaser hereby agrees that Purchaser shall not, to
the extent requested by the Corporation and an underwriter of common stock (or
other securities) of the Corporation, offer, sell, contract to sell or grant any
option to purchase or otherwise dispose of any of the Stock during a period not
to exceed one hundred eighty (180) days following the effective date of a
registration statement of the Corporation filed under the Securities Act;
provided, however, that such agreement shall be applicable only to the first two
(2) such registration statements of the Corporation which cover shares (or other
securities) to be sold on behalf of the Corporation to the public in an
underwritten public offering.
In order to enforce the foregoing covenant, the Corporation may impose
stop-transfer instructions with respect to the Stock of Purchaser (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
10. PURCHASER'S REPRESENTATIONS. In connection with the purchase of the
Stock, Purchaser hereby represents and warrants to the Corporation as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. Purchaser is
purchasing the Stock solely for Purchaser's own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling,
-4-
<PAGE> 5
offering to sell or otherwise disposing of or distributing the Stock or any
portion thereof in any transaction other than a transaction exempt from
registration under the Securities Act. Purchaser also represents that the entire
legal and beneficial interest of the Stock is being purchased, and will be held,
for Purchaser's account only, and neither in whole or in part for any other
person. Purchaser either has a pre-existing business or personal relationship
with the Corporation (including a parent, affiliate or subsidiary of the
Corporation) or any of its officers, directors or controlling persons or by
reason of Purchaser's business or financial experience or the business or
financial experience of Purchaser's professional advisors who are unaffiliated
with and who are not compensated by the Corporation (including a parent,
affiliate or subsidiary of the Corporation) or any affiliate or selling agent of
the Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect Purchaser's own interests in connection with this transaction.
(b) RESIDENCE. Purchaser's principal residence is located at the
address indicated beneath Purchaser's signature below.
(c) INFORMATION CONCERNING CORPORATION. Purchaser has heretofore
discussed the Corporation and its plans, operations and financial position with
the Corporation's officers and has heretofore received all such information as
Purchaser has deemed necessary and appropriate to enable Purchaser to evaluate
the financial risk inherent in making an investment in the Stock, and Purchaser
has received satisfactory and complete information concerning the business and
financial condition of the Corporation in response to all inquiries in respect
thereof.
(d) ECONOMIC RISK. Purchaser realizes that the purchase of the Stock
will be a highly speculative investment and involves a high degree of risk, and
Purchaser is able, without significantly impairing Purchaser's financial
position, to hold the Stock for an indefinite period of time and to suffer a
complete loss on Purchaser's investment.
(e) RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(i) the sale of the Stock has not been registered under the
Securities Act, and the Stock must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available and the Corporation is under no obligation to register the Stock;
(ii) the share certificate representing the Stock will be stamped
with the legends specified in Section 8 hereof; and
(iii) the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
-5-
<PAGE> 6
(f) DISPOSITION UNDER RULES 144 AND 701. Purchaser understands that
the shares of Stock are restricted securities within the meaning of Rule 144
promulgated under the Securities Act; that the exemption from registration under
Rule 144 will not be available in any event for at least two years from the date
of purchase and payment (the "Holding Period") of the Stock, and even then will
not be available unless (i) a public trading market then exists for the Common
Stock of the Corporation, (ii) adequate information concerning the Corporation
is then available to the public, and (iii) other terms and conditions of Rule
144 are complied with; and that any sale of the Stock may be made only in
limited amounts in accordance with such terms and conditions.
Purchaser understands that the resale provisions of Rule 701, if
available, will not apply until 90 days after the Corporation becomes subject to
the reporting obligation under the Securities Exchange Act of 1934 (the
"Exchange Act"). There can be no assurance that the requirements of Rule 144 or
Rule 701 will be met, or that the Stock will ever be saleable.
(g) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
Purchaser's representations set forth above, or the restrictions set forth in
Section 6 and elsewhere herein, Purchaser further agrees that Purchaser shall in
no event make any disposition of all or any portion of the Stock unless and
until:
(A) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said Registration Statement; or, (B)(1) Purchaser shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a detailed statement of the circumstances surrounding the
proposed disposition, (2) Purchaser shall have furnished the Corporation with an
opinion of Purchaser's counsel to the effect that such disposition will not
require registration of such shares under the Securities Act, and (3) such
opinion of Purchaser's counsel shall have been concurred in by counsel for the
Corporation and the Corporation shall have advised Purchaser of such
concurrence.
(h) VALUATION OF COMMON STOCK. Purchaser understands that the Stock
has been valued by the Board of Directors and that the Corporation believes this
valuation represents a fair attempt at reaching an accurate appraisal of its
worth; Purchaser understands, however, that the Corporation can give no
assurances that such price is in fact the fair market value of the Stock and
that it is possible that, with the benefit of hindsight, the Internal Revenue
Service could successfully assert that the value of the common stock on the date
of purchase is substantially greater than so determined.
If the Internal Revenue Service were to succeed in a tax
determination that the Stock received had value greater than that upon which the
transaction was based, the additional value would constitute ordinary income as
of the date of its receipt. The additional taxes (and interest) due would be
payable by Purchaser, and there is no provision for the Corporation to reimburse
Purchaser for that tax liability, and Purchaser assumes all responsibility for
such potential tax liability. Under current law, in the event such additional
value would represent more than 25 percent of Purchaser's gross
-6-
<PAGE> 7
income for the year in which the value of the shares were taxable, the Internal
Revenue Service would have six years from the due date for filing the return (or
the actual filing date of the return if filed thereafter) within which to assess
Purchaser the additional tax and interest which would then be due.
The Corporation would have the benefit, in any such transaction,
if a determination was made prior to the three year statute of limitations
period affecting the Corporation, of an increase in its deduction for
compensation paid, which would offset its operating profits, or, if not
profitable, would create net operating loss carry forward arising from
operations in that year.
(i) SECTION 83(b) ELECTION. Purchaser understands that Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code") taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" means the right of the Corporation to buy back the stock
pursuant to this Agreement (the "Purchase Option"). In the event the
Corporation has registered under the Exchange Act, "restriction" with respect to
officers, directors and 10% shareholders also means the six (6) month period
after the Closing during which such officers, directors and 10% shareholders are
subject to suit under Section 16(b) of the Exchange Act. Purchaser understands
that he may elect to be taxed at the time the Stock is purchased rather than
when and as the Purchase Option or six (6) month Section 16(b) period expires by
filing an election under Section 83(b) of the Code with the I.R.S. within thirty
(30) days from the date of purchase. Even if the fair market value of the Stock
equals the amount paid for the Stock, the election must be made to avoid adverse
tax consequences in the future. The form for making this election is attached as
Exhibit 1 hereto. Purchaser understands that failure to make this filing timely
will result in the recognition of ordinary income by Purchaser, as the Purchase
Option lapses, or after the lapse of the six (6) month Section 16(b) period, on
the difference between the purchase price and the fair market value of the Stock
at the time such restrictions lapse.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE CORPORATION'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(B), EVEN IF
PURCHASER REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
PURCHASER'S BEHALF.
11. ESCROW. As security for the faithful performance of the terms of
this Agreement and the Note and to ensure the availability for delivery of the
Stock upon exercise of the Corporation's option to purchase the Stock as set
forth in Section 3 hereof, the Purchaser agrees to deliver to and deposit with
the Secretary of the Corporation, or such other person designated by the
Corporation, as escrow agent in this transaction ("Escrow Agent"), two Stock
Assignments duly endorsed (with date and number of shares blank) in the form
attached hereto as Exhibit 2, together with the certificate or certificates
evidencing the Stock (the "Collateral"); said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Corporation and the Purchaser set forth in Exhibit 3
attached hereto and incorporated by this reference, which instructions shall
also be delivered to the Escrow Agent at the closing hereunder.
-7-
<PAGE> 8
12. MISCELLANEOUS.
(a) Subject to the provisions and limitations hereof, Purchaser may,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Corporation with respect to the Stock.
(b) The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at the address shown on the
Corporation's employment records and to the Corporation at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten (10) days' advance written notice to the other
party hereto.
(d) Purchaser hereby authorizes and directs the Secretary or
Transfer Agent of the Corporation to transfer the Stock as to which the option
to buy pursuant to Section 3 has been exercised from Purchaser to the
Corporation.
(e) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
(f) No supplement, modification or amendment of any term, provision
or condition of this Agreement shall be binding or enforceable unless executed
in writing by the parties hereto.
(g) Should any part, term or provision of this Agreement or any
document required herein to be executed be declared invalid, void or
unenforceable, all remaining parts, terms and provisions hereof shall remain in
full force and effect and shall in no way be invalidated, impaired or affected
thereby.
(h) This Agreement shall be governed by and construed and enforced
in accordance with and subject to the laws of the State of California.
13. ARBITRATION. At the option of either party, any and all disputes or
controversies whether of law or fact and of any nature whatsoever arising from
or respecting this Agreement, except for the obligation of Purchaser to make
payment for the Stock, shall be decided by arbitration by the American
Arbitration Association in accordance with the rules and regulations of that
Association.
-8-
<PAGE> 9
The arbitrators shall be selected as follows: In the event the
Corporation and Purchaser agree on one arbitrator, the arbitration shall be
conducted by such arbitrator. In the event the Corporation and Purchaser do not
so agree, the Corporation and Purchaser shall each select one independent,
qualified arbitrator and the two arbitrators so selected shall select the third
arbitrator. The Corporation reserves the right to object to any individual
arbitrator who shall be employed by or affiliated with a competing organization.
Arbitration shall take place at San Francisco, California, or any
other location mutually agreeable to the parties. At the request of either
party, arbitration proceedings will be conducted in the utmost secrecy; in such
case all documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available for the
inspection only of the Corporation or Purchaser and their respective attorneys
and their respective experts who shall agree in advance and in writing to
receive all such information confidentially and to maintain such information in
secrecy until such information shall become generally known. The arbitrator, who
shall act by majority vote, shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a temporary and/or a permanent injunction, and shall also be
able to award damages, with or without an accounting and costs. The decree or
judgment of an award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
Reasonable notice of the time and place of arbitration shall be given
to all persons, other than the parties, as shall be required by law, in which
case such persons or those authorized representatives shall have the right to
attend and/or participate in all the arbitration hearings in such manner as the
law shall require.
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER SKYSTREAM CORPORATION
a California Corporation
- ------------------------------- By:
------------------------------
Title:
Address: ---------------------------
----------------------
----------------------
THIS AGREEMENT DOES NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED EMPLOYMENT FOR THE VESTING PERIOD OR ANY OTHER PERIOD. PURCHASER
UNDERSTANDS THAT PURCHASER'S EMPLOYMENT WITH THE CORPORATION IS ON AN "AT WILL"
BASIS, UNLESS OTHERWISE SPECIFICALLY AGREED TO BY THE CORPORATION IN WRITING.
CONSENT OF SPOUSE
The undersigned spouse of Purchaser has read and hereby approves the
foregoing Agreement. In consideration of the Corporation's granting my spouse
the right to purchase the Stock as set forth in the Agreement, the undersigned
hereby agrees to be irrevocably bound by the Agreement and further agrees that
any community property interest shall be similarly bound by the Agreement. I
hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
---------------------------------
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<PAGE> 11
EXHIBIT 1
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986 to include in Purchaser's gross income for the
current taxable year, the amount of any compensation taxable to him in
connection with Purchaser's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME OF TAXPAYER: SPOUSE: __________________
ADDRESS: ______________________________________________________________
IDENTIFICATION NO. OF TAXPAYER: ____________ SPOUSE: __________________
TAXABLE YEAR: 1996
2. The property with respect to which the election is made is described as
follows:
1,000,000 shares of the Common Stock of SkyStream Corporation, a
California corporation (the "Company").
3. The date on which the property was transferred is: July 1, 1996
4. The property is subject to the following restrictions:
The right of the Company to repurchase the shares, or a portion thereof,
upon termination of employment at a formula price. The right lapses upon
the occurrence of certain events related to the purpose of the transfer.
5. The value at the time of transfer, determined without regard to any
restriction other than a restriction which by its terms will never
lapse, of such property is: $.01 per share.
6. The amount (if any) paid for such property: $.01 per share.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated:
----------------- ------------------------------
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated:
----------------- ------------------------------
Spouse of Taxpayer
<PAGE> 12
EXHIBIT 2
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement dated as of July 1, 1996 (the "Agreement") ________________
("Purchaser") hereby sells, assigns and transfers unto SkyStream Corporation
________________________________________________ (______) shares of the Common
Stock of SkyStream Corporation, a California corporation, standing in the
undersigned's name on the books of said corporation represented by certificate
No. herewith, and does hereby irrevocably constitute and appoint _______
________________ attorney to transfer the said stock on the books of the said
corporation with full power of substitution in the premises. THIS ASSIGNMENT MAY
ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS THERETO.
Dated: PURCHASER
-----------------
Signature
---------------------
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Corporation to exercise its
"Purchase Option" set forth in the Agreement without requiring additional
signatures on the part of the Purchaser.
<PAGE> 13
EXHIBIT 3
JOINT ESCROW INSTRUCTIONS
July 1, 1996
Secretary
SkyStream Corporation
1282 Estate Drive
Los Altos, CA 94024
Dear Sir:
As Escrow Agent for both SkyStream Corporation, a California corporation
("Corporation"), and the undersigned purchaser of stock of the Corporation
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Restricted Stock Purchase
Agreement ("Agreement") between the Corporation and the undersigned, to which a
copy of these Joint Escrow Instructions is attached as Exhibit 3, in accordance
with the following instructions:
1. In the event the Corporation and/or any assignee of the Corporation
(referred to collectively for convenience herein as the "Corporation") exercises
the option set forth in Section 3 of the Agreement, the Corporation shall give
to Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Corporation. Purchaser and the Corporation hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares of
stock being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price (by check) for the number of
shares of stock being purchased pursuant to the exercise of the Corporation's
Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock (as that term is defined in the
Agreement) to be held by you hereunder pursuant to Section 10 of the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute all documents
necessary or appropriate to make such securities negotiable or other property
transferable, as the case may be, and to complete any transaction herein
contemplated. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Corporation while the
stock is held by you.
<PAGE> 14
4. None of the certificates representing the shares of stock deposited
under these escrow instructions shall be released to the Purchaser if such
shares of stock are subject to the Purchase Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and all be discharged of all further
obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and of the arbitrator provided
for in Section 13 of the Agreement, and are hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court and of the
arbitrator provided for in Section 13 of the Agreement. In case you obey or
comply with any such order, judgment or decree, you shall not be liable to any
of the parties hereto or to any other person, firm or corporation by reason of
such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be Secretary of the Corporation or if you shall resign by
written notice to each party. In the event of any such termination, the
Corporation shall appoint a successor Escrow Agent.
<PAGE> 15
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of the
arbitrator provided for in Section 13 of the Agreement or of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
CORPORATION: SkyStream Corporation
1282 Estate Drive
Los Altos, CA 94024
PURCHASER: -------------------------
-------------------------
-------------------------
ESCROW AGENT: Secretary
SkyStream Corporation
1282 Estate Drive
Los Altos, CA 94024
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
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<PAGE> 16
Very truly yours,
SKYSTREAM CORPORATION,
a California corporation
By:
-----------------------------
PURCHASER:
--------------------------------
ESCROW AGENT:
- ------------------------------
Secretary
-4-
<PAGE> 17
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
SELLER : SKYSTREAM CORPORATION
COMPANY : SKYSTREAM CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
(i) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933 ("Securities Act").
(ii) I understand that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of my
investment intent as expressed herein. In this connection, I understand that, in
the view of the Securities and Exchange Commission ("SEC"), the statutory basis
for such exemption may be unavailable if my representation was predicated solely
upon a present intention to hold these Securities for the minimum capital gains
period specified under tax statutes, for a deferred sale, for or until an
increase or decrease in the market price of the Securities, or for a period of
one year or any other fixed period in the future.
(iii) I further understand that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. Moreover, I understand
that the Company is under no obligation to register the Securities. In addition,
I understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
<PAGE> 18
(iv) I am familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof in a non-public offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of issuance of the Securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including, among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly with a market maker (as said term is defined under the Securities
Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of
certain public information about the Company and the amount of securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge
and agree to the restrictions set forth in paragraph (c) hereof.
In the event that the Company does not qualify under Rule 701 at
the time of issuance of the Securities, then the Securities may be resold in
certain limited circumstances subject to the provisions of Rule 144, which
requires among other things: (1) the availability of certain public information
about the Company, (2) the resale occurring not less than two years after the
party has purchased, and made full payment for, within the meaning of Rule 144,
the securities to be sold; and, in the case of an affiliate, or of a
non-affiliate who has held the securities less than three years, (3) the sale
being made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934) and the amount of securities being sold during
any three month period not exceeding the specified limitations stated therein,
if applicable.
(V) I AGREE, IN CONNECTION WITH THE COMPANY'S INITIAL
UNDERWRITTEN PUBLIC OFFERING OF THE COMPANY'S SECURITIES, (1) NOT TO SELL, MAKE
SHORT SALE OF, LOAN, GRANT ANY OPTIONS FOR THE PURCHASE OF, OR OTHERWISE DISPOSE
OF ANY SHARES OF COMMON STOCK OF THE COMPANY HELD BY ME (OTHER THAN THOSE SHARES
INCLUDED IN THE REGISTRATION) WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY
OR THE UNDERWRITERS MANAGING SUCH INITIAL UNDERWRITTEN PUBLIC OFFERING OF THE
COMPANY'S SECURITIES FOR ONE HUNDRED EIGHTY (180) DAYS FROM THE EFFECTIVE DATE
OF SUCH REGISTRATION, AND (2) I FURTHER AGREE TO EXECUTE ANY AGREEMENT
REFLECTING (1) ABOVE AS MAY BE REQUESTED BY THE UNDERWRITERS AT THE TIME OF THE
PUBLIC OFFERING; PROVIDED, HOWEVER, THAT THE OFFICERS AND DIRECTORS OF THE
COMPANY WHO OWN THE STOCK OF THE COMPANY ALSO AGREE TO SUCH RESTRICTIONS.
(vi) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that
persons
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<PAGE> 19
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial burden
of proof in establishing that an exemption from registration is available for
such offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(vii) I understand that the certificate evidencing the Securities
will be imprinted with a legend which prohibits the transfer of the Securities
without the consent of the Commissioner of Corporations of California. I have
read the applicable Commissioner's Rules with respect to such restriction, a
copy of which is attached.
Signature of Purchaser:
____________________________
Date:________________, 19___
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<PAGE> 1
EXHIBIT 4.5.1
AMENDMENT TO
RESTRICTED STOCK PURCHASE AGREEMENT
This Amendment is made as of the 7th day of February, 1997, to the
Restricted Stock Purchase Agreement dated as of July 10, 1996 (the "Agreement")
by and between SkyStream Corporation and ________________ ("Purchaser").
1. This Amendment confirms that the Agreement is dated as of July 10,
1996.
2. Effective upon the closing of the sale of shares of Series A
Preferred Stock pursuant to the terms of the Series A Preferred Stock Purchase
Agreement dated as of February 7, 1997 (the "Closing"), Section 6 of the
Agreement is amended to read in its entirety as follows:
6. RESTRICTION ON TRANSFER.
(a) Purchaser shall not sell, transfer, pledge, hypothecate or otherwise
dispose of any shares of the Stock except in accordance with (i) the terms of
this Agreement, (ii) Article VIII, Section 8.6 of the Corporation's Bylaws and
(iii) the terms of that certain Right of First Refusal and Co-Sale Agreement
dated February 7, 1997 (the "Co-Sale Agreement"). Unless prior written consent
is obtained from the Corporation or the other parties to the Co-Sale Agreement,
any transfer, sale, assignment, hypothecation, pledge, encumbrance, alienation,
or other disposition of any of the Stock, or any interest therein other than
according to the terms of this Agreement, the Bylaws and the Co-Sale Agreement,
shall be void and shall transfer no right, title or interest in or to any or all
of the Stock to the purported transferee, buyer, assignee, pledgee or
encumbrance holder.
(b) Involuntary Transfer.
(i) Corporation's Right to Purchase upon Involuntary Transfer. In
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including death or divorce) of
all or a portion of the Stock by the record holder thereof, the Corporation
shall have an option to purchase all of the Stock transferred at the greater of
the purchase price paid by the Purchaser pursuant to this Agreement or the fair
market value of the Stock on the date of transfer. Upon such a transfer, the
person acquiring the Stock shall promptly notify the Secretary of the
Corporation of such transfer. The right to purchase such shares of Stock shall
be provided to the Corporation for a period of twenty (20) days following
receipt by the Corporation of written notice by the person acquiring the Stock.
(ii) Price for Involuntary Transfer. With respect to any Stock to be
transferred pursuant to Section 6(b)(i), the price per share shall be a price
set by the Board of Directors of the Corporation that will reflect the current
fair market value of the Stock in terms of present earnings and future prospects
of the Corporation. The Corporation shall notify Purchaser or his or her
executor, as
<PAGE> 2
the case may be, of the price so determined within thirty (30) days after
receipt by it of written notice of the transfer or proposed transfer of the
Stock. However, if the Purchaser does not agree with the valuation as determined
by the Board of Directors of the Corporation, the Purchaser shall be entitled to
have the valuation determined by an independent appraiser to be mutually agreed
upon by the Corporation and the Purchaser and whose fees shall be borne equally
by the Corporation and the Purchaser.
(c) Assignment. The right of the Corporation to purchase any part of
the Stock may be assigned in whole or in part to any shareholder or shareholders
of the Corporation or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the parent or 100% owned subsidiary
of the Corporation, must pay the Corporation, upon assignment of such right,
cash equal to the difference between the original purchase price and fair market
value, if the original purchase price is less than the fair market value of the
Stock subject to the assignment.
(d) Restrictions Binding on Transferees. All transferees of Stock or
any interest therein will receive and hold such Stock or interest subject to the
provisions of this Agreement, the Bylaws of the Corporation and the Co-Sale
Agreement including, insofar as applicable, the Repurchase Option. Any sale or
transfer of the Stock shall be void unless the provisions of this Agreement, the
Bylaws and the Co-Sale Agreement are met.
3. Section 7 of the Agreement shall be amended to read in its entirety
as follows:
7. Termination of Rights. The restrictions set forth in Section 6 of
this Agreement shall terminate on (i) the closing date of an underwritten public
offering of Common Stock of the Corporation (the "IPO") or (ii) the closing date
of a sale of substantially all of the assets of the Corporation, purchase of
substantially all of the outstanding shares of the Corporation or merger of the
Corporation pursuant to which shareholders of this Corporation receive cash
and/or securities of a buyer whose shares are publicly traded (the
"Acquisition").
4. Section 9 of the Agreement shall be amended to read in its entirety
as follows:
9. Market Standoff. Purchaser hereby agrees that Purchaser shall not,
to the extent requested by the Corporation or the underwriters managing any
underwritten public offering of common stock (or other securities) of the
Corporation, offer, sell, contract to sell, make any short sale of, loan or
grant any option to purchase or otherwise dispose of any of the Stock during a
period not to exceed one hundred eighty (180) days following the effective date
of a registration statement, or such longer period as may be agreed to by the
holders of a majority of the outstanding Registrable Securities (as such term is
defined in the Rights Agreement between the Purchaser and the holders of Series
A Preferred Stock dated February 7, 1997) of the Corporation filed under the
Securities Act; provided, however, that such agreement shall be applicable only
to the first two (2) such registration statements of the Corporation which cover
shares (or other securities) to be sold on behalf of the Corporation to the
public in an underwritten public offering.
<PAGE> 3
In order to enforce the foregoing covenant, the Corporation may impose
stop-transfer instructions with respect to the Stock of Purchaser (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
5. Except as amended herewith, all other paragraphs of the Agreement
shall continue in full force and effect. In the event of any conflict between
the provisions of the Agreement and this Amendment, the provisions of this
Amendment will govern.
6. This Amendment, the Agreement and the documents referred to herein
constitute the entire agreement among the parties as to the matters addressed
herein and therein, including but not limited to the employment severance
benefits granted by the Corporation to the Purchaser.
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date and year first above written.
PURCHASER SKYSTREAM CORPORATION
By By
------------------------------ ------------------------------
Title
----------------------------
<PAGE> 1
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Telephone (650) 493-9300 Facsimile (650) 493-6811
March 8, 2000
SkyStream Networks Inc.
555 Clyde Avenue
Mountain View, CA 94043
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 (File No. 333-____)
to be filed by you with the Securities and Exchange Commission on March __, 2000
(the "Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of ________ shares of Common Stock of
Skystream Networks Inc. (the "Shares"). As your counsel in connection with this
transaction, we have examined the proceedings proposed to be taken in connection
with said sale and issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
various states, where required, the Shares when issued and sold in the manner
referred to in the Registration Statement will legally and validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the prospectus constituting a part thereof,
and any amendment thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 10.1
SKYSTREAM NETWORKS INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of January
__, 2000 by and between SkyStream Networks Inc., a Delaware corporation (the
"Company"), and _________________ ("Indemnitee").
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services
to the Company, the Company wishes to provide for the indemnification of, and
the advancement of expenses to, Indemnitee to the maximum extent permitted by
law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty
in obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of such
insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in connection with the Company's reincorporation, the Company
and Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement, with such changes as are required to
conform the existing agreement to Delaware law and to provide indemnification
and advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law;
WHEREAS, in view of the considerations set forth above, the Company
desires that Indemnitee shall be indemnified and advanced expenses by the
Company as set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth
below.
1. Certain Definitions.
a. "Change in Control" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the
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<PAGE> 2
total voting power represented by the Company's then outstanding Voting
Securities, (ii) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least two
thirds (2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof,
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation other than a merger or consolidation which
would result in the Voting Securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity) at least 80% of
the total voting power represented by the Voting Securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of (in one transaction or a series of related transactions) all
or substantially all of the Company's assets.
b. "Claim" shall mean with respect to a Covered Event: any
threatened, pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other.
c. References to the "Company" shall include, in addition to
SkyStream Networks Corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
SkyStream Networks Corporation (or any of its wholly owned subsidiaries) is a
party which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee, agent
or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust or other enterprise, Indemnitee shall stand in the same
position under the provisions of this Agreement with respect to the resulting or
surviving corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
d. "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
e. "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim
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<PAGE> 3
and any federal, state, local or foreign taxes imposed on the Indemnitee as a
result of the actual or deemed receipt of any payments under this Agreement.
f. "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
g. "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).
h. References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.
i. "Reviewing Party" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board of
Directors, Independent Legal Counsel or any other person or body not a party to
the particular Claim for which Indemnitee is seeking indemnification.
j. "Section" refers to a section of this Agreement unless otherwise
indicated.
k. "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
a. Indemnification of Expenses. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part out of
a Covered Event), including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses.
b. Review of Indemnification Obligations. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any
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<PAGE> 4
payments to Indemnitee not made prior to such determination by such Reviewing
Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee
(who hereby agrees to reimburse the Company) for all Expenses theretofore paid
to Indemnitee to which Indemnitee is not entitled hereunder under applicable
law; provided, however, that if Indemnitee has commenced or thereafter commences
legal proceedings in a court of competent jurisdiction to secure a determination
that Indemnitee is entitled to be indemnified hereunder under applicable law,
any determination made by any Reviewing Party that Indemnitee is not entitled to
be indemnified hereunder under applicable law shall not be binding and
Indemnitee shall not be required to reimburse the Company for any Expenses
theretofore paid in indemnifying Indemnitee until a final judicial determination
is made with respect thereto (as to which all rights of appeal therefrom have
been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for
any Expenses shall be unsecured and no interest shall be charged thereon.
c. Indemnitee Rights on Unfavorable Determination; Binding Effect. If
any Reviewing Party determines that Indemnitee substantively is not entitled to
be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
d. Selection of Reviewing Party; Change in Control. If there has not
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the employment of separate counsel by one or more
Indemnitees has been previously authorized by the Company in writing, or (ii) an
Indemnitee shall have provided to the Company a written statement that such
Indemnitee has reasonably concluded that there may be a conflict of interest
between such Indemnitee and the other Indemnitees with respect to the matters
arising under this Agreement.
e. Mandatory Payment of Expenses. Notwithstanding any other provision
of this Agreement other than Section 10 hereof, to the extent that Indemnitee
has been successful on the merits or otherwise, including, without limitation,
the dismissal of an action without prejudice, in defense of
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<PAGE> 5
any Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. Expense Advances.
a. Obligation to Make Expense Advances. Upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay such amounts if it shall
ultimately be determined that the Indemnitee is not entitled to be indemnified
therefore by the Company hereunder under applicable law, the Company shall make
Expense Advances to Indemnitee.
b. Form of Undertaking. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured
and no interest shall be charged thereon.
c. Determination of Reasonable Expense Advances. The parties agree
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
a. Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such written
demand by Indemnitee is presented to the Company, except in the case of Expense
Advances, which shall be made no later than ten (10) business days after such
written demand by Indemnitee is presented to the Company.
b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
c. No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that
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<PAGE> 6
Indemnitee should be indemnified under this Agreement under applicable law,
shall be a defense to Indemnitee's claim or create a presumption that Indemnitee
has not met any particular standard of conduct or did not have any particular
belief. In connection with any determination by any Reviewing Party or otherwise
as to whether the Indemnitee is entitled to be indemnified hereunder under
applicable law, the burden of proof shall be on the Company to establish that
Indemnitee is not so entitled.
d. Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
e. Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently retained by
or on behalf of Indemnitee with respect to the same Claim; provided that, (i)
Indemnitee shall have the right to employ Indemnitee's separate counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of separate
counsel by Indemnitee has been previously authorized by the Company, (B)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
a. Scope. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable law,
statute or rule which expands the right of a Delaware corporation to indemnify a
member of its board of directors or an officer, employee, agent or fiduciary, it
is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits afforded by such change. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, such change, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement, shall
have no effect on this Agreement or the parties' rights and obligations
hereunder except as set forth in Section 10(a) hereof.
b. Nonexclusivity. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation, its
Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The
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<PAGE> 7
indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement,
the Company shall not be obligated pursuant to the terms of this Agreement:
a. Excluded Action or Omissions. To indemnify or make Expense
Advances to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving indemnification
under applicable law.
b. Claims Initiated by Indemnitee. To indemnify or make Expense
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's Certificate of Incorporation or Bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law, regardless of whether Indemnitee ultimately is determined to be
entitled to such indemnification, Expense Advances, or insurance recovery, as
the case may be.
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<PAGE> 8
c. Lack of Good Faith. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
d. Claims Under Section 16(b). To indemnify Indemnitee for Expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or
Interpretation. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; provided, however, that
until such final judicial determination is made, Indemnitee shall be entitled
under Section 3 to receive payment of Expense Advances hereunder with respect to
such action.
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<PAGE> 9
14. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
15. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
17. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies,
liabilities, powers and duties of the parties to this Agreement, shall be
governed by and construed in accordance with the laws of the State of Delaware
as applied to contracts between Delaware residents entered into and to be
performed entirely in the State of Delaware without regard to principles of
conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
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21. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
SKYSTREAM NETWORKS INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Address: 555 Clyde Avenue, Suite B
Mountain View, CA 94043
AGREED TO AND ACCEPTED
INDEMNITEE:
-----------------------------------
(signature)
-----------------------------------
Name
-----------------------------------
Address
-----------------------------------
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<PAGE> 1
EXHIBIT 10.2
SKYSTREAM NETWORKS INC.
1996 STOCK OPTION PLAN
(as amended February 29, 2000)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock options plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board of Directors
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means SkyStream Networks Inc., a Delaware corporation.
(h) "Consultant" means any person who is engaged by the Company or
any Parent or Subsidiary to render consulting or advisory services to such
entity and who is compensated for such services.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon
<PAGE> 2
expiration of such leave is guaranteed by statute or contract. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of the The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
(q) "Option Agreement" means a written or electronic agreement
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
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<PAGE> 3
(r) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(s) "Optioned Stock" means the Common Stock subject to an Option.
(t) "Optionee" means the holder of an outstanding Option granted
under the Plan.
(u) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(v) "Plan" means this 1996 Stock Option Plan.
(w) "Service Provider" means an Employee, Director or Consultant.
(x) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.
(y) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 14,898,900 Shares (after giving effect to the
three-for-two stock split approved by the stockholders of the Company on
February 29, 2000), together with an annual increase in the number of shares of
Common Stock reserved for issuance hereunder on the first day of the Company's
fiscal year, beginning with January 1, 2001 equal to the lesser of (i) 3,500,000
shares, (ii) 5% of the outstanding shares of the Company as of the last day of
the prior fiscal year or (iii) such amount as determined by the Board of
Directors. The Shares may be authorized but unissued, or reacquired Common
Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to directors,
non-director Officers and Employees who are neither directors nor Officers.
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<PAGE> 4
(i) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
performance-based compensation within the meaning of Section 162(m) of the Code,
the Plan shall be administered by a Committee of two or more outside directors
within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(ii) Other Administration. Other than as provided above, the Plan
shall be administered by (A) the Board or (B) a Committee, which Committee shall
be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may from
time to time be granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
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<PAGE> 5
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(x) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(iiii) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable; and
(iv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(b) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.
(b) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
(i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of Optionee's relationship as a Service Provider with
the Company, nor shall it interfere
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<PAGE> 6
in any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Service Providers:
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial service relationship
with the Company, a Service Provider may be granted Options to purchase up to an
additional 2,500,000 Shares which shall not count against the amount set forth
in subsection (i) above.
(ii) The foregoing limitations shall be adjusted appropriately in
connection with any change in the Company's capitalization as described in
Section 11.
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan; provided, however, that in the event of an initial
public offering by the Company prior to such expiration of the Plan, the term of
the Plan shall be extended until the tenth anniversary of February 18,2000.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
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<PAGE> 7
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any other Service Provider, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist y of (1) cash, (2) check, (3)
promissory note, (4) other Shares which (x) in the case of Shares acquired upon
exercise of an Option have been owned by the Optionee for more than six months
on the date of surrender and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price, (6)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, (7) any combination of
the foregoing methods of payment or (8) such other consideration and method of
payment for the issuance of Shares to the extent permitted by Applicable Laws.
In making its determination as to the
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<PAGE> 8
type of consideration to accept, the Administrator shall consider if acceptance
of such consideration may be reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator and set forth in the Option Agreement. Unless
the Administrator provides otherwise, vesting of Options granted hereunder shall
be tolled during any unpaid leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when (i) written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and (ii) full payment
for the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under Section 8(b) of the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
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<PAGE> 9
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If such disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated as an Incentive
Stock Option and shall be treated for tax purposes as a Nonstatutory Stock
Option on the day three months and one day following such termination. If, on
the date of termination, the Optionee is not vested as to his or her entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Agreement (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquires the right to exercise the Option by bequest or inheritance,
but only to the extent that the Option is vested on the date of death. In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the Plan. The Option may be exercised by the executor or administrator
of the Optionee's estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or distribution. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Unless determined otherwise by the
Administrator, Options may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions are
the Administrator deems appropriate.
11. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but
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<PAGE> 10
as to which no Options have yet been granted or which have been returned to the
Plan upon cancellation or expiration of an Option, as well as the price per
share of Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.
(c) Merger of Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
may be substituted by such successor corporation or a parent or subsidiary of
such successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately prior to the merger,
the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the
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<PAGE> 11
consideration to be received upon the exercise of the Option for each Share of
Optioned Stock subject to the Option to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan
(b) Stockholder Approval. The Board shall obtain stockholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall impair the rights of any Optionee, unless mutually
agreed otherwise between the Optionee and the Administrator, which agreement
must be in writing and signed by the Optionee and the Company. Termination of
the Plan shall not affect the Administrator's ability to exercise the powers
granted to it hereunder with respect to Options granted under the Plan prior to
the date of such termination.
14. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws, and the requirements
of any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Administrator may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
-11-
<PAGE> 12
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under Applicable Laws.
-12-
<PAGE> 1
EXHIBIT 10.2.1
SKYSTREAM CORPORATION
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48th of the Shares subject to the Option
shall vest each month period thereafter.
<PAGE> 2
Termination Period:
This Option may be exercised for 45 days after termination of employment
or consulting relationship, or such longer period as may be applicable upon
death or disability of Optionee as provided in the Plan, but in no event later
than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. SkyStream Corporation, a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1996 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option. This Option shall be exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a fraction of a Share.
(b) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability of
the Option is governed by Sections 6, 7 and 8 below, subject to the limitation
contained in subsection 2(i)(c).
(c) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
<PAGE> 3
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his or her Investment
Representation Statement in the form attached hereto as Exhibit B, and shall
read the applicable rules of the Commissioner of Corporations attached to such
Investment Representation Statement.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the Exercise Price.
5. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event an Optionee's Continuous
Status as an Employee or Consultant terminates, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
-3-
<PAGE> 4
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of his or her disability, Optionee
may, but only within six (6) months from the date of such termination (and in no
event later than the expiration date of the term of such Option as set forth in
the Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination; provided, however, that if such
disability is not a "disability" as such term is defined in Section 22(e)(3) of
the Code, in the case of an Incentive Stock Option such Incentive Stock Option
shall automatically convert to a Nonstatutory Stock Option on the day three
months and one day following such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within six (6) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and Options granted to more than ten percent (10%) shareholders shall apply to
this Option.
11. Taxation Upon Exercise of Option. Optionee understands that, upon
exercising a Nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.
12. Tax Consequences. Set forth below is a brief summary as of the date
of this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares.
-4-
<PAGE> 5
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS
OPTION OR DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability or state income tax liability upon
the exercise of the Option, although the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price will be
treated as an adjustment to the alternative minimum tax for federal tax purposes
and may subject the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of ISO Following Disability. If the Optionee's
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO to
be qualified as an ISO.
(iii) Exercise of Nonstatutory Stock Option. There may be a regular
federal income tax liability and state income tax liability upon the exercise of
a Nonstatutory Stock Option. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Optionee is an Employee or a former Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if such withholding amounts
are not delivered at the time of exercise.
(iv) Disposition of Shares. In the case of an NSO, if Shares are held
for at least one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal and state income tax purposes. In
the case of an ISO, if Shares transferred pursuant to the Option are held for at
least one year after exercise and are disposed of at least two years after the
Date of Grant, any gain realized on disposition of the Shares will also be
treated as long-term capital gain for federal and state income tax purposes. If
Shares purchased under an ISO are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (1) the
Fair Market Value of the Shares on the date of exercise, or (2) the sale price
of the Shares.
(v) Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
-5-
<PAGE> 6
13. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by California law except for that body of
law pertaining to conflict of laws.
SKYSTREAM CORPORATION
a California corporation
By:
------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he is familiar with the terms and provisions thereof, and hereby accepts this
Option subject to all of the terms and provisions thereof. Optionee has reviewed
the Plan and this Option in their entirety, has had an opportunity to obtain the
advice of counsel prior to executing this Option and fully understands all
provisions of the Option. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator upon
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company upon any change in the residence address indicated below.
Dated:
--------------- ----------------------------------
Optionee
Residence Address:
----------------------------------
----------------------------------
----------------------------------
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<PAGE> 7
EXHIBIT A
1996 STOCK OPTION PLAN
EXERCISE NOTICE
SkyStream Corporation
555 Clyde Avenue, Suite B
Mountain View, CA 94043
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of SkyStream Corporation
(the "Company") under and pursuant to the 1996 Stock Option Plan, as amended
(the "Plan") and the [XX] Incentive [ ] Nonstatutory Stock Option Agreement
dated March 3, 1999 (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. Company's Right of First Refusal. Before any Shares held by Optionee
or any transferee (either being sometimes referred to herein as the "Holder")
may be sold or otherwise transferred (including transfer by gift or operation of
law), the Company or its assignee(s) shall have a right of first refusal to
purchase the Shares on the terms and conditions set forth in this Section (the
"Right of First Refusal").
<PAGE> 8
(a) Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
-2-
<PAGE> 9
(g) Termination of Right of First Refusal. The Right of First Refusal
shall terminate as to any Shares 90 days after the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
5. Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by the Company or by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
-3-
<PAGE> 10
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO RESTRICTIONS ON
TRANSFER FOR A PERIOD OF 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE
COMPANY'S INITIAL UNDERWRITTEN PUBLIC OFFERING AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF BY THE HOLDER WITHOUT THE CONSENT OF THE
COMPANY OR THE MANAGING UNDERWRITER."
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
7. Market Standoff. Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of the securities of the Company under the
Securities Act of 1933, as amended (the "Act"), Optionee shall not sell or
otherwise transfer the Shares for a period of 180 days following the effective
date of a Registration filed under the Act; provided, that such restriction
shall apply only to the first registration statement of the Company to become
effective under the Act which include securities to be sold on behalf of the
Company in an underwritten offering under the Act. The Company may impose
stop-transfer instructions with respect to the Shares subject to the foregoing
restrictions until the end of each such 180-day period.
8. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
-4-
<PAGE> 11
10. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
11. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
12. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
13. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
14. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option Agreement
and the Investment Representation Statement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Purchaser with
respect to the subject matter hereof, and may not be modified adversely to the
Purchaser's interest except by means of a writing signed by the Company and
Purchaser
Submitted by: Accepted by:
OPTIONEE: SKYSTREAM CORPORATION
By:
-------------------------------
Its:
------------------------------
- ----------------------------------
(Signature)
Address: Address:
- ---------------------------------- 55 Clyde Avenue, Suite B
Mountain View, CA 94043
- ----------------------------------
-5-
<PAGE> 12
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : SKYSTREAM CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. Optionee is
acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the Securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule
144, each promulgated under the Securities Act, which, in substance, permit
limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the Optionee,
the exercise will be exempt from registration under the
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<PAGE> 13
Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the Securities Act, Optionee
shall not sell or otherwise transfer any Shares or other securities of the
Company during the 180-day period following the effective date of a registration
statement of the Company filed under the Securities Act; provided, however, that
such restriction shall only apply to the first registration statement of the
Company to become effective under the Securities Act which include securities to
be sold on behalf of the Company to the public in an underwritten public
offering under the Securities Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
Signature of Optionee:
---------------------------
Date: , 19
--------------- ---
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<PAGE> 1
EXHIBIT 10.2.2
SKYSTREAM CORPORATION
1996 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
SkyStream Corporation
555 Clyde Avenue, Suite B
Mountain View, CA 94043
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, ______________, 2000,
_____________ ("Purchaser") hereby elects to exercise Purchaser's option to
purchase an aggregate of __________ shares of the Common Stock (the "Shares") of
SkyStream Corporation (the "Company") under and pursuant to the 1996 Stock
Option Plan, as amended (the "Plan") and the Incentive Stock Option Agreement
dated __________________, 2000 (the "Option Agreement"), of which none of the
shares have become vested under the vesting schedule set forth in the Option
Agreement. (Shares which at any time have vested under such vesting schedule
shall be then referred to as "Vested Shares" and shares which at any time have
not yet vested shall be then referred to as "Unvested Shares." The Vested Shares
and the Unvested Shares are sometimes collectively referred to herein as the
"Shares"). As set forth in the Plan and the Option Agreement, in the event of
Purchaser's election to exercise the Option as to Unvested Shares, this
Agreement gives the Company the right, in the event of termination of the
Purchaser's employment with the Company to repurchase at the Option Price (as
defined herein) any or all of the Shares that are Unvested Shares as of the date
of termination.
Subject to the terms and conditions of this Agreement, the Company
hereby agrees to sell the Shares to Purchaser and Purchaser agrees to purchase
the Shares from the Company on the Closing Date (as herein defined), at a price
of $____ per share (the "Option Price"), for an aggregate purchase price of
$__________. The Shares are being purchased and sold in accordance with and
subject to the provisions of the Plan and the Option Agreement, each of which is
incorporated by reference.
The purchase and sale of the Shares shall occur at a closing to be held
at such time and place (the "Closing Date"), as designated by the Company no
less than two business days prior to the Closing Date. The closing will take
place at the principal office of the Company or at such other place as shall be
designated by the Company. At the closing, Purchaser shall deliver to the
Company cash, a check payable to the order of the Company in the amount of the
purchase price of the Shares, or a duly executed full recourse promissory Note,
together a with Security Agreement, in the form attached hereto as Exhibit 1
(the "Note"). As security for the payment of the Note and any renewal or
modification thereof, the Purchaser hereby grants to the Company a security
interest in, and pledges with and delivers
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<PAGE> 2
to the Company the Shares, to be held pursuant to the escrow referred to in
Section 9 hereof, and a duly executed Security Agreement in the form attached
hereto as Exhibit 2 (the "Security Agreement"). Upon the occurrence of a default
in the payment of the Note when due, the Company shall be entitled to immediate
possession of the Shares and all rights and remedies of a secured party under
the Commercial Code of the State of California.
2. COMPANY'S UNVESTED SHARE REPURCHASE OPTION.
(a) The Company shall have the right to repurchase the Unvested Shares
at the Option Price in the event of a termination of the Purchaser's employment
with the Company prior to the date on which they become Vested Shares pursuant
to the vesting schedule set forth in the Option Agreement (the "Unvested Share
Repurchase Option").
(b) Within 30 days following a termination of the Purchaser's employment
with the Company, the Company shall notify the Purchaser by written notice
delivered or mailed as provided in Section 10, as to whether it wishes to
purchase the Unvested Shares pursuant to exercise of the Unvested Share
Repurchase Option. If the Company (or its assignee) elects to purchase the
Unvested Shares hereunder, it shall set a date for the closing of the
transaction at a place specified by the Company not later than 10 days from the
date of such notice. At such closing, the Company (or its assignee) shall tender
payment for the Unvested Shares and the certificates representing the Unvested
Shares so purchased shall be canceled. Purchaser hereby authorizes and directs
the Secretary or Transfer Agent of the Company to transfer the Unvested Shares
as to which the Unvested Share Repurchase Option has been exercised from the
Purchaser to the Company. The Option Price may be payable, at the option of the
Company, in cancellation of all or a portion of any outstanding indebtedness of
the Purchaser to the Company or in cash (by check), or both.
(c) Nothing in this Agreement shall affect in any manner whatsoever the
right or power of the Corporation, or a parent or subsidiary of the Corporation,
to terminate Purchaser's employment, for any reason, with or without cause.
3. LEGALITY OF CORPORATE DISTRIBUTIONS. Notwithstanding any other provision in
this Agreement, the Corporation shall not be required to purchase or pay for any
Stock purchasable or purchased by it hereunder, if such purchase or such payment
of all or any part of the purchase price shall be or constitute, in the good
faith determination of the President or Board of Directors of the Corporation,
an unlawful corporate distribution in contravention of the laws of any state
having jurisdiction with respect to the transactions contemplated hereby. In the
event of such determination and due notice thereof to Purchaser, any transferee
of the Stock or their respective estates, as the case may be, each date of
making any such purchase or making any such payment hereunder by the
Corporation, respectively, may be extended from time to time at the option of
the Corporation for up to two (2) years. If any such purchase is not made and
fully paid for within three (3) years after such purchase was to have been made
pursuant
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<PAGE> 3
to the terms of this Agreement, however, Purchaser or any transferee of the
Stock or their respective estates, as the case may be, shall have the option to
have the transaction rescinded.
4. STOCK SPLITS, ETC. If, from time to time during the term of this Agreement:
(a) There is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Corporation; or
(b) There is any consolidation, merger or sale of all, or substantially
all, of the assets of the Corporation;
then, in such event, any and all new, substituted or additional
securities or other property to which Purchaser is entitled by reason of
Purchaser's ownership of Stock shall be immediately subject to this Agreement
and be included in the word "Stock" for all purposes with the same force and
effect as the shares of Stock presently subject to the terms of this Agreement.
5. RESTRICTION ON TRANSFER. Purchaser shall not sell, transfer, pledge,
hypothecate or otherwise dispose of any shares of the Stock except in accordance
with the terms of this Agreement. Unless prior written consent is obtained from
the Corporation, any transfer, sale, assignment, hypothecation, pledge,
encumbrance, alienation, or other disposition of any of the Stock, or any
interest therein other than according to the terms of this Agreement, shall be
void and shall transfer no right, title, or interest in or to any or all of the
Stock to the purported transferee, buyer, assignee, pledgee, or encumbrance
holder.
The Corporation shall not be required (i) to transfer on its books
any shares of Stock which shall have been disposed of in violation of any of the
provisions set forth in this Agreement, or (ii) to treat as owner of such shares
or to accord the right to vote as such owner or to pay dividends to any
transferee to whom such shares shall have been so transferred.
6. LEGENDS. All certificates representing the shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon the
following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED."
(b) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RIGHTS OF
FIRST REFUSAL CONTAINED IN THE BYLAWS OF THIS CORPORATION AND
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<PAGE> 4
IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, COPIES OF
WHICH MAY BE OBTAINED FROM THE SECRETARY OF THE CORPORATION."
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AS SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
(d) "THE SECURITIES REPRESENTED HEREBY MAY BE SUBJECT TO RESTRICTIONS
ON TRANSFER FOR A PERIOD OF NOT MORE THAN 180 DAYS FOLLOWING THE EFFECTIVE DATE
OF A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR AN
OFFERING OF THE CORPORATION'S SECURITIES PURSUANT TO THE TERMS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION."
(e) Any legend required to be placed thereon by the California
Commissioner of Corporations or under other applicable state Blue Sky laws.
7. MARKET STANDOFF. Purchaser hereby agrees that Purchaser shall not, to the
extent requested by the Corporation or the underwriters managing any
underwritten public offering of common stock (or other securities) of the
Corporation, offer, sell, contract to sell, make any short sale of, loan or
grant any option to purchase or otherwise dispose of any of the Stock during a
period not to exceed one hundred eighty (180) days following the effective date
of a registration statement, or such longer period as may be agreed to by the
holders of a majority of the outstanding Registrable Securities (as such term is
defined in the Rights Agreement between the Corporation and the holders of
Series A Preferred Stock dated February 7, 1997) of the Corporation filed under
the Securities Act; provided, however, that such agreement shall be applicable
only to the first two (2) such registration statements of the Corporation which
cover shares (or other securities) to be sold on behalf of the Corporation to
the public in an underwritten public offering.
In order to enforce the foregoing covenant, the Corporation may impose
stop-transfer instructions with respect to the Stock of Purchaser (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
8. PURCHASER'S REPRESENTATIONS. In connection with the purchase of the Stock,
Purchaser hereby represents and warrants to the Corporation as follows:
(a) INVESTMENT INTENT; CAPACITY TO PROTECT INTERESTS. Purchaser is
purchasing the Stock solely for Purchaser's own account for investment and not
with a view to or for sale in connection with any distribution of the Stock or
any portion thereof and not with any present intention of selling,
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<PAGE> 5
offering to sell or otherwise disposing of or distributing the Stock or any
portion thereof in any transaction other than a transaction exempt from
registration under the Securities Act. Purchaser also represents that the entire
legal and beneficial interest of the Stock is being purchased, and will be held,
for Purchaser's account only, and neither in whole or in part for any other
person. Purchaser either has a pre-existing business or personal relationship
with the Corporation (including a parent, affiliate or subsidiary of the
Corporation) or any of its officers, directors or controlling persons or by
reason of Purchaser's business or financial experience or the business or
financial experience of Purchaser's professional advisors who are unaffiliated
with and who are not compensated by the Corporation (including a parent,
affiliate or subsidiary of the Corporation) or any affiliate or selling agent of
the Corporation, directly or indirectly, could be reasonably assumed to have the
capacity to evaluate the merits and risks of an investment in the Corporation
and to protect Purchaser's own interests in connection with this transaction.
(b) RESIDENCE. Purchaser's principal residence is located at the
address indicated beneath Purchaser's signature below.
(c) INFORMATION CONCERNING CORPORATION. Purchaser has heretofore
discussed the Corporation and its plans, operations and financial position with
the Corporation's officers and has heretofore received all such information as
Purchaser has deemed necessary and appropriate to enable Purchaser to evaluate
the financial risk inherent in making an investment in the Stock, and Purchaser
has received satisfactory and complete information concerning the business and
financial condition of the Corporation in response to all inquiries in respect
thereof.
(d) ECONOMIC RISK. Purchaser realizes that the purchase of the Stock
will be a highly speculative investment and involves a high degree of risk, and
Purchaser is able, without significantly impairing Purchaser's financial
position, to hold the Stock for an indefinite period of time and to suffer a
complete loss on Purchaser's investment.
(e) RESTRICTED SECURITIES. Purchaser understands and acknowledges
that:
(i) the sale of the Stock has not been registered under the
Securities Act, and the Stock must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available and the Corporation is under no obligation to register the Stock;
(ii) the share certificate representing the Stock will be stamped
with the legends specified in Section 7 hereof; and
(iii) the Corporation will make a notation in its records of the
aforementioned restrictions on transfer and legends.
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<PAGE> 6
(f) DISPOSITION UNDER RULES 144 AND 701. Purchaser understands that
the shares of Stock are restricted securities within the meaning of Rule 144
promulgated under the Securities Act; that the exemption from registration under
Rule 144 will not be available in any event for at least one year from the date
of purchase and payment (the "Holding Period") of the Stock, and even then will
not be available unless (i) a public trading market then exists for the Common
Stock of the Corporation, (ii) adequate information concerning the Corporation
is then available to the public, and (iii) other terms and conditions of Rule
144 are complied with; and that any sale of the Stock may be made only in
limited amounts in accordance with such terms and conditions.
Purchaser understands that the resale provisions of Rule 701, if
available, will not apply until 90 days after the Corporation becomes subject to
the reporting obligation under the Securities Exchange Act of 1934 (the
"Exchange Act"). There can be no assurance that the requirements of Rule 144 or
Rule 701 will be met, or that the Stock will ever be saleable.
(g) FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting
Purchaser's representations set forth above, or the restrictions set forth in
Section 5 and elsewhere herein, Purchaser further agrees that Purchaser shall in
no event make any disposition of all or any portion of the Stock unless and
until:
(i) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said Registration Statement; or, (ii)(1) Purchaser shall have
notified the Corporation of the proposed disposition and shall have furnished
the Corporation with a detailed statement of the circumstances surrounding the
proposed disposition, (2) Purchaser shall have furnished the Corporation with an
opinion of Purchaser's counsel to the effect that such disposition will not
require registration of such shares under the Securities Act, and (3) such
opinion of Purchaser's counsel shall have been concurred in by counsel for the
Corporation and the Corporation shall have advised Purchaser of such
concurrence.
(h) VALUATION OF COMMON STOCK. Purchaser understands that the Stock
has been valued by the Board of Directors and that the Corporation believes this
valuation represents a fair attempt at reaching an accurate appraisal of its
worth; Purchaser understands, however, that the Corporation can give no
assurances that such price is in fact the fair market value of the Stock and
that it is possible that, with the benefit of hindsight, the Internal Revenue
Service could successfully assert that the value of the common stock on the date
of purchase is substantially greater than so determined.
If the Internal Revenue Service were to succeed in a tax
determination that the Stock received had value greater than that upon which the
transaction was based, the additional value would constitute ordinary income as
of the date of its receipt. The additional taxes (and interest) due would be
payable by Purchaser, and there is no provision for the Corporation to reimburse
Purchaser for that tax liability, and Purchaser assumes all responsibility for
such potential tax liability. Under current law, in the event such additional
value would represent more than 25 percent of Purchaser's gross
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<PAGE> 7
income for the year in which the value of the shares were taxable, the Internal
Revenue Service would have six years from the due date for filing the return (or
the actual filing date of the return if filed thereafter) within which to assess
Purchaser the additional tax and interest which would then be due.
The Corporation would have the benefit, in any such transaction,
if a determination was made prior to the three year statute of limitations
period affecting the Corporation, of an increase in its deduction for
compensation paid, which would offset its operating profits, or, if not
profitable, would create net operating loss carry forward arising from
operations in that year.
(i) SECTION 83(B) ELECTION. Purchaser understands that Section 83 of
the Internal Revenue Code of 1986, as amended (the "Code") taxes as ordinary
income the difference between the amount paid for the Stock and the fair market
value of the Stock as of the date any restrictions on the Stock lapse. In this
context, "restriction" means the right of the Corporation to buy back the stock
pursuant to this Agreement (the "Purchase Option"). In the event the Corporation
has registered under the Exchange Act, "restriction" with respect to officers,
directors and 10% shareholders also means the six (6) month period after the
Closing during which such officers, directors and 10% shareholders are subject
to suit under Section 16(b) of the Exchange Act. Purchaser understands that he
may elect to be taxed at the time the Stock is purchased rather than when and as
the Purchase Option or six (6) month Section 16(b) period expires by filing an
election under Section 83(b) of the Code with the I.R.S. within thirty (30) days
from the date of purchase. Even if the fair market value of the Stock equals the
amount paid for the Stock, the election must be made to avoid adverse tax
consequences in the future. The form for making this election is attached as
Exhibit 3 hereto. Purchaser understands that failure to make this filing timely
will result in the recognition of ordinary income by Purchaser, as the Purchase
Option lapses, or after the lapse of the six (6) month Section 16(b) period, on
the difference between the purchase price and the fair market value of the Stock
at the time such restrictions lapse.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE CORPORATION'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(B), EVEN IF
PURCHASER REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
PURCHASER'S BEHALF.
9. ESCROW. As security for the faithful performance of the terms of this
Agreement and the Note and to ensure the availability for delivery of the Stock
upon exercise of the Corporation's option to purchase the Stock as set forth in
Section 3 hereof, the Purchaser agrees to deliver to and deposit with the
Secretary of the Corporation, or such other person designated by the
Corporation, as escrow agent in this transaction ("Escrow Agent"), two Stock
Assignments duly endorsed (with date and number of shares blank) in the form
attached hereto as Exhibit 4, together with the certificate or certificates
evidencing the Stock (the "Collateral"); said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Corporation and the Purchaser set forth in Exhibit 5
attached hereto and incorporated by this reference, which instructions shall
also be delivered to the Escrow Agent at the closing hereunder.
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<PAGE> 8
10. MISCELLANEOUS.
(a) Subject to the provisions and limitations hereof, Purchaser may,
during the term of this Agreement, exercise all rights and privileges of a
stockholder of the Corporation with respect to the Stock.
(b) The parties agree to execute such further instruments and to take
such further action as may reasonably be necessary to carry out the intent of
this Agreement.
(c) Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to Purchaser at the address shown on the
Corporation's employment records and to the Corporation at the address of its
principal corporate offices (attention: President) or at such other address as
such party may designate by ten (10) days' advance written notice to the other
party hereto.
(d) Purchaser hereby authorizes and directs the Secretary or Transfer
Agent of the Corporation to transfer the Stock as to which the option to buy
pursuant to Section 2 has been exercised from Purchaser to the Corporation.
(e) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation, or a parent or subsidiary of the
Corporation, to terminate Purchaser's employment, for any reason, with or
without cause.
(f) No supplement, modification or amendment of any term, provision
or condition of this Agreement shall be binding or enforceable unless executed
in writing by the parties hereto.
(g) Should any part, term or provision of this Agreement or any
document required herein to be executed be declared invalid, void or
unenforceable, all remaining parts, terms and provisions hereof shall remain in
full force and effect and shall in no way be invalidated, impaired or affected
thereby.
(h) This Agreement shall be governed by and construed and enforced in
accordance with and subject to the laws of the State of California.
11. ARBITRATION. At the option of either party, any and all disputes or
controversies whether of law or fact and of any nature whatsoever arising from
or respecting this Agreement, except for the obligation of Purchaser to make
payment for the Stock, shall be decided by arbitration by the American
Arbitration Association in accordance with the rules and regulations of that
Association.
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<PAGE> 9
The arbitrators shall be selected as follows: In the event the
Corporation and Purchaser agree on one arbitrator, the arbitration shall be
conducted by such arbitrator. In the event the Corporation and Purchaser do not
so agree, the Corporation and Purchaser shall each select one independent,
qualified arbitrator and the two arbitrators so selected shall select the third
arbitrator. The Corporation reserves the right to object to any individual
arbitrator who shall be employed by or affiliated with a competing organization.
Arbitration shall take place at San Francisco, California, or any
other location mutually agreeable to the parties. At the request of either
party, arbitration proceedings will be conducted in the utmost secrecy; in such
case all documents, testimony and records shall be received, heard and
maintained by the arbitrators in secrecy under seal, available for the
inspection only of the Corporation or Purchaser and their respective attorneys
and their respective experts who shall agree in advance and in writing to
receive all such information confidentially and to maintain such information in
secrecy until such information shall become generally known. The arbitrator, who
shall act by majority vote, shall be able to decree any and all relief of an
equitable nature, including but not limited to such relief as a temporary
restraining order, a temporary and/or a permanent injunction, and shall also be
able to award damages, with or without an accounting and costs. The decree or
judgment of an award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
Reasonable notice of the time and place of arbitration shall be given
to all persons, other than the parties, as shall be required by law, in which
case such persons or those authorized representatives shall have the right to
attend and/or participate in all the arbitration hearings in such manner as the
law shall require.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
PURCHASER SKYSTREAM CORPORATION
a California Corporation
- ------------------------------- By:
-----------------------------
Title:
---------------------------
Address:
---------------------------
---------------------------
THIS AGREEMENT DOES NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED EMPLOYMENT FOR THE VESTING PERIOD OR ANY OTHER PERIOD. PURCHASER
UNDERSTANDS THAT PURCHASER'S EMPLOYMENT WITH THE CORPORATION IS ON AN "AT WILL"
BASIS, UNLESS OTHERWISE SPECIFICALLY AGREED TO BY THE CORPORATION IN WRITING.
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<PAGE> 10
CONSENT OF SPOUSE
The undersigned spouse of Purchaser has read and hereby approves the
foregoing Agreement. In consideration of the Corporation's granting my spouse
the right to purchase the Stock as set forth in the Agreement, the undersigned
hereby agrees to be irrevocably bound by the Agreement and further agrees that
any community property interest shall be similarly bound by the Agreement. I
hereby appoint my spouse as my attorney-in-fact with respect to any amendment or
exercise of any rights under the Agreement.
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EXHIBIT 1
Promissory Note
Mountain View, California
_____________, 2000
$
-------------
FOR VALUE RECEIVED, _________________ ("Holder") promises to pay to
SkyStream Corporation, a California corporation (the "Company"), or order, the
principal sum of ______________ Dollars ($___________), together with interest
at the minimum rate allowable to avoid imputation of interest, compounded
annually, based on a 365-day year.
Principal and interest shall be due and payable upon the earlier of (i)
five years from the date of this Note, or (ii) 90 days after the termination of
Holder's employment with the Company. Payments of principal and interest shall
be made in lawful money of the United States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Exercise Notice and Restricted
Stock Purchase Agreement dated as of ________________, 2000. This Note is
secured in part by a pledge of the Company's Common Stock under the terms of
such Exercise Notice and Restricted Stock Purchase Agreement.
The Holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee or consultant
of the Company for any reason, this Note shall, at the option of the Company, be
accelerated, and the whole unpaid balance of principal and accrued interest on
this Note shall be due and payable 90 days after such cessation of employment or
consulting arrangement.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the Holder shall be paid by the
undersigned.
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<PAGE> 12
EXHIBIT 2
SECURITY AGREEMENT
This Security Agreement is made as of _____________, 2000 between
SkyStream Corporation, a California corporation ("Pledgee"), and _____________
("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase shares of Common Stock of
Pledgee under the Exercise Notice and Restricted Stock Purchase Agreement dated
_________, 2000 (the "Agreement"), and Pledgor's election under the terms of the
Agreement to pay for such shares with his promissory note (the "Note"), Pledgor
has purchased __________ shares of Pledgee's Common Stock (the "Shares") at a
price of $_______ per share, for a total purchase price of $______________. The
Note and the obligations thereunder are as set forth in Exhibit 1 to the
Agreement.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Agreement, Pledgor, pursuant to
the Commercial Code of the State of California, hereby pledges all of such
Shares (herein sometimes referred to as the "Collateral") represented by
certificate number ______, duly endorsed in blank or with executed stock powers,
and herewith delivers said certificate to the Secretary of Pledgee
("Pledgeholder"), who shall hold said certificate subject to the terms and
conditions of this Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Agreement, and
the Pledgeholder shall not encumber or dispose of such Shares except in
accordance with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
(b) Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
<PAGE> 13
(c) Margin Regulations. In the event that Pledgee's Common Stock is
now or later becomes margin-listed by the Federal Reserve Board and Pledgee is
classified as a "lender" within the meaning of the regulations under Part 207 of
Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to
cooperate with Pledgee in making any amendments to the Note or providing any
additional collateral as may be necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription options or other rights or options shall be issued in
connection with the pledged Shares, such rights, or options shall be the
property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
(a) Payment of principal or interest on the Note shall be delinquent
for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon
<PAGE> 14
payments of the principal of the Note. The number of the pledged Shares which
shall be released shall be that number of full Shares which bears the same
proportion to the initial number of Shares pledged hereunder as the payment of
principal bears to the initial full principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
-3-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" ---------------------------------------
Signature
Print Name
Address:
---------------------------------------
---------------------------------------
"PLEDGEE" SkyStream Corporation
a California corporation
By
------------------------------------
Title
----------------------------------
-4-
<PAGE> 16
EXHIBIT 3
ELECTION UNDER SECTION 83(B)
OF THE INTERNAL REVENUE CODE OF 1986
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986 to include in Purchaser's gross income for the
current taxable year, the amount of any compensation taxable to him in
connection with Purchaser's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME OF TAXPAYER: ________________________ SPOUSE: __________________
ADDRESS: ______________________________________________________________
IDENTIFICATION NO. OF TAXPAYER: _____________ SPOUSE: ________________
TAXABLE YEAR: 2000
2. The property with respect to which the election is made is described as
follows:
3. The date on which the property was transferred is:
4. The property is subject to the following restrictions:
The right of the Company to repurchase the shares, or a portion thereof,
upon termination of employment at a formula price. The right lapses upon
the occurrence of certain events related to the purpose of the transfer.
5. The value at the time of transfer, determined without regard to any
restriction other than a restriction which by its terms will never
lapse, of such property is:
6. The amount (if any) paid for such property:
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Dated: _______________ _________________________________
Taxpayer, _____________
The undersigned spouse of taxpayer joins in this election.
Dated: _______________ _________________________________
Spouse of Taxpayer
<PAGE> 17
EXHIBIT 4
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Exercise Notice and
Restricted Stock Purchase Agreement dated as of _______________, 2000 (the
"Agreement"), ____________ ("Purchaser") hereby sells, assigns and transfers
unto SkyStream Corporation _______________________________ (______) shares of
the Common Stock of SkyStream Corporation, a California corporation, standing in
the undersigned's name on the books of said corporation represented by
certificate No. ____________ herewith, and does hereby irrevocably constitute
and appoint _______ ________________ attorney to transfer the said stock on the
books of the said corporation with full power of substitution in the premises.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND THE EXHIBITS
THERETO.
Dated:____________________ PURCHASER
Signature _______________________________
INSTRUCTION: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE. The
purpose of this assignment is to enable the Corporation to exercise its
"Unvested Share Repurchase Option" set forth in the Agreement without requiring
additional signatures on the part of the Purchaser.
<PAGE> 18
EXHIBIT 5
JOINT ESCROW INSTRUCTIONS
____________, 2000
Secretary
SkyStream Corporation
555 Clyde Avenue, Suite B
Mountain View, CA 94043
Dear Sir:
As Escrow Agent for both SkyStream Corporation, a California corporation
("Corporation"), and the undersigned purchaser of stock of the Corporation
("Purchaser"), you are hereby authorized and directed to hold the documents
delivered to you pursuant to the terms of that certain Exercise Notice and
Restricted Stock Purchase Agreement ("Agreement") between the Corporation and
the undersigned, to which a copy of these Joint Escrow Instructions is attached
as Exhibit 5, in accordance with the following instructions:
1. In the event the Corporation and/or any assignee of the Corporation
(referred to collectively for convenience herein as the "Corporation") exercises
the option set forth in Section 3 of the Agreement, the Corporation shall give
to Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Corporation. Purchaser and the Corporation hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice in accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares of
stock being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price (by check) for the number of
shares of stock being purchased pursuant to the exercise of the Corporation's
Unvested Share Repurchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock (as that term is defined in the
Agreement) to be held by you hereunder pursuant to Section 10 of the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute all documents
necessary or appropriate to make such securities negotiable or other property
transferable, as the case may be, and to complete any transaction herein
contemplated. Subject to the provisions of this paragraph 3,
<PAGE> 19
Purchaser shall exercise all rights and privileges of a shareholder of the
Corporation while the stock is held by you.
4. None of the certificates representing the shares of stock deposited
under these escrow instructions shall be released to the Purchaser if such
shares of stock are subject to the Unvested Share Repurchase Option.
Notwithstanding the foregoing, none of the certificates representing
the Shares deposited under these escrow instructions shall be released to the
Purchaser if the Purchaser's Note given in payment for such shares has not been
paid in full. So long as the Note is outstanding, the shares shall be held by
you as collateral for the obligation under the Note. Subject to the provisions
of this paragraph 4, upon payment of the Note in full the certificates
representing the shares may be released and delivered to the Purchaser. In the
event Purchaser defaults in payment of the Note when due, you shall, upon
written request of the Company, deliver the certificate evidencing the shares
and the stock assignments to the Company to enable the Company to exercise its
rights as a secured party under the Commercial Code of the State of California.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and all be discharged of all further
obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law and of the arbitrator provided
for in Section 11 of the Agreement, and are hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court and of the
arbitrator provided for in Section 11 of the Agreement. In case you obey or
comply with any such order, judgment or decree, you shall not be liable to any
of the parties hereto or to any other person, firm or corporation by reason of
such compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
<PAGE> 20
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be Secretary of the Corporation or if you shall resign by
written notice to each party. In the event of any such termination, the
Corporation shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of the
arbitrator provided for in Section 11 of the Agreement or of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
CORPORATION: SkyStream Corporation
555 Clyde Avenue, Suite B
Mountain View, CA 94043
PURCHASER: _______________________
_______________________
ESCROW AGENT: Secretary
SkyStream Corporation
555 Clyde Avenue, Suite B
Mountain View, CA 94043
-3-
<PAGE> 21
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
Very truly yours,
SKYSTREAM CORPORATION,
a California corporation
By:
------------------------------
PURCHASER:
---------------------------------
ESCROW AGENT:
- ------------------------------
Secretary
-4-
<PAGE> 22
EXHIBIT A
INVESTMENT REPRESENTATION STATEMENT
PURCHASER :
SELLER : SKYSTREAM CORPORATION
COMPANY : SKYSTREAM CORPORATION
SECURITY : COMMON STOCK
AMOUNT: __________ shares
DATE: __________, 2000
In connection with the purchase of the above-listed Securities, I, the
Purchaser, represent to the Seller and to the Company the following:
1. I am aware of the Company's business affairs and financial condition,
and have acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Securities. I am purchasing these
Securities for my own account for investment purposes only and not with a view
to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933 ("Securities Act").
2. I understand that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed herein. In this connection, I understand that, in the view of the
Securities and Exchange Commission ("SEC"), the statutory basis for such
exemption may be unavailable if my representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
3. I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
4. I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of issuance of the Securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including, among other things: (1) the sale being made
through a broker in an unsolicited "broker's transaction" or in transactions
directly
<PAGE> 23
with a market maker (as said term is defined under the Securities Exchange Act
of 1934); and, in the case of an affiliate, (2) the availability of certain
public information about the Company and the amount of securities being sold
during any three month period not exceeding the limitations specified in Rule
144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and
agree to the restrictions set forth in paragraph (c) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about the
Company, (2) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (3) the sale being made through
a broker in an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934) and the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
5. I AGREE, TO THE EXTENT REQUESTED BY THE CORPORATION OR THE
UNDERWRITERS MANAGING ANY UNDERWRITTEN PUBLIC OFFERING OF COMMON STOCK (OR OTHER
SECURITIES) OF THE CORPORATION, NOT TO OFFER, SELL, CONTRACT TO SELL, MAKE ANY
SHORT SALE OF, LOAN OR GRANT ANY OPTION TO PURCHASE OR OTHERWISE DISPOSE OF ANY
OF THE STOCK DURING A PERIOD NOT TO EXCEED ONE HUNDRED EIGHTY (180) DAYS
FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT, OR SUCH LONGER PERIOD
AS MAY BE AGREED TO BY THE HOLDERS OF A MAJORITY OF THE OUTSTANDING REGISTRABLE
SECURITIES (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT BETWEEN THE
CORPORATION AND THE HOLDERS OF SERIES A PREFERRED STOCK DATED FEBRUARY 7, 1997)
OF THE CORPORATION FILED UNDER THE SECURITIES ACT; PROVIDED, HOWEVER, THAT SUCH
AGREEMENT SHALL BE APPLICABLE ONLY TO THE FIRST TWO (2) SUCH REGISTRATION
STATEMENTS OF THE CORPORATION WHICH COVER SHARES (OR OTHER SECURITIES) TO BE
SOLD ON BEHALF OF THE CORPORATION TO THE PUBLIC IN AN UNDERWRITTEN PUBLIC
OFFERING.
6. I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that
persons proposing to sell private placement securities other than in a
registered offering and otherwise than pursuant to Rule 144 will have a
substantial burden of proof in establishing that an exemption from registration
is available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own risk.
Signature of Purchaser:
--------------------------------
Date: , 2000
----------------
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<PAGE> 1
EXHIBIT 10.3
SKYSTREAM NETWORKS INC
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock
Purchase Plan of SkyStream Networks Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or
any committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean SkyStream Networks Inc. and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all compensation reportable on Form
W-2, including without limitation base straight time gross earnings, sales
commissions, payments for overtime, shift premiums, incentive compensation,
incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each
Purchase Period.
<PAGE> 2
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final prospectus included within the
registration statement in Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock (the
"Registration Statement").
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before April 30,
2002. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the next Exercise
Date, except that the first Purchase Period of any Offering Period shall
commence on the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
-2-
<PAGE> 3
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)) who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 30, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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<PAGE> 4
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period, including allowing such
changes only at the beginning of each Purchase Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock (subject to any adjustment pursuant to
Section 19) on the Enrollment Date, and provided further that such purchase
shall be
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<PAGE> 5
subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board
may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of the Company's Common Stock an
Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any
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<PAGE> 6
time by giving written notice to the Company in the form of Exhibit B to this
Plan. All of the participant's payroll deductions credited to his or her account
shall be paid to such participant promptly after receipt of notice of withdrawal
and such participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares shall
be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in succeeding Offering Periods
which commence after the termination of the Offering Period from which the
participant withdraws.
11. Termination of Employment.
Upon a participant's ceasing to be an Employee, for any reason, he
or she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 500,000 shares (after giving effect to the three-for-two stock split
approved by the stockholders of the Company on February 29, 2000) together with
an annual increase to the number of shares reserved for issuance thereunder on
the first day of the Company's fiscal year beginning in January 1, 2001, equal
to the lesser of (i) 1,500,000 shares, (ii) 3% of the outstanding shares of the
Company on the last day of the prior fiscal year or (iii) such amount as
determined by the Board.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the participant
and his or her spouse.
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<PAGE> 7
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
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<PAGE> 8
19. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 19 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board
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<PAGE> 9
of Directors on any Exercise Date if the Board determines that the termination
of the Offering Period or the Plan is in the best interests of the Company and
its shareholders. Except as provided in Section 19 and this Section 20 hereof,
no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation
of the Plan may result in unfavorable financial accounting consequences, the
Board may, in its discretion and, to the extent necessary or desirable, modify
or amend the Plan to reduce or eliminate such accounting consequence including,
but not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
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<PAGE> 10
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company; provided, however, the Plan shall not become
effective until the effective date of the Company's initial public offering
pursuant to a registration statement filed with the Securities and Exchange
Commission. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by any applicable laws, regulations, or stock exchange rules, if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
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<PAGE> 11
EXHIBIT A
SKYSTREAM NETWORKS INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the SkyStream
Networks Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") and subscribes to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday during the Offering Period in
accordance with the Employee Stock Purchase Plan. (Please note that the
percentage withholding must be between 1% and 15% and that no fractional
percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only): _________
__________________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
after the date of any disposition of my shares and I will make adequate
provision for Federal, state or other tax withholding obligations, if any,
which arise upon the
<PAGE> 12
disposition of the Common Stock. The Company may, but will not be
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
-----------------------------------------------------
(First) (Middle) (Last)
--------------------------- ---------------------------------------
Relationship
---------------------------------------
(Address)
Employee's Social
Security Number:
---------------------------------------
Employee's Address:
---------------------------------------
---------------------------------------
---------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
------------------------- ---------------------------------------
Signature of Employee
---------------------------------------
Spouse's Signature (If beneficiary
other than spouse)
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<PAGE> 13
EXHIBIT B
SKYSTREAM NETWORKS INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the SkyStream
Networks Inc. Employee Stock Purchase Plan which began on ____________, ______
(the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
--------------------------------------
--------------------------------------
--------------------------------------
Signature:
--------------------------------------
Date:
---------------------------------
<PAGE> 1
EXHIBIT 10.4
SKYSTREAM NETWORKS INC.
2000 DIRECTOR STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 2000 Director Stock
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the common stock of the Company.
(d) "Company" shall mean SkyStream Networks Inc.
(e) "Director" shall mean a member of the Board.
(f) "Disability" shall mean total and permanent disability as
defined in section 22(e)(3) of the Code.
(g) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for the last market
<PAGE> 2
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(j) "Inside Director" shall mean a Director who is an Employee.
(k) "Option" shall mean a stock option granted pursuant to the
Plan.
(l) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(m) "Optionee" shall mean a Director who holds an Option.
(n) "Outside Director" shall mean a Director who is not an
Employee.
(o) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 2000 Director Stock Option Plan.
(q) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 400,000 Shares (after giving effect to the three-for-two
stock split approved by the stockholders of the Company on February 29, 2000)
(the "Pool") (the Shares may be authorized, but unissued, or reacquired Common
Stock), together with an annual increase to the number of Shares reserved
thereunder on the first day of the Company's fiscal year, beginning with January
1, 2001, equal to the lesser of (i) 100,000 Shares, (ii) 0.25% of the
outstanding Shares of Common Stock on the last day of each prior fiscal year or
(iii) such amount as determined by the Board.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
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<PAGE> 3
(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or to determine the number of Shares
to be covered by Options.
(ii) Each Outside Director shall be automatically granted an
Option to purchase Shares (the "First Option") on the date on which the later of
the following events occurs: (A) the effective date of this Plan, as determined
in accordance with Section 6 hereof; or (B) the date on which such person first
becomes an Outside Director, whether through election by the shareholders of the
Company or appointment by the Board to fill a vacancy; provided, however, that
an Inside Director who ceases to be an Inside Director but who remains a
Director shall not receive a First Option. The First Option for an Outside
Director who has not previously received a stock option grant from the Company
shall be for 30,000 Shares; provided, however, it shall be increased by 2,000
Shares for service as Chairman of the Board of Directors, 2,000 Shares for
service on the Board's Audit Committee and 2,000 Shares for service on the
Board's Compensation Committee. The First Option, if any, for an Outside
Director who has previously received a stock option grant from the Company shall
consist only of 2,000 Shares for service as Chairman of the Board of Directors,
2,000 Shares for service on the Board's Audit Committee and 2,000 Shares for
service on the Board's Compensation Committee.
(iii) Each Outside Director shall subsequently be
automatically granted an Option to purchase Shares (a "Subsequent Option") on
the date of the next meeting of the Board following the Annual Meeting of
Shareholders in each year commencing with the 2001 Annual Meeting of
Shareholders provided he or she is then an Outside Director and if as of such
date, he or she shall have served on the Board for at least the preceding six
(6) months. The Subsequent Option Shall be for 10,000 Shares; provided, however,
it shall be increased by 2,000 Shares for service as Chairman of the Board of
Directors, 2,000 Shares for service on the Board's Audit Committee and 2,000
Shares for service on the Board's Compensation Committee.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 16 hereof.
(v) The terms of a First Option granted hereunder shall be
as follows:
(A) the term of the First Option shall be ten (10)
years.
(B) the First Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the First Option provided,
however, that in the case of a First Option granted on the effective date of the
Company's initial public offering pursuant to a registration statement filed
with the Securities and Exchange Commission, the exercise price per share shall
be the initial public offering price per share.
-3-
<PAGE> 4
(D) subject to Section 10 hereof, the First Option
shall become exercisable as to 1/4 of the Shares subject to the First Option on
the anniversary of the date of grant, and as to 1/48 of the First Option at the
end of each month thereafter, so that the First Option shall be fully
exercisable four years after its date of grant, provided that the Optionee
continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall
be as follows:
(A) the term of the Subsequent Option shall be ten
(10) years.
(B) the Subsequent Option shall be exercisable only
while the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the date of grant of the Subsequent Option.
(D) subject to Section 10 hereof, the Subsequent
Option shall become exercisable cumulatively with respect to 1/48th of the
Subsequent Option at the end of each month after the date of grant, so that the
Subsequent Option shall be fully exercisable four years after its date of grant,
provided that the Optionee continues to serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the number
of Shares previously purchased under Options to exceed the Pool, then the
remaining Shares available for Option grant shall be granted under Options to
the Outside Directors on a pro rata basis. No further grants shall be made until
such time, if any, as additional Shares become available for grant under the
Plan through action of the Board or the shareholders to increase the number of
Shares which may be issued under the Plan or through cancellation or expiration
of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan; provided, however, the Plan
shall not become effective until the effective date of the Company's initial
public offering pursuant to a registration statement filed with the Securities
and Exchange Commission. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 11 of the Plan.
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<PAGE> 5
7. Form of Consideration. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within three (3) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of such termination, and to the extent that the
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
-5-
<PAGE> 6
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options may be
substituted by the successor corporation or a Parent or
-6-
<PAGE> 7
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee serves
as a Director or a director of the Successor Corporation. Following such
assumption or substitution, if the Optionee's status as a Director or director
of the Successor Corporation, as applicable, is terminated other than upon a
voluntary resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof.
-7-
<PAGE> 8
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
-8-
<PAGE> 1
EXHIBIT 10.4.1
SKYSTREAM NETWORKS INC.
DIRECTOR OPTION AGREEMENT
SkyStream Networks Inc., (the "Company"), has granted to _________________
(the "Optionee"), an option to purchase a total of [__________ (____)] shares of
the Company's Common Stock (the "Optioned Stock"), at the price determined as
provided herein, and in all respects subject to the terms, definitions and
provisions of the Company's 2000 Director Option Plan (the "Plan") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is
not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
(a) This Option shall become exercisable in installments
cumulatively with respect to ____________ of the Optioned Stock
___________________ the date of grant, and as to an additional 1/48 of the
Optioned Stock each month thereafter, so that one hundred percent (100%) of the
Optioned Stock shall be exercisable four years after the date of grant;
provided, however, that in no event shall any Option be exercisable prior to the
date the stockholders of the Company approve the Plan.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
<PAGE> 2
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the
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<PAGE> 3
date of exercise of the Option, to the extent not included in income as
described above, will be treated as capital gain or loss.
DATE OF GRANT:
--------------
SkyStream Networks Inc.,
a Delaware corporation
By:
----------------------------------
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated:
---------------------
-------------------------------------
Optionee
-3-
<PAGE> 4
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
SkyStream Networks Inc.
_______________
_______________
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of SkyStream Networks Inc. (the "Company") under and pursuant to the
Company's 2000 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the
Shares must be held indefinitely unless they are registered under the Securities
Act of 1933, as amended (the "1933 Act"), or unless an exemption from such
registration is available, and that the certificate(s) representing the Shares
may bear a legend to that effect. Optionee understands that the Company is under
no obligation to register the Shares and that an exemption may not be available
or may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the
<PAGE> 5
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: SkyStream Networks Inc.
By: By:
-------------------------------- --------------------------------
Its:
-------------------------------
Address:
Dated: Dated:
----------------------------- -----------------------------
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<PAGE> 1
EXHIBIT 10.5
[SKYSTREAM CORPORATION LETTERHEAD]
June 12, 1997
Mr. James D. Olson
9 Ashdown Place
Half Moon Bay, CA 94019
Dear Jim:
On behalf of the Board of Directors of SkyStream Corp. (the "Company"), I am
pleased to offer you the position of President, Chief Executive Officer and
Member of the Board of Directors, commencing on or before July 10, 1997. Your
base salary will be $14,583.33 per month ($175,000.00 on an annualized basis),
which will be paid in accordance with the Company's normal payroll procedures.
You will also receive an annual bonus based on meeting objectives defined by
you and agreed upon by the Company's Board of Directors. Your targeted bonus
for meeting these objectives will be $100,000.00. We expect that your
objectives will include, but will not be limited to, revenue and profit
targets. Your base salary and bonus will be reviewed annually by the Board of
Directors or compensation committee. As an employee of the Company you will be
eligible to participate in benefits generally provided by the Company to its
employees.
At its next meeting, the Company's Board of Directors will grant you the right
to purchase 1,092,500 shares of Common Stock at the fair market value ($0.10
per share) for such shares pursuant to the Company's Stock Option Plan,
including the standard vesting provision thereunder. At your option, you may
select to exercise your stock options subject to a company Repurchase Right
(the "Repurchase Right"), that would lapse on the same schedule that the stock
options would normally vest. If you elect to exercise your options subject to
the Repurchase Right the purchase price of the Common Stock may be financed
with a full recourse promissory note (the "Note") payable to the Company. The
Note shall bear interest at the minimum rate allowable to avoid imputation of
interest (currently 6.8 percent) compounded annually. Interest shall be
forgiven annually as long as you remain employed by the Company, with the
amount of such forgiveness grossed up for federal and state income tax
purposes. The Note shall be due and payable upon the earlier of (i) five years
from the date of the Note, or (ii) 90 days after the termination of your
employment with the Company. In addition, the proceeds from any sale by you of
any shares of Common Stock of the Company shall be applied to repay the Note.
<PAGE> 2
MR. JAMES D. OLSON JUNE 12, 1997
Your employment with the Company is "at will" and may be terminated by you or by
the Company at any time, with or without cause (as defined below). If, however,
the Company decides to terminate your employment for reasons other than cause,
the Company shall pay you all compensation (including base salary and bonus) due
to you at the date of termination and continue to pay you in equal installments,
an amount equal to the sum of your then current base salary for a period of six
(6) months from the date of termination. During such period, you shall continue
to vest your stock options and be entitled to participate in the Company's
employee health, medical, and other benefits on the same basis as if you were an
employee. If in the first year of your employment, the Company is acquired or
sold, and, as a result of such acquisition you are involuntarily or
constructively terminated without cause, you will nonetheless vest an aggregate
of 25 percent of your stock options, or, in the case of a Repurchase Right, an
aggregate of 25 percent of the Company's Repurchase Right will lapse.
In the event your employment is terminated for cause, you will be entitled to
any unpaid salary and bonus (if any) due to you pursuant to this agreement
through the date of termination and you will be entitled to no other
compensation from the Company. "Cause" shall mean (i) willful and repeated
failure to comply with the lawful written directions of the Company's Board of
Directors, (ii) gross negligence or willful misconduct in the performance of
duties for the Company, (iii) commission of any act of fraud, or (iv) conviction
of a felony involving morale turpitude causing material harm to the reputation
of the Company, in each case as determined in good faith by the Company's Board
of Directors.
For the purpose of compliance with federal immigration law, you will be required
to provide to the Company documentary evidence of your identity and eligibility
for employment in the United States. This documentation must be provided to the
Company within three business days of your hire date or your employment
relationship may be terminated. In addition, as a condition of your employment,
you will be required to sign our standard Proprietary Information Agreement.
To indicate your acceptance of the Company's offer, please sign and date this
letter below and return it to me; a duplicate original is enclosed for your
records. This letter and the Proprietary Information Agreement set forth the
terms of your employment with the Company and supersede any prior representation
or agreement, whether written or oral. This letter may not be modified or
amended except by a written agreement signed by a representative of the Company
and by you.
Jim, we are all very excited about your joining SkyStream Corp. We believe that
with your background and accomplishments you are the right person to lead our
team to high levels of success. The video networking and distribution market
<PAGE> 3
MR. JAMES D. OLSON JUNE 12, 1997
will explode in the coming decade and we look forward to exploiting that
opportunity with you at SkyStream.
Very truly yours,
SKYSTREAM CORP.
/s/ GEOFFREY Y. YANG
- -----------------------------
Geoffrey Y. Yang
For the Board of Directors
Accepted and agreed to by:
/s/ JAMES D. OLSON
-----------------------------
Mr. James D. Olson
June 13, 1997
-----------------------------
Date
ajr
Enclosure: Duplicate Original Letter
<PAGE> 1
EXHIBIT 10.6
[SKYSTREAM CORPORATION LETTERHEAD]
Monday, September 8, 1997
Susan Ketcham
735 Nevada Avenue
San Mateo, CA 94402
(650) 343-0489
Dear Susan:
I am pleased to offer you the position of Director of Finance, reporting to
myself, Jim Olson, President and Chief Executive Officer at SkyStream
Corporation. In this position, you will be responsible for all aspects of
SkyStream's accounting and finance activities. You will also be responsible for
all aspects of our Human Resources function. As Director of Finance you will
receive a starting base salary of ninety thousand dollars ($90,000) per year.
You will also receive an annual bonus based on meeting mutually agreed
objectives. Your targeted bonus for meeting these objectives will be $20,000.
Your salary shall be paid twice per month and is subject to withholding for
federal, state and other applicable taxes.
Further, we will recommend to SkyStream's Board of Directors that you be
granted incentive stock options to purchase, 55,000 shares of SkyStream common
stock which will vest over a four year vesting schedule from the date of your
employment. Vesting will be annual for the first year and monthly the following
three years.
As an employee of SkyStream, you and your dependents will be entitled to
SkyStream medical, dental, life/AD&D, and 401k benefits as made available to
all SkyStream employees. Information on the details of our plans will be
delivered to you separately.
When you report to work, you will be expected to execute our standard company
agreement relative to patents, inventions and confidential information.
This is an offer for "at will" employment, and does not constitute an offer or
guarantee of employment for any period of time. Your employment and
compensation can be terminated at any time for any reason or for no reason,
subject to the terms hereof and your rights to compensation hereunder. If in
the first year of your employment, the company is acquired or sold, and, as a
result of such acquisition you are involuntarily or constructively terminated
without cause, you will nonetheless vest an aggregate of 25% of your stock
options. This letter constitutes the full and entire understanding and
agreement between the parties with respect to the subject of employment, and
supersedes any prior discussions.
This offer is effective through September 12, 1997. It will expire if not
accepted in writing by that date. I anticipate your start date to be October 1,
1997, or earlier. I look forward to your acceptance. Please sign and return one
of these letters upon acceptance and retain the other for your records.
Susan, we are all very excited about you joining SkyStream. We believe that
your background and accomplishments are ideal for what we need. I am confident
that you are the right person to lead our finance function and become a
valuable member of my executive team. The video networking and distribution
market is poised to explode and we excitedly look forward to exploiting that
opportunity with you at SkyStream.
Sincerely,
James D. Olson
Chief Executive Officer
ACCEPTED: /s/ SUSAN KETCHAM DATED: 9/8/97
--------------------------------- ----------------------------
<PAGE> 1
EXHIBIT 10.7
[SKYSTREAM CORPORATION LETTERHEAD]
Friday, January 30, 1998
Chandy Nilakantan
11746 Ridge Creek Court
Cupertino, CA 95014
(408) 253-6011
Dear Chandy:
I am pleased to offer you the position of Vice President of Engineering at
SkyStream Corporation. You will report to myself, Jim Olson, President and Chief
Executive Officer. In this position, you will be responsible for all aspects of
SkyStream's engineering activities. These include R & D engineering, technical
support, and quality assurance. As Vice President of engineering you will
receive a starting base salary of one hundred sixty five thousand dollars
($165,000) per year. You will receive an annual bonus payment of $30,000 for
meeting mutually agreed objectives. You and I will set these objectives within
the first 60 days of your employment at SkyStream. Your salary shall be paid
twice per month and is subject to withholding for federal, state and other
applicable taxes.
Further, we will recommend to SkyStream's Board of Directors that you be granted
incentive stock options to purchase 285,000 shares of SkyStream common stock
which will vest over a four year vesting schedule from the date of your
employment. Vesting will be annual vesting for the first year and monthly
vesting the following three years. At your option, you may elect to exercise
your stock options subject to a company Repurchase Right (the "Repurchase
Right"), that would lapse on the same schedule that the stock options would
normally vest.
As an employee of SkyStream, you and your dependents will be entitled to
SkyStream medical, dental, vision, EAP, 401(k), LTD and Life Insurance benefits
as made available to all SkyStream employees. Information on the details of our
plans will be delivered to you separately.
When you report to work, you will be expected to execute our standard company
agreement relative to patents, inventions and confidential information.
This is an offer for "at will" employment, and does not constitute an offer or
guarantee of employment for any period of time. Your employment and compensation
can be terminated at any time for any reason or for no reason, subject to the
terms hereof and your rights to compensation hereunder. This letter constitutes
the full and entire understanding and agreement between the parties with respect
to the subject of employment, and supersedes any prior discussions.
This offer is effective through Monday, February 2, 1998. It will expire if not
accepted in writing by that date. I anticipate your start date to be Monday,
February 23, 1998, or earlier. I look forward to your acceptance. Please sign
and return one of these letters upon acceptance, and retain the other letter
for your records.
Chandy, we are all excited about you joining SkyStream. We believe that your
background and accomplishments are ideal for what we need. I am confident that
you are the right person to lead our engineering function and become a valuable
member of my executive team. The video networking and distribution market is
poised to explode and we excitedly look forward to exploiting that opportunity
with you at SkyStream.
Sincerely,
/s/ JAMES D. OLSON
James D. Olson
- ----------------------
President and Chief Executive Officer
ACCEPTED: /s/ CHANDY NILAKANTAN DATED: Feb 2, 1998
------------------------------ -------------------------------
<PAGE> 1
EXHIBIT 10.8
[SKYSTREAM CORPORATION LETTERHEAD]
Friday, April 17, 1998
Clint Chao
590 Hermosa Way
Menlo Park, CA 94025
(650) 328-6535
Dear Clint:
I am pleased to offer you the position of Vice President of Marketing at
SkyStream Corporation. You will report to myself, Jim Olson, President and Chief
Executive Officer. In this position, you will be responsible for all aspects of
SkyStream's marketing activities. As Vice President of marketing you will
receive a starting base salary of one hundred sixty thousand dollars ($160,000)
per year. You will receive an annual bonus payment of $20,000 for meeting
mutually agreed objectives. You and I will set these objectives within the first
60 days of your employment at SkyStream. Your salary shall be paid twice per
month and is subject to withholding for federal, state and other applicable
taxes.
Further, we will recommend to SkyStream's Board of Directors that you be granted
incentive stock options to purchase 250,000 shares of SkyStream common stock
which will vest over a four year vesting schedule from the date of your
employment. Vesting will be annual vesting for the first year and monthly
vesting the following three years. At your option, you may elect to exercise
your stock options subject to a company Repurchase Right (the "Repurchase
Right"), that would lapse on the same schedule that the stock options would
normally vest.
As an employee of SkyStream, you and your dependents will be entitled to
SkyStream medical, dental, vision, EAP, 401(k), LTD and Life Insurance benefits
as made available to all SkyStream employees. Information on the details of our
plans will be delivered to you separately.
When you report to work, you will be expected to execute our standard company
agreement relative to patents, inventions and confidential information.
This is an offer for "at will" employment, and does not constitute an offer or
guarantee of employment for any period of time. Your employment and compensation
can be terminated at any time for any reason or for no reason, subject to the
terms hereof and your rights to compensation hereunder. This letter constitutes
the full and entire understanding and agreement between the parties with respect
to the subject of employment, and supersedes any prior discussions.
This offer is effective through Tuesday, April 21, 1998. It will expire if not
accepted in writing by that date. I anticipate your start date to be Monday, May
4, 1998, or earlier. I look forward to your acceptance. Please sign and return
one of these letters upon acceptance, and retain the other letter for your
records.
Clint, we are all excited about you joining SkyStream. We believe that your
background and accomplishments are ideal for what we need. I am confident that
you are the right person to lead our marketing function and become a valuable
member of my executive team. The video networking and distribution market is
poised to explode and we excitedly look forward to exploring that opportunity
with you at SkyStream.
Sincerely,
/s/ JAMES D. OLSON
James D. Olson
- ----------------------------
President and Chief Executive Officer
ACCEPTED: /s/ CLINT CHAO DATED: 4/20/98
------------------------------ -------------------------------
<PAGE> 1
EXHIBIT 10.9
[SKYSTREAM LETTERHEAD]
November 1, 1998
Dan Riordan
2556 Wilde Ave.
Pleasanton, CA 94588
(925) 462-1647
Dear Dan:
I am pleased to offer you the position of Vice President of Worldwide Sales at
SkyStream Corporation. You will report to myself, Jim Olson, President and Chief
Executive Officer. In this position, you will be responsible for all aspects of
SkyStream's direct and indirect channel sales activities around the world. You
will receive a starting base salary of one hundred fifty thousand dollars
($150,000) per year. In addition, you will receive up to $110,000 of incentive
compensation per year provided that SkyStream meets its targeted revenue
objectives beginning in the second quarter of 1999. In the event SkyStream
exceeds its targeted revenue objectives beginning in the second quarter of 1999,
you will receive additional incentive compensation. The formula to determine the
additional incentive compensation will be determined jointly by you and me no
later than December 16, 1998. For the fourth quarter of 1998, and through the
first quarter of 1999, you will receive a non-recoverable draw to cover your
incentive compensation independent of SkyStream's revenue performance during
that period. Assuming your start date is December 1, 1998, your incentive
compensation will be $110,000/4=$27,500 for 1998, and your incentive
compensation will be $110,000/4=$27,500 for the first quarter of 1999. Half of
your incentive compensation will be paid to you when revenue is recognized and
half when customer payment has been received. Your base salary will be paid
twice per month and is subject to withholding for federal, state, and other
applicable taxes, as is your incentive compensation.
Further, I will recommend to SkyStream's Board of Directors that you be granted
incentive stock options to purchase 210,000 shares of SkyStream common stock
which will vest over a four year vesting schedule from the date of your
employment. Vesting will be annual vesting for the first year and monthly
vesting the following three years. At your option, you may elect to exercise
your stock options subject to a company Repurchase right that would lapse on the
same schedule that the stock options would normally vest.
As an employee of SkyStream, you and your dependents will be entitled to
SkyStream medical, dental, vision, EAP, 401(k), LTD and Life/AD&D
insurance, and Section 125 benefits as made available to all SkyStream
employees. Information on the details of our plans will be delivered to you
separately.
When you report to work, you will be expected to execute our standard company
agreement relative to patents, inventions, and confidential information.
This is an offer for "at will" employment, and does not constitute an offer or
guarantee of employment for any period of time. Your employment and compensation
can be terminated at any time for any reason or for no reason, subject to the
terms hereof and your rights to compensation hereunder. This letter constitutes
the full and entire understanding and agreement between the parties with respect
to the subject of employment, and supersedes any prior discussions.
<PAGE> 2
This offer is effective through Friday, November 6, 1998. It will expire if not
accepted in writing by that date. I anticipate your start date to be Tuesday,
December 1, 1998 or earlier. I look forward to your acceptance. This e-mail
offer letter will be replaced by a hard copy offer letter on Friday, November 6,
1998. Please sign and return the hard copy upon acceptance.
Dan, we are all excited about you joining SkyStream. We believe that your
background and accomplishments are ideal for what we need. I am confident that
you are the right person to lead our sales function and become a valuable
member of my executive team. The video networking and distribution market is
poised to explode and we excitedly look forward to exploring that opportunity
with you at SkyStream.
Sincerely,
/s/ JAMES D. OLSON
James D. Olson
President and Chief Executive Officer
SkyStream Corporation
ACCEPTED: /s/ DAN RIORDAN DATED: 11/6/98
------------------------------ -------------------------------
<PAGE> 1
EXHIBIT 10.10
October 17, 1999
David Olson
Dear David:
I am pleased to offer you the position of Vice President of Operations at
SkyStream Corporation. You will report to myself, Jim Olson, President and Chief
Executive Officer. In this position, you will be responsible for all aspects of
Information Systems, HR, Manufacturing, Customer Support, and Integration
Services activities. You will receive a starting base salary of one hundred
seventy five thousand dollars ($175,000) per year. Your base salary shall be
paid twice per month and is subject to withholding for federal, state and other
applicable taxes as is your incentive compensation.
Further, we will recommend to SkyStream's Board of Directors that you be granted
incentive stock options to purchase 175,000 shares of SkyStream common stock
which will vest over a four year vesting schedule from the date of your
employment. Vesting will be annual vesting for the first year and monthly
vesting the following three years. At your option, you may elect to exercise
your stock options subject to a company Repurchase right that would lapse on the
same schedule that the stock options would normally vest.
As an employee of SkyStream, you and your dependents will be entitled to
SkyStream medical, dental, vision, EAP, 401k, LTD, Life/AD&D insurance, and
Section 125 benefits as made available to all SkyStream employees. Information
on the details of our plans will be delivered to you separately.
When you report to work, you will be expected to execute our standard company
agreement relative to patents, inventions, and confidential information.
This is an offer for "at will" employment, and does not constitute an offer or
guarantee of employment for any period of time. Your employment and
compensation can be terminated at any time for any reason or for no reason,
subject to the terms hereof and your rights to compensation hereunder. This
letter constitutes the full and entire understanding and agreement between the
parties with respect to the subject of employment, and supersedes any prior
discussions.
This offer is effective through Wednesday, October 20, 1999. It will expire if
not accepted in writing by that date. I anticipate your start date to be Friday,
November 12, 1999. I look forward to your acceptance. This e-mail offer letter
will be replaced by a hard copy offer letter on Friday, October 29, 1999. Please
sign and return the hard copy upon acceptance.
David, we are all excited about you joining SkyStream. We believe that your
background and accomplishments are ideal for what we need. I am confident that
you are the right person to lead our Manufacturing, IS, Support, Integration,
and HR functions and become a valuable member of my executive team. The
broadcast networking market is poised to explode and we excitedly look forward
to exploiting that opportunity with you at SkyStream.
Sincerely,
James Olson
President and Chief Executive Officer
SkyStream Corporation
<PAGE> 2
Accepted /s/ DAVID OLSON Date 10-19-99
---------------------------- ------------------------------
<PAGE> 1
EXHIBIT 10.11
January 28, 2000
Roger E. George
2424 Villa Nueva Way
Mountain View, CA 94040
650 962-1656
Dear Roger:
I am pleased to offer you the position of Vice President of Legal Affairs and
General Counsel at SkyStream Networks. You will report to myself, Jim Olson,
President and Chief Executive Officer. In this position, you will be responsible
for all aspects of legal compliance, corporate development including M&A,
corporate governance, and general corporate law including contracts, real
estate, and employment law. You will receive a starting base salary of one
hundred thirty-five thousand dollars ($135,000) per year. In addition, you will
be eligible to receive up to 20% of your base salary in the form of bonus
payments based on company performance and on meeting annual objectives defined
by you and me. Your base salary will be paid twice per month and is subject to
withholding for federal, state, and other applicable taxes, as is your incentive
compensation.
Further, I will recommend to SkyStream's Board of Directors that you be granted
the right to purchase 100,000 shares of SkyStream common stock which will vest
over a four year vesting schedule from the start date of your employment.
Vesting will be annual vesting for the first year and monthly vesting the
following three years. At your option, you may elect to exercise your stock
options subject to a company Repurchase Right that would lapse on the same
schedule that the stock options would normally vest. If you elect to exercise
your options subject to the Repurchase Right the purchase price of the Common
Stock may be financed with a full recourse promissory note payable to the
Company. The Note shall bear interest at the minimum rate allowable to avoid
imputation of interest compounded annually. Interest shall be forgiven annually
as long as you remain employed by the Company. The Note shall be due and payable
upon the earlier of (i) five years from the date of the Note, or (ii) 90 days
after the termination of your employment with the Company. In addition, the
proceeds from any sale by you of any shares of Common Stock of the Company
shall be applied to repay the Note.
As an employee of SkyStream, you and your dependents will be entitled to
SkyStream medical, dental, vision, EAP, 401K, LTD,
<PAGE> 2
Life/AD&D Insurance, and Section 125 benefits as made available to all
SkyStream employees. Information on the details of our plans will be delivered
to you separately.
When you report to work, you will be expected to execute our standard company
agreement relative to patents, inventions, and confidential information.
This is an offer for "at will" employment, and does not constitute an offer or
guarantee of employment for any period of time. Your employment and compensation
can be terminated at any time for any reason or for no reason, subject to the
terms hereof and your rights to compensation hereunder. If in the first year of
your employment, the Company is acquired or sold, and, as a result of such
acquisition you are involuntarily or constructively terminated without cause,
you will nonetheless vest an aggregate of 50% of your stock options, or in the
case of a Repurchase Right, an aggregate of 50% of the Company's Repurchase
Right will lapse. This letter constitutes the full and entire understanding and
agreement between the parties with respect to the subject of employment, and
supersedes any prior discussions.
Roger, we are all excited about you joining SkyStream. We believe that your
background and accomplishments are ideal for what we need. I am confident that
you are the right person to lead SkyStream's legal function and become a
valuable member of my executive team. The Broadcast Internet market is now
exploding and we look forward to your participation in this extraordinary
opportunity.
Sincerely,
James Olson
President and Chief Executive Officer
SkyStream Networks
Accepted /s/ ROGER E. GEORGE
--------------------------------
Date 28 Jan. 2000
-----------------------------------
<PAGE> 1
EXHIBIT 10.12
SUBLEASE AGREEMENT
SUBLEASE AGREEMENT
1. PARTIES: The parties to this Sublease Agreement are ARCADIS GERAGHY &
MILLER, INC., (FORMERLY ACUREX ENVIRONMENTAL CORPORATION), A DELAWARE
CORPORATION, hereinafter called "Sublessor", and SKYSTREAM CORPORATION
hereinafter called "Sublessee".
2. PREMISES: The premises covered in by this Sublease Agreement are
portions of the building known as 555 Clyde Avenue, Mountain View,
located in Santa Clara County, California, comprising the following:
A. Approximately 21,531 rentable square feet on the first and
second floors of the building. The leased space is illustrated
on the attached Exhibit A and B.
B. Use of the second floor conference rooms designated on Exhibit
A. Sublessor at Sublessor's sole discretion can terminate this
privilege at any time during the Sublease by giving Sublessee
written notice.
C. Maintenance of heating, ventilating and air conditioning (HVAC)
equipment, plumbing, electrical power, roof, building exterior,
landscaping and parking lot provided by Sublessor.
3. TERM: The Sublease of the above premises by Sublessee shall commence on
January 1, 2000 and shall end on December 31, 2000.
4. RENT: Sublessee shall pay to Sublessor as rent for the Premises equal
monthly payments of $46,291.65, in advance, on the first (1st) day of
each month of the term hereof. Sublessee shall pay Sublessor upon the
execution hereof as rent for first month's rent of $46,291.65. Rent for
any period during the term hereof which is for less than one month shall
be a prorated portion of the monthly installment. Rent shall be payable
in lawful money of the United States to Sublessor at the address stated
herein or to such other persons or at such other places as Sublessor may
designate in writing.
5. UTILITIES: Utilities, including gas, electricity, water, sewer,
janitorial and garbage removal shall be provided to Sublessee by
Sublessor.
6. TAXES: Real Property taxes are the responsibility of the Sublessor.
7. INSURANCE: Sublessee at Sublessee's expense shall provide and keep in
force during the term of this Sublease Agreement a general liability
insurance policy with a recognized casualty insurance company qualified
to do business in California,
<PAGE> 2
protecting Sublessor, Master Lessor and Sublessee against any and all
liability occasioned by occurrence in amounts not less than $1,000,000.00
and satisfactory to Sublessor. Sublessee shall furnish a Certificate of
Insurance to Sublessor and Master Lessor naming Sublessor and Master Lessor
as Additional Insured. Sublessor agrees during the Sublease term to carry
fire and extended coverage insurance insuring Sublessee's interest in the
premises in such amounts and covering such perils as Sublessor shall
determine, but Sublessor shall have no obligation to insure against loss
by Sublessee to Sublessee's property of any kind in or about the premises
occurring from any cause whatsoever, and Sublessee shall have no interest
in the proceeds of any insurance carried by Sublessor. If Sublessor's
insurance rates for the premises are increased at any time during the term
of the Sublease as a result of the Sublessee's use and occupancy of the
premises, Sublessee agrees to reimburse Sublessor for the full amount of
such increase immediately upon receipt of demand from Sublessor.
8. USE: The Premises shall be used and occupied only for general office and
for no other purpose.
9. COMPLIANCE WITH LAW: A. Sublessor warrants to Sublessee that the Premises
in its existing state, but without regard to the use for which Sublessee
will use the Premises, does not violate any applicable building code
regulation or ordinance at the time that this Sublease is executed. In the
event that it is determined that this warranty has been violated, then it
shall be the obligation of the Sublessor, after written notice from
Sublessee, to promptly, at Sublessor's sole cost and expense, rectify any
such violation. In the event that Sublessee does not give to Sublessor
written notice of the violation of this warranty within one (1) year from
the commencement of the term of this Sublease, it shall be conclusively
deemed that such violation did not exist and the correction of the same
shall be the obligation of the Sublessee.
B. Except as provided in paragraph 9A, Sublessee shall, at Sublessee's
expense, comply promptly with all applicable statutes, ordinances, rules,
regulations, orders, restrictions of record, and requirements in effect
during the term or any part of the term hereof regulating the use by
Sublessee of the Premises. Sublessee shall not use or permit the use of the
Premises in any manner that will tend to create waste or a nuisance or, if
there shall be more than one tenant of the building containing Premises,
which shall tend to disturb such other tenants.
10. CONDITION OF PREMISES: Except as provided in paragraph 9A, Sublessee hereby
accepts the Premises in their condition existing as of the date of the
execution hereof, subject to all applicable zoning, municipal, county and
state laws, ordinances, and regulations governing and regulating the use of
the Premises, and accepts this Sublease subject thereto and to all matters
disclosed thereby and by any exhibits attached hereto. Sublessee
acknowledges that neither Sublessor nor Sublessor's agents have made any
representation or warranty as to the suitability of the Premises for the
conduct of Sublessee's business.
<PAGE> 3
11. COMPUTER EQUIPMENT/INSTALLATION: Any internal wiring installed other than
within Sublessee's space shall be installed by the Sublessor's contractors
or a contractor approved by the Sublessor.
12. MASTER LEASE: This sublease is subject to all the applicable terms and
conditions of the Master Lease, initially dated OCTOBER 23, 1976, with
Amendments, between Sublessor, and the Master Lessor: RICHARD N. MOSEMAN,
BONNIE MOSEMAN MILLER, and PROPERTIES INTERNATIONAL, ALLRENT, INC., A
CALIFORNIA CORPORATION. The Master Lease is hereby incorporated into this
Sublease Agreement, and Sublessee shall assume and perform the obligations
of the Lessee under this Master Lease to the extent that said terms and
conditions are applicable to the premises subleased pursuant to this
Sublease. Sublessee shall not permit or permit to be committed on the
premises any act or omission which shall violate any term or condition of
the Master Lease. In the event of termination of Sublessor's interest as
Lessee under the Master Lease for any reason, then this Sublease shall
terminate coincidentally therewith without any liability of Sublessor to
Sublessee.
13. ASSIGNMENT: Sublessee shall not assign this Sublease or any interest
therein nor sublet the premises or any part thereof or any right or
privilege appurtenant thereto nor permit the occupancy of use of any part
thereof by any person without the prior written consent of Sublessor. Any
such assignment or subletting without proper prior written consent shall be
void and, at the option of the Sublessor, may terminate this Sublease.
14. SIGNAGE: Sublessee shall not place any signs anywhere on the exterior of
the building or on the land within the property boundaries or inside the
building in or visible from the common areas without the prior written
consent of Sublessor.
15. DEFAULT: Sublessor may terminate this lease for default for violation of
any term or condition of the Master Lease or this Sublease.
16. HAZARDOUS MATERIALS: During the term of this Sublease, Sublessee shall
comply with all federal, state, and local laws, ordinances, and
regulations relating to the use, storage, sale, transportation or disposal
to, from, or on the premises of any Hazardous Materials. Upon execution of
this Sublease and on an ongoing basis, Sublessee shall provide Sublessor
with a list, no less frequently than quarterly, of Hazardous Materials that
Sublessee uses or maintains on the premises. Sublessee shall not be
responsible for any adverse environmental conditions relating to Hazardous
Materials that are not caused by Sublessee, its agents, employees,
contractors, or invitees.
Sublessee shall indemnify, defend (by counsel reasonably acceptable to
Master Lessor and Sublessor), protect and hold Master Lessor and Sublessor
and each of their employees, agents, successors, and assigns, free and
harmless from and against all claims, liabilities, penalties, forfeitures,
losses, or expenses (including attorneys'
<PAGE> 4
fees (arising from or caused by (a) the discharge by Sublessee in or from
the premises of any Hazardous Materials, or Sublessee's use, storage,
transportation, discharge, or generation of Hazardous Materials to, in, on,
under, about or from the premises, or (b) Sublessee's failure to comply
with any Hazardous Materials Law. In the event that Sublessee becomes
liable under this section the Sublessee's obligations hereunder shall
include, without limitation, all costs of any required repair, clean-up,
or decontamination of the premises, and the preparation and implementation
of any closure, remedial action, or other required procedures in
connection therewith. The foregoing indemnity shall survive the expiration
or the earlier termination of this Sublease.
"Hazardous Materials" shall mean any hazardous or toxic substances,
material, or wastes including, but not limited to, those substances,
materials, and wastes regulated now or in the future by any federal,
state, or local regulatory body.
17. NOTICE TO VACATE: Prior to the expiration of the Sublease, Sublessee must
give Sublessor not less than six (6) months notice in writing of its
intent to vacate the premises. If Sublessee does not give Sublessor notice
on or before July 1, 2000 of its intent to vacate, the sublease will not
terminate on December 31, 2000 but on the sixth (6) month anniversary of
the actual notice given. By example, if Sublessee gives written notice on
September 1, 2000, the Sublease will not expire until February 28, 2001.
Sublessee will be obligated to pay all rents and other charges due up to
and including the actual date of vacation of the premises.
18. KEYS: Sublessee shall be provided with two (2) keys to the front door of
the 555 Clyde building. Sublessee has the option to have locks installed
on the office door, but must bear the burden of this cost. All locksmith
work must be performed and coordinated through Sublessor's vendor.
Additional keys may be purchased for a fee of $5.00 each.
19. ENTIRE AGREEMENT: The foregoing constitutes the entire agreement between
the parties and may be modified only by a written amendment signed by both
parties.
20. ATTORNEY'S FEES: If any party or the Broker named herein brings an action
to enforce the terms hereof or to declare rights hereunder, the prevailing
party in any such action, on trial and appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the
Court the provision of this paragraph shall inure to the benefit of the
Broker named herein who seeks to enforce a right hereunder.
THE SUBLEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR HIS
APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE REAL ESTATE BROKER
OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS SUBLEASE OR THE TRANSACTION RELATING THERETO.
<PAGE> 5
Sublessor: Sublessee:
ARCADIS Geraghty & Miller, Inc. Skystream Corporation
/s/ [SIGNATURE ILLEGIBLE] /s/ SUSAN KETCHAM
- -------------------------- -------------------------
ARCADIS Geraghty & Miller, Inc. VP Finance
555 Clyde Avenue
Mountain View, CA 94043
Date: 12/31/99 Date: 12/29/99
------------- ------------
CONSENT TO SUBLEASE: Without releasing Lessee in the Master Lease from the
obligations hereunder, the undersigned hereby consents to the foregoing
Sublease Agreement between ARCADIS Geraghty & Miller, Inc., Lessee under the
Master Lease, and SkyStream Corporation, Sublessee, provided that this consent
shall no be construed as a consent to any further subletting.
Dated:
----------------- -----------------------
-----------------------
-----------------------
Richard N. Moseman, Bonnie
Moseman Miller and Properties
International, Allrent, Inc.,
Lessor under the Master Lease
<PAGE> 6
BUILDING 6 -- 555 CLYDE AVENUE
DOWNSTAIRS
EXHIBIT A
NOT TO SCALE
[FLOOR DIAGRAM OMITTED]
<PAGE> 7
BUILDING 6 -- 555 CLYDE AVENUE
UPSTAIRS
EXHIBIT B
NOT TO SCALE
[FLOOR DIAGRAM OMITTED]
<PAGE> 1
EXHIBIT 10.13
PARTIES This Lease, executed in duplicate at Mountain View, California, this
day of October 23, 1976, by and between RICHARD N. MOSEMAN, BONNIE
MOSEMAN MILLER, and PROPERTIES INTERNATIONAL, allrent, INC., a
California corporation, and ACUREX CORPORATION, a California
corporation, hereinafter called respectively Lessor and Lessee,
without regard to number or gender.
USE WITNESSETH: That Lessor hereby leases to Lessee, and Lessee hires
from Lessor, for the purpose of conducting therein machinery and
electronics manufacturing, research and development, related
administrative activities and executive offices, and for no other
purpose, those certain premises with the appurtenances, situated in
City of Mountain View, County of Santa Clara, State of California,
and more particularly described as follows, to-wit:
PREMISES That certain parcel of real property referred to as Assessor's
parcel #159-43-005, commonly known as 555 Clyde Avenue, consisting
of approximately 2.963 acres of land, more or less, more
particularly described in Exhibit "A" attached hereto and made a
part hereof, together with a two-story building to be constructed
thereon by Lessor consisting of approximately 51,200 square feet of
floor space, and related side improvements, hereinafter referred to
as "the premises."
TERM The term shall be for two hundred forty (240) calendar months
commencing on the 1st day of June, 1977, and ending on the 31st day
of May, 1997, at the rent hereafter provided, payable in lawful
money of the United States of America, which Lessee agrees to pay to
Lessor, without deduction or offset, at such place or places as may
be designated from time to time by Lessor, in installments as
follows:
RENTAL Initial rental of Fifteen Thousand Six Hundred Sixteen Dollars
($15,616) per month. Rent for the month of June 1977 in the amount
of Fifteen thousand Six Hundred Sixteen Dollars ($15,616) shall be
payable upon the execution of this lease. Thereafter, rent shall be
payable monthly, in advance, on the first day of each calendar month
of the lease term, commencing with the first day of July 1977 and
continuing on the first day of each calendar month thereafter during
the lease term, subject to adjustment in the rental as provided in
Paragraph 30 hereof.
Provided Lessee faithfully performs its obligations hereunder, and
is not then in default hereunder, Lessor hereby grants to Lessee the
option to extend the lease term for sixty (60) months upon the
expiration of the initial lease term. The option to extend shall be
exercised by Lessee giving written notice of exercise to Lessor not
less than one hundred eighty (180) days prior to the expiration of
the initial lease term. Such extended term shall be upon all of the
terms and provisions of this Lease, except for the rental which
shall be determined by negotiations of the parties. In the event
that the parties are unable to agree upon the rental within ninety
(90) days after the exercise of the option by Lessee, then such
option shall be null and void and of no force of effect, and the
lease term shall expire and terminate upon the expiration of the
initial lease term, if not sooner terminated pursuant to the
provisions hereof.
SECURITY The Lessee has deposited with the Lessor $15,000 as security for the
DEPOSIT full and faithful performance of each and every term, provision,
covenant, and condition of this lease. In the event the Lessee
defaults on any of the terms, provisions, covenants or conditions of
this lease, including, but not limited to the payment of rent, the
Lessor may use, apply or retain the whole or any part of such
security for the payment of any rent in default or for any other sum
which the lessor may spend or be required to spend by reason of the
Lessee's default. Should the Lessee faithfully and fully comply with
all of the terms, provisions, covenants and conditions of this
lease, the security, or any balance thereof, shall be returned to
the Lessee, or at the option of the Lessor, to the last assignee of
the Lessee's interest in this lease at the expiration of the term
hereof, at the termination of any extension of the term or at the
termination of the Lessee's occupancy of the premises, whichever is
later.
CONSTRUC-
TION OF
IMPROVE-
MENTS;
POSSESSION
<PAGE> 2
ACCEPTANCE 2. By entry hereunder, upon commencement of the lease term Lessee
OF accepts the premises as being in good sanitary order, condition and
PREMISES repair, and accepts the building and other improvements in their
AND condition. The Lessee agrees on the last day of the term hereof, or
COVENANT TO on sooner termination of this lease, to surrender the premises,
SURRENDER together with all alterations, additions, and improvements which may
have been made in, to, or on the premises by Lessor or Lessee, unto
Lessor in good and sanitary order, condition and repair, excepting
for such wear and tear as would be normal for the period of the
Lessee's occupancy. The Lessee, on or before the end of the term or
sooner termination of this Lease, shall remove all his or its
personal property and trade fixtures from the premises and all
property not so removed shall be deemed to be abandoned by the
Lessee. If the premises be not surrendered at the end of the term or
sooner termination of this lease, the Lessee shall indemnify the
Lessor against loss or liability resulting from delay by the Lessee
in so surrendering the premises including, without limitation, any
claims made by any succeeding tenant founded on such delay. See
Amendment 2.
USES 3. Lessee shall not commit, or suffer to be committed, any waste
PROHIBITED upon the said premises, or any nuisance, or other act or thing which
may disturb the quiet enjoyment of any other tenant in or around the
buildings in which the demised premises may be located, or allow any
sale by auction upon the premises, or allow the premises to be used
for any improper, immoral, unlawful or objectionable purpose, or
place any loads upon the floor, walls, or ceiling which endanger the
structure, or place any harmful liquids in the drainage system of
the building. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the leased premises outside of
the building proper. No materials, supplies, equipment, finished
products or semi-finished products, raw materials or articles of any
nature shall be stored upon or permitted to remain on any portion of
the leased premises outside of the buildings proper.
ALTERATIONS 4. The Lessee shall not make, or suffer to be made, any
AND alterations or additions to the said premises, or any part thereof,
ADDITIONS without the written consent of the Lessor first had and obtained by
the Lessee; any addition or alteration to the said premises, except
movable furniture and trade fixtures, shall become at once a part of
the realty and belong to the Lessor. Alterations and additions which
are not to be deemed as trade fixtures shall include heating,
lighting, electrical systems, air-conditioning, partitioning,
carpeting, or any other installation which has become an integral
part of the leased premises. The Lessee will at all times permit
notices of non-responsibility to be posted and to remain posted
until the completion of alterations or additions which have been
approved by the Lessor.
MAINTENANCE 5. Lessee shall, at its sole cost, keep and maintain said
OF PREMISES premises and appurtenances and every part thereof, including, but
not limited to, glazing, sidewalks, parking areas, plumbing,
electrical systems, heating and air conditioning installations, any
store front, and the interior of the premises in good and sanitary
order, condition, and repair. The Lessee agrees to water, maintain
and replace, when necessary, any shrubbery and landscaping provided
by Lessor on the leased premises. The Lessee hereby waives all right
to make repairs at the expense of Lessor as provided in Section 1942
of the Civil Code of the State of California, and all rights
provided for by Section 1941 of said Civil Code.
FIRE AND 6. Lessee shall not use, or permit said premises, or any part
EXTENDED thereof, to be used, for any purpose other than that for which the
COVERAGE said premises are hereby leased; and no use, shall be made or
INSURANCE permitted to be made of the said premises, nor acts done, which will
cause a cancellation of any insurance policy covering said building,
or any part thereof, nor shall Lessee sell or permit to be kept,
used or sold, in or about said premises, any article which may be
prohibited by the standard form of fire insurance policies. Lessee
shall, at his sole cost and expense, comply with any and all
requirements, pertaining to said premises, of any insurance
organization or company, necessary for the maintenance of reasonable
fire and public liability insurance, covering said building and
appurtenances. The Lessor agrees to purchase and keep in force fire,
and extended coverage insurance covering the leased premises in
amounts not to exceed the actual insurable value of said premises.
The Lessee agrees to pay to the Lessor as additional rent, on
demand, the full cost of said insurance as evidenced by insurance
billings to the Lessor. It is understood and agreed that Lessee's
obligation under this paragraph will be pro-rated to reflect the
commencement and termination dates of this lease. See Amendment 6.
ABANDON- 7. Lessee shall not vacate or abandon the premises at any time
MENT during the term; and if Lessee shall abandon, vacate or surrender
said premises, or be dispossessed by process of law, or otherwise,
any personal property belonging to Lessee and left on the premises
shall be deemed to be abandoned, at the option of Lessor, except
such property as may be mortgaged to Lessor.
FREE FROM 8. Lessee shall keep the demised premises and the property in
LIENS which the demised premises are situated, free from any liens arising
out of any work performed, materials furnished, or obligations
incurred by Lessee.
COMPLIANCE 9. Lessee shall, at his sole cost and expense, comply with all
WITH of the requirements of all Municipal, State and Federal authorities
GOVERN- now in force, or which may hereafter be in force, pertaining to the
MENTAL said premises, and shall faithfully observe in the use of the
REGULA- premises all Municipal ordinances and State and Federal statutes now
TIONS in force or which may hereafter be in force. The judgment of any
court of competent jurisdiction, or the admission of Lessee in any
action or proceeding against Lessee, whether Lessor be a party
thereto or not, that Lessee has violated any such ordinance or
statute in the use of the premises, shall be conclusive of that fact
as between Lessor and Lessee.
INDEMNIFI- 10. The Lessee, as a material part of the consideration to be
CATION OF rendered to the Lessor, hereby waives all claims against the Lessor
LESSOR AND for damages to goods, wares and merchandise, and all other personal
LESSEE'S property in, upon, or about said premises and for injuries to
LIABILITY persons in or about said premises, from any cause arising at
INSURANCE anytime, excepting claims arising from the Lessor's negligence, and
the Lessee will hold the Lessor exempt and harmless from any damage
or injury to any person, or to the goods, wares and merchandise and
all other personal property of any person, arising from the use of
the premises by the Lessee, or from the failure of the Lessee to
keep the premises in good condition and repair, as herein provided.
The Lessee shall secure and keep in force a bodily injury and
property damage policy covering the leased premises, including
parking areas, insuring the Lessee and naming the Lessor as an
additional insured. A copy of said policy shall be delivered to the
Lessor and the minimum limits of coverage thereof shall be
$1,000,000 for any single or multiple injuries and $100,000 property
damage, and the Lessee shall obtain a written obligation on the part
of the insurer to give the Lessor written notification before any
cancellation thereof.
ADVERTISE- 11. Lessee will not place or permit to be placed, in, upon or
MENTS AND about the said premises any unusual or extraordinary signs, or any
SIGNS signs not approved by the city or other governing authority. The
Lessee will not place, or permit to be placed, upon the premises,
any signs, advertisements or notices without the written consent of
the Lessor first had and obtained. Any sign so placed on the
premises shall be so placed upon the understanding and agreement
that Lessee will remove same at the termination of the tenancy
herein created and repair any damage or injury to the premises
caused thereby, and if not so re- [REST OF SENTENCE ILLEGIBLE]
<PAGE> 3
UTILITIES 12. Lessee shall for water, gas, heat, light, power, telephone
service and all other services supplied to the said premises.
ATTORNEY'S 13. In case suit should be brought for the possession of the
FEES premises, for the recovery of any sum due hereunder, or because of
the breach of nay other covenant herein, the losing party shall pay
to the prevailing party a reasonable attorney's fee, which shall be
deemed to have accrued on the commencement of such action and shall
be enforceable whether or not such action is prosecuted to
judgement.
INSOL- 14. Either (a) the appointment of a receiver to take possession
VENCY or of all or substantially all of the assets of Lessee, or (b) a
BANK- general assignment by Lessee for the benefit of creditors, or (c)
RUPTCY any action taken or suffered by Lessee under any insolvency or
bankruptcy act shall constitute a breach of this lease by Lessee.
See Amendment 14.
DEFAULT 15. In the event of any breach of this lease by the Lessee, or an
abandonment of the premises by the Lessee, the Lessor has the option
of 1) removing all persons and property from the premises and
repossessing the premies in which case any of the Lessee's property
which the Lessor removes from the premises may be stored in a public
warehouse or elsewhere at the cost of, and for the account of
Lessee, or 2) allowing the Lessee to remain in full possession and
control of the premises. If the Lessor chooses to repossess the
premises, the lease will automatically terminate in accordance with
provisions of the California Civil Code, Section 1951.2. In the
event of such termination of the lease, the Lessor may recover from
the Lessee: 1) the worth at the time of award of the unpaid rent
which had been earned at the time of termination including interest
at 10% per annum; 2) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
the Lessee proves could have been reasonably avoided including
interest at 10% per annum; 3) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and 4) any other amount
necessary to compensate the Lessor for all the detriment proximately
caused by the Lessee's failure to perform his obligations under the
lease or which in the ordinary course of things would be likely to
result therefrom. If the Lessor chooses not to repossess the
premises, but allows the Lessee to remain in full possession and
control of the premises, then in accordance with provisions of the
California Civil Code, Section 1951.4, the Lessor may treat the
lease as being in full force and effect, and may collect from the
Lessee all rents as they become due through the termination date of
the lease as specified in the lease. For the purposes of this
paragraph, the following do not constitute a termination of Lessee's
right to possession:
a) Acts of maintenance or preservation or efforts to relet the
property.
b) The appointment of a receiver on the initiative of the Lessor to
protect his interest under this lease.
SURRENDER 16. The voluntary or other surrender of this lease by Lessee, or
OF LEASE a mutual cancellation thereof, shall not work a merger, and shall,
at the option of Lessor, terminate all or any existing subleases or
subtenancies, or may, at the option of Lessor, operate as an
assignment to him of any or all such subleases or subtenancies.
TAXES 17. The Lessee shall be liable for all taxes levied against
personal property and trade or business fixtures, and agrees to pay,
as additional rental, during the term of this lease and any
extension thereof, all real estate taxes and the yearly installments
of any special assessments levied against the leased premises after
the commencement date of this lease. It is understood and agreed
that the Lessee's obligation under this paragraph will be pro-rated
to reflect the commencement and termination dates of this lease.
NOTICES 18. See Amendment 18.
ENTRY BY 19. Lessee shall permit Lessor and his agents to enter into and
LESSOR upon said premises at all reasonable times for the purpose of
inspecting the same or for the purpose of maintaining the building
in which said premises are situated, or for the purpose of making
repairs, alterations or additions to any other portion of said
building, including the erection and maintenance of such
scaffolding, canopies, fences and props as may be required without
any rebate of rent and without any liability to Lessee for any loss
of occupation or quiet enjoyment of the premises thereby
occasioned; and shall permit Lessor and his agents, at any time
within 180 days prior to the expiration of this lease, to place upon
said premises any usual or ordinary "For Sale" or "to lease" signs
and exhibit the premises to prospective tenants at reasonable
hours.
DESTRUC- 20. See Amendment 20.
TION OF
PREMISES
ASSIGN- 21. Lessee shall not assign this lease, or any interest therein,
MENT and shall not subject the said premises or any part thereof, or any
AND right or privilege appurtenant thereto, or suffer any other person
SUBLET- (the agents and servants of Lessee excepted) to occupy or use the
TING said premises, or any portion thereof, without the written consent
of Lessor first had and obtained, and a consent to one assignment,
subletting, occupation or use by any other person, shall not be
deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or
subletting without such consent shall be void, and shall, at the
option of the Lessor, terminate this lease. This lease shall not,
nor shall any interest therein, be assignable, as to the interest of
Lessee, by operation of law, without the written consent of Lessor.
The Lessor, however, cannot unreasonably withhold consent to
sublet, assign, or both.
<PAGE> 4
CONDEMNA- 22. See Amendment 22.
TION
EFFECT OF 23. The term "Lessor" as used in this lease, means only the owner
CONVEYANCE for the time being of the land and building containing the premises,
so that, in the event of any sale of said land or building, or in
the event of a lease of said building, the Lessor shall be and
hereby is entirely freed and relieved of all covenants and
obligations of the Lessor hereunder, and it shall be deemed and
construed, without further agreement between the parties and the
purchaser at any such sale, or the Lessee of the building, that the
purchaser or Lessee of the building has assumed and agreed to carry
out any and all covenants and obligations of the Lessor hereunder.
If any security be given by the Lessee to secure the faithful
performance of all or any of the covenants of this lease on the part
of Lessee, the Lessor may transfer and deliver the security, as
such, to the purchaser at any such sale or the Lessee of the
building, and thereupon the Lessor shall be discharged from any
further liability in reference thereto. See Amendment 23.
SUBORDINA- 24. Lessee agrees that this lease may, at the option of Lessor,
TION be subject and subordinate to any mortgage, deed of trust or other
instrument of security which has been or shall be placed on the land
and building or land or building of which the premises form a part,
and this subordination is hereby made effective without any further
act of Lessee. The Lessee shall, at any time hereinafter, on demand,
execute any instruments, releases, or other documents that may be
required by any mortgagee, mortgagor, or trustor or beneficiary
under any deed of trust for the purpose of subjecting and
subordinating this lease to the lien of any such mortgage, deed of
trust or other instrument of security, provided the holder of such
encumbrance agrees to recognize Lessee's interest hereunder if
Lessee is not then in default.
WAIVER 25. The waiver by Lessor of any breach of any term, covenant or
condition, herein contained shall not be deemed to be a waiver of
such term, covenant or condition or any subsequent breach of the
same or any other term, covenant or condition therein contained. The
subsequent acceptance of rent hereunder by Lessor shall not be
deemed to be a waiver of any preceding breach by Lessee of any term,
covenant or condition of this lease, other than the failure of
Lessee to pay the particular rental so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of
acceptance of such rent.
HOLDING 26. Any holding over after the expiration of the said term,
OVER with the consent of Lessor, shall be construed to be a tenancy from
month to month, at a rental to be negotiated by Lessor and Lessee
prior to the expiration of said term, and shall otherwise be on the
terms and conditions herein specified, so far as applicable.
SUCCESSORS 27. The covenants and conditions herein contained shall, subject
AND to the provisions as to assignment, apply to and bind the heirs,
ASSIGNS successors, executors, administrators and assigns of all of the
parties hereto; and all of the parties hereto shall be jointly and
severally liable hereunder.
TIME 28. Time is of the essence of this lease.
MARGINAL 29. The marginal headings or titles to the paragraphs of this
CAPTIONS lease are not a part of this lease and shall have no effect upon the
construction or interpretation of any part thereof. This instrument
contains all of the agreements and conditions made between the
parties hereto and may not be modified orally or in any other manner
than by an agreement in writing signed by all of the parties hereto
or their respective successors in interest.
Amendment Nos. 1, 2, 6, 11, 14, 18, 20, 22, and 23 and the additional
Paragraphs 30, 31, 32, 33, 34, 35, and 36 attached hereto are incorporated
herein and hereby made a part of this lease.
IN WITNESS WHEREOF, Lessor and Lessee have executed these presents, the day and
year first above written.
LESSOR LESSEE
/s/ RICHARD N. MOSEMAN ACUREX CORPORATION
- ---------------------------------- -----------------------------------
RICHARD N. MOSEMAN
/s/ BONNIE MOSEMAN MILLER By
- ---------------------------------- -----------------------------------
BONNIE MOSEMAN MILLER
PROPERTIES INTERNATIONAL, allrent, By /s/ TIMOTHY P. CARLSON
INC., a California corporation -----------------------------------
- ----------------------------------
By /s/ SALLY MOSEMAN, President
- ----------------------------------
SALLY MOSEMAN, President
<PAGE> 5
10/23/76
ADDENDUM TO LEASE DATED OCTOBER 23, 1976 BETWEEN RICHARD
N. MOSEMAN, BONNIE MOSEMAN MILLER, AND PROPERTIES INTERNATIONAL,
ALLRENT, INC., A CALIFORNIA CORPORATION, HEREAFTER REFERRED TO AS
"LESSOR," AND ACUREX CORPORATION, A CALIFORNIA
CORPORATION, HEREAFTER REFERRED TO AS "LESSEE."
Lessor and Lessee further agree as follows:
Amendment 1 - Construction of Improvements; Possession
(a) Lessor shall construct the building and shell substantially in
accordance with the site plan attached hereto as Exhibit "B" and the sheet
entitled "Project Items - Shell" attached hereto as a part of Exhibit "C." Said
building shell shall also be constructed substantially in accordance with
working drawings, plans and specifications (herein called the "plans") to be
prepared by Lessor's architect and to be received by Lessee prior to its signing
of this Lease. Lessee's signing of this Lease shall be deemed to constitute
Lessee's approval of the plans, subject only to Lessee's right, subject to
Lessor's prior written approval, which will not be unreasonably withheld, to
request certain minor adjustments in the plans regarding the location of
exterior doors to allow for balanced door access for future uses. Approval of
plans by Lessee does not relieve Lessor of responsibility of providing a
building meeting requirements of all bodies having jurisdiction. Lessor shall
give Lessee at least thirty (30) days' notice prior to the anticipated
completion date and permit Lessee to enter upon the premises to install Lessee's
fixtures and equipment.
(b) Lessor shall contribute the maximum amount of Five Hundred Thousand
Dollars ($500,000) to defray the cost of construction and installation by
Lessor's contractor of the interior improvements after completion of the
building shell. Any additional cost of interior improvements in excess of Five
Hundred Thousand Dollars ($500,000) shall be paid by Lessee. The interior
improvements to be constructed for the Five Hundred Thousand Dollar ($500,000)
contribution thereto by Lessor are referred to in the sheet entitled "Project
Items in $500,000 Interior" which is a part of Exhibit "C" attached hereto. Said
sum of Five Hundred Thousand Dollars ($500,000) to be contributed by Lessor for
the interior improvements shall be used for the construction and installation of
typical, multipurpose interior improvements usable by normal occupants of
industrial buildings. Said sum of Five Hundred Thousand Dollars ($500,000) shall
not be used to defray the cost of any specialized or extraordinary type interior
improvements. None of the items referred to in the sheet entitled "Project Items
in $500,000 Interior" which is a part of Exhibit "C" attached hereto shall be
deleted without Lessor's prior written consent, which consent shall not be
unreasonably withheld. Plans for the interior improvements shall be supplied by
Lessee to Lessor as follows: (i) plans for the sewage and other plumbing
facilities for the restrooms and cafeteria and for all
<PAGE> 6
underground electric boxes prior to the commencement of construction of the
building shell, and (ii) all other interior plans no later than thirty (30) days
after the commencement of construction of the shell.
(c) Lessor and Lessee shall cooperate in the construction of the building
and interior improvements, and they shall each use their best efforts to
prosecute the work to completion in a prompt and diligent manner in order that
said building and improvements may be substantially completed on the premises on
or before May 1, 1977 (the "Completion Date"). If, by the Completion Date, the
premises are not substantially completed because of delays for causes beyond
Lessor's control (such as, without limitation, strikes, lockouts, labor
troubles, inability to procure materials, failure of power or other utilities or
services, restrictive governmental laws or regulations, riots, insurrection,
wars, inclement weather, acts of God, or breach of this lease by Lessee), then
(i) Lessor shall not have any liability to Lessee for any consequential loss or
damage, nor shall this Lease be void or voidable, but this Lease shall remain
valid and continue in full force and effect, and (ii) the time for completion of
the premises shall be extended for a period of time which equals the aggregate
period of any delay or delays in prosecution of Lessor's work.
Amendment 2 - Acceptance of Premises and Covenant to Surrender
Lessee shall have ninety (90) days following the date of occupancy of the
premises within which to notify Lessor in writing of any material defects in the
premises, which defects Lessor shall correct as promptly as possible.
Amendment 6 - Fire and Extended Coverage Insurance
If at any time during the term of this Lease, or any extensions thereof,
Lessee obtains a firm written bid from a responsible broker representing a
responsible insurance company qualified to do business in California and
satisfactory to Lessor for the same fire and extended coverage insurance which
is then in effect on the premises at a lower premium, then Lessor will at
Lessor's option either purchase the insurance from Lessee's broker, commencing
with the next premium term, cause Lessor's insurance broker to meet the lower
price, or credit the Lessee with the price difference.
Lessor shall have no obligation to insure against loss by Lessee to any
leasehold improvements, fixtures, furniture or other personal property
installed by Lessee at Lessee's expense in or about the premises occurring from
any cause whatsoever and Lessee shall have no interest in the proceeds of any
insurance carried by Lessor, except as provided in Amendment 20 hereof.
Amendment 11 - Advertisements and Signs
Lessor will not unreasonably withhold Lessor's consent to the installation
on the premises by Lessee, at Lessee's expense, of
2.
<PAGE> 7
normal business signs, provided that the location and design thereof have been
approved in advance by Lessor's architect.
Amendment 14 -- Insolvency or Bankruptcy
Lessee shall have thirty (30) days following the happening of any such
event referred to in (a), (b), or (c) of Paragraph 14 hereof within which to
cure any such breach. If Lease fails to cure any such breach within said thirty
(30) day period, then Lessor, at Lessor's option, may terminate this lease
upon giving ten (10) days prior written notice of termination to Lessee.
Amendment 18 -- Notices
All notices to be given to Lessor or Lessee shall be given in writing and
delivered personally to Lessor or to an officer of Lessee, or by depositing the
same in the United States mail, postage prepaid, and addressed to the parties
as follows:
To Lessor: c/o Miss Sally Moseman
c/o Properties International
1631 Filbert Street
San Francisco, California 94123
To Lessee: Acurex Corporation
485 Clyde Avenue
Mountain View, California 94040
Either party may designate a different address for notice by giving
written notice thereof to the other party in the manner referred to above.
Amendment 20 -- Destruction of Premises
In the event of a partial destruction of the said premises during the said
term for any cause other than uninsured damages by earthquake, or by any other
uninsured casualty, Lessor shall forthwith repair the same, provided such
repairs can be made within ninety (90) days under the laws and regulations of
State, Federal, County or Municipal authorities, but such partial destruction
shall in no way annul or void this lease, except that Lessee shall be entitled
to a proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of
such repairs shall interfere with the business carried on by Lessee in the said
premises. If such partial destruction is caused by earthquake or by any other
uninsured casualty, or if such repairs cannot be made within ninety (90) days,
Lessor may, at Lessor's option, make same within a reasonable time, but not to
exceed one hundred eighty (180) days, and this lease shall continue in full
force and effect and the rent shall be proportionately reduced as aforesaid in
this paragraph provided. In the event that Lessor does not so elect to repair
the damage caused by an uninsured casualty, or in the event that Lessor does
not so elect to make such
3.
<PAGE> 8
repairs which cannot be made within ninety (90) days, or such repairs cannot be
made under such laws and regulations, this lease may be terminated at the
option of either party, provided that such option to terminate is exercised by
giving written notice to the other party within fifteen (15) days after the
date of notice by Lessor to Lessee of Lessor's intention not to make repairs.
In respect to any partial destruction which Lessor is obligated to repair or
may elect to repair under the terms of this paragraph, the provisions of
Section 1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil
Code of the State of California are waived by Lessee. A total destruction of
the building in which the said premises may be situated shall terminate this
lease. In the event of any dispute between Lessor and Lessee relative to the
provisions of this paragraph, they shall each select an arbitrator, the two
arbitrators so selected shall select a third arbitrator and the three
arbitrators so selected shall hear and determine the controversy and their
decision thereon shall be final and binding upon both Lessor and Lessee, who
shall bear the cost of such arbitration equally between them. In the event that
Lessor is obligated to repair damage, or elects to repair damage, in accordance
with this paragraph, Lessor's obligation shall be limited to the construction of
the building, interior improvements, and site work initially constructed by
Lessor, at Lessor's expense, and Lessee shall construct and install, at Lessee's
expense, all other leasehold improvements, fixtures, and equipment originally
installed by Lessee. If Lessor is obligated or elects to repair damage to
interior improvements which Lessor originally financed pursuant to Amendment
1(b) Lessor will allow Lessee to make such repairs to complete the interior as
previously constructed. If Lessee so requests Lessor shall make available to
Lessee that portion of any insurance proceeds Lessor receives as a result of the
damage to the premises which are allocated by Lessor's insurance company for
repair of interior improvements originally installed by Lessor pursuant to
Amendment 1(b) hereof. Lessee's obligation to repair the interior improvements
shall be limited to the insurance proceeds made available to Lessee for such
purposes.
Amendment 22 -- Condemnation
If any part of the premises shall be taken for any public or quasi-public
use, under any statute or by right of eminent domain or private purchase in
lieu thereof, and a part thereof remains which is susceptible, of occupation
hereunder, this lease shall, as to the part so taken, terminate as of the date
title shall vest in the condemnor or purchaser, and the rent payable hereunder
shall be adjusted so that the Lessee shall be required to pay for the remainder
of the term only such portion of such rent as the value of the part remaining
after such taking bears to the value of the entire premises prior to such
taking. If all of the premises, or such part thereof be taken so that there
does not remain a portion reasonably suitable for the continued use and
occupancy by Lessee for the purposes specified in the use clause above, this
lease shall thereupon terminate. If a part or all of the premises be taken, all
4.
<PAGE> 9
compensation awarded upon such taking shall go to the Lessor and the Lessee
shall have no claim thereto; provided, however, that Lessee shall be entitled
to remove any trade fixtures supplied by Lessee from that portion or all of the
premises condemned, or alternatively, if a separate allocation is made in the
condemnation award for Lessee's trade fixtures, Lessee shall be entitled to
receive that part of the condemnation award specifically designated as
compensation for the taking of any trade fixtures supplied and paid for by
Lessee.
Amendment 23 - Effect of Conveyance
In the event of the sale or transfer by Lessor of the premises prior to
the completion of the building and improvements to be constructed on the
property by Lessor, Lessor shall not be freed and relieved of Lessor's
covenants and obligations hereunder until delivery to Lessee of the completion
notice as provided for in Paragraph 35 hereof.
Paragraph 30 - Rental Adjustments
(a) The initial monthly rental of Fifteen Thousand Six Hundred Sixteen
Dollars ($15,616) is based upon the building to be constructed on the premises
consisting of 51,200 square feet, with the rental computed at the rate of
$0.305 per square foot; and is further based upon Lessor contributing the
maximum amount of Five Hundred Thousand Dollars ($500,000) for interior
improvements after completion of the building shell. Any additional cost of
interior improvements in excess of Five Hundred Thousand Dollars ($500,000),
shall be paid by Lessee. If the total cost of the interior improvements is less
than Five Hundred Thousand Dollars ($500,000) but not less than Four Hundred
Fifty Thousand Dollars ($450,000), the initial monthly rental shall be reduced
by an amount equal to one percent (1%) per month of the amount by which the cost
of said interior improvements is less than Five Hundred Thousand Dollars
($500,000). No reduction in the initial monthly rental shall be given in the
event the total cost of the interior improvements is less than Four Hundred
Fifty Thousand Dollars ($450,000). There is attached hereto as a part of Exhibit
"C" a description of the project items and interior improvements which the
parties hereby agree represent a full and complete list of said items. The
parties agree to execute an amendment to this lease reflecting the adjustment in
the monthly rental, if applicable, upon completion of construction.
(b) The initial monthly rental, as adjusted pursuant to sub-paragraph (a)
above of this Amendment 30, shall be adjusted as of June 1, 1982, June 1, 1987,
and June 1, 1992, each of which is hereafter referred to as a "rent adjustment
date," to reflect changes in the cost of living from the commencement date of
the lease term to each rent adjustment date. The adjustments, if any, in the
monthly rental shall be calculated on the basis of changes in the United States
Department of Labor, Bureau of Labor Statistics Consumer Price Index, Subgroup
"all items," for San Francisco-Oakland (1967=100), hereafter referred to as the
"CPI." The CPI for May 1977 is hereafter referred to as the "base CPI." The
monthly rental for the five (5) year period commencing June 1, 1982, and for
each five (5) year
5.
<PAGE> 10
period commencing June 1, 1982, and for each five (5) year period after each
successive rent adjustment date thereafter, of the lease term shall be adjusted
by the percentage increase or decrease, if any , in the CPI as of the month of
May immediately prior to the rent adjustment date over the base CPI; provided,
however, that for the period June 1, 1982 through May 31, 1987 the monthly
rental shall not exceed one hundred twenty percent (120%) of the initial monthly
rental; for the period June 1, 1987 through May 31, 1992 the monthly rental
shall not exceed one hundred forty percent (140%) of the initial monthly rental;
and for the period June 1, 1992 through May 31, 1997 the monthly rental shall
not exceed one hundred sixty percent (160%) of the initial monthly rental; and
provided further that the amount of the monthly rental increase for any of the
five (5) year periods over the preceding five (5) year period shall not exceed
twenty percent (20%) of the initial monthly rental. Notwithstanding the
foregoing, the monthly rental at all times during the lease term shall not be
less than the initial monthly rental of Fifteen Thousand Six Hundred Sixteen
Dollars ($15,616), adjusted by the provisions of subparagraph (a) above of this
Amendment 30. When the monthly rental for each five (5) year period commencing
with a rent adjustment date is determined, Lessor shall give Lessee written
notice to that effect indicating how the new monthly rental figure was computed.
If at any rental adjustment date there shall not exist a Consumer Price Index in
the same format as referred to in this paragraph, the parties shall substitute
any official index published by the Bureau of Labor Statistics or successor or
similar governmental agency, as may then be in existence which shall be most
nearly comparable thereto. If the parties are unable to agree upon a successor
index, the parties shall refer their choice of a successor index to arbitration
to be conducted by three arbitrators, one to be selected by Lessor, one to be
selected by Lessee, and the third to be selected by said first two chosen
arbitrators. Said arbitrators shall make a report in writing signed by each of
them within twenty (20) days after their selection. The expenses of the
arbitration shall be borne equally by the parties hereto and the report of the
majority of the arbitrators shall be binding upon both Lessor and Lessee.
Paragraph 31 - Memorandum of Lease
This lease shall not be recorded; provided that if either party requests
the other party to do so, the parties shall execute a Memorandum of Lease in
recordable form which shall refer to the parties, the premises, and the terms
of the lease.
Paragraph 32 - Waiver of Subrogation
The parties release each other, and their respective authorized
representatives, from any claims for damage to any person or to the premises
and to the fixtures, personal property, Lessee's improvements, and alterations
of either Lessor or Lessee in or on the premises that are caused by or result
from risks insured against under any insurance policies carried by the parties
and in force at the time of any such damage.
Each party shall cause each insurance policy obtained by it to provide
that the insurance company waives all right of recovery by way of subrogation
against either party in connection with any damage covered by any policy.
Neither party shall be liable to the other for any damage caused by fire or any
of the risks insured against under any insurance policy required by this lease.
If any insurance policy cannot be obtained with a waiver of subrogation, or is
obtainable only by the payment of an additional premium charge above that
charged by insurance companies issuing policies without
6.
<PAGE> 11
waiver of subrogation, the party undertaking to obtain the insurance shall
notify the other party of this fact. The other party shall have a period of ten
(10) days after receiving the notice either to place the insurance with a
company that is reasonably satisfactory to the other party and that will carry
the insurance with a waiver of subrogation, or to agree to pay the additional
premium if such a policy is obtainable at additional cost. If the insurance
cannot be obtained or the party in whose favor a waiver of subrogation is
desired refuses to pay the additional premium charged, the other party is
relieved of the obligation to obtain a waiver of subrogation rights with
respect to the particular insurance involved.
Paragraph 33 - Tennis Court
- ---------------------------
Lessee shall give Lessor written notice of the first to occur of the
following events:
(a) The lease rights or the right to use the adjoining Hetch
Hetchy area has terminated or is no longer in effect for any reason, or
(b) Three (3) months prior to the expiration of the lease term or
any renewal thereof.
Upon giving such written notice, Lessee shall, if requested to do so by Lessor,
remove that portion of the tennis court which is situated on the premises and
replace that area with landscaping which is consistent with the original
landscaping of the area, subject to Lessor's approval.
Paragraph 34 - Financing
- ------------------------
This lease and Lessor's obligations hereunder are conditional upon Lessor
obtaining a commitment for a construction loan and permanent financing for
construction of the building and improvements to be erected on the premises,
upon terms and conditions reasonably acceptable to Lessor, within thirty (30)
days after approval by the parties of the final plans and specifications for
the building and improvements. Lessor agrees to exercise all reasonable efforts
to obtain said financing. If Lessor is unable to obtain said financing within
said thirty (30) day period, Lessor shall promptly give written notice thereof
to Lessee. Lessee shall have forty-five (45) days following, the receipt of
said notice from Lessor within which to obtain financing through Lessee's own
agents. Lessor shall accept financing for the project with a loan obtained by
Lessee, provided that the loan amount is between $1,250,000 and $1,350,000 for
a loan term of from twenty-five (25) years to thirty (30) years, at an interest
rate of not to exceed nine and three-fourths percent (9-3/4%) per annum, and a
maximum loan fee of not more than one (1) point. If Lessee is unable to obtain
said financing for Lessor within said forty-five (45) day period, Lessor may
then terminate this lease by giving written notice of termination to Lessee.
7.
<PAGE> 12
Paragraph 35 - Occupancy
In the event the premises are not completed and available for occupancy on
the commencement date of this lease as set forth in the paragraph entitled
"Term" on page 1, the term of this lease shall commence on that date which
Lessee commences operations in the premises which shall not be more than thirty
(30) days after delivery by Lessor to Lessee of notice of completion of the
construction contemplated by Amendment 1(a) hereto. Promptly upon commencement
of the lease term, Lessee agrees to execute and deliver to Lessor a letter
confirming the commencement date and termination date of this lease.
Paragraph 36 - FAA Approval
This lease and Lessor's obligations hereunder are conditioned upon Lessee
delivering to Lessor prior to commencement of construction described in
Amendment 1(a) hereto of a copy of a current approval by the Federal Aviation
Administration as well as the Commanding Officer, Naval Air Station, Moffett
Field, of the construction of the premises which are the subject of this lease.
/s/ RICHARD N. MOSEMAN
--------------------------------------
RICHARD N. MOSEMAN
/s/ BONNIE MOSEMAN MILLER
--------------------------------------
BONNIE MOSEMAN MILLER
PROPERTIES INTERNATIONAL, allrent, INC
By /s/ SALLY MOSEMAN
------------------------------------
SALLY MOSEMAN, President
"Lessor"
ACUREX CORPORATION
By
------------------------------------
By /s/ [Signature Illegible]
------------------------------------
V.P.
"Lessee"
8.
<PAGE> 13
APPLICATION NO. SJ-379416 SCHEDULE C
- --------------------------------------------------------------------------------
The land referred to herein is described as follows:
ALL THAT CERTAIN REAL PROPERTY IN THE CITY OF MOUNTAIN VIEW, COUNTY OF SANTA
CLARA, STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
ALL OF LOT 3 AS SHOWN UPON THAT CERTAIN MAP ENTITLED, "TRACT NO. 3813", WHICH
MAP WAS FILED FOR RECORD DECEMBER 28, 1964 IN BOOK 189 OF MAPS, PAGE 32, IN THE
OFFICE OF THE RECORDER OF THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA.
Exhibit "A"
<PAGE> 14
[MAP OF TRACT 3813]
Exhibit "A"
<PAGE> 15
[SITE PLAN OF PROPOSED BUILDING #5]
Exhibit "B"
<PAGE> 16
PROJECT ITEMS - SHELL
Included Excluded
- -------------------------------------------------------------------------------
2-story concrete tilt-up natural change charges
concrete
overhang
approximately 25,600 sq ft
each floor tennis court, incremental cost above
basis by lessee
bronze glass with anodized frames
sky lights
one 3000-pound elevator
natural convection
two interior stair wells
primary fire sprinklers
roof insulation
excavating/grading/paving
landscaping
irrigation/drainage
utilities to building
with/2000 AMPS, 480 volts
Exhibit "C"
<PAGE> 17
EXHIBIT "C"
PROJECT ITEMS IN $500,000 INTERIOR
<TABLE>
<CAPTION>
Included in $500,000 Excluded in $500,000
- ------------------------------------ ----------------------------------------
<S> <C>
Architectural fee budgeted Architectural budget beyond
of $15,000 $15,000
Heat/vent/air conditioning Change charges
with economizer
Window coverings
Complete electrical
All other improvements to
Finished restroom cores and/or equipment for cafeteria
Ceilings Telephone equipment
Flooring Items which could be termed
special purpose items or
Drop fire sprinklers unusual items not consistent
with normal R&D buildings
Roof screens in the area, to be approved
by lessor and/or lender
Entrance lobby
Partitioning and doors based on
Acurex May 3 drawing
Cafeteria with:
asbestos flooring (vinyl)
drop ceiling
heating/air conditioning
sprinklers
All other items not included in
shell items
Exhibit "C"
</TABLE>
<PAGE> 18
October 23, 1976
Acruex Corporation
485 Clyde Avenue
Mountain View, California 94040
Re: Lease for 555 Clyde Avenue, Mountain View
Gentlemen:
Reference is hereby made to the Lease dated October 23, 1976 between
Richard N. Moseman, Bonnie Moseman Miller, and Properties International,
allrent, Inc., as lessor, and Acurex Corporation, as lessee, covering premises
at 555 Clyde Avenue, Mountain View, California.
Commencement of construction of the building and improvements has been
delayed because of the protracted lease negotiations between the parties. Lessor
is now uncertain that the completion date of May 1, 1977 referred to in
Amendment 1(c) of the Lease can be achieved on a normal construction schedule,
even without delays beyond lessor's control. Therefore, the parties agree that
so long as lessor exercises due diligence in prosecuting the work of
construction to completion, lessor shall not be liable to lessee for any
damages, and lessee shall not have any right to terminate the Lease, in the
event construction is not completed by lessor on or before May 1, 1977. The
rental adjustment dates under Paragraph 30(b) shall be adjusted accordingly.
Notwithstanding the provisions of Paragraph 36 of the Lease, regarding
FAA approval, if lessee does not deliver to lessor on or before November 8,
1976 the approval in writing by the Federal Aviation Administration, as well as
the Commanding Officer, Naval Air Station, Moffett Field, of the construction
of the premises which are the subject of the Lease, either lessor or lessee may
terminate this Lease upon delivering written notice of termination to the other
on or before 5:00 P.M. on November 10, 1976. In the event this Lease is so
terminated, Acurex shall pay lessor $3,000 for preconstruction costs incurred
by lessor through the date of termination.
If the provisions of this letter are acceptable, please sign at the
space below indicating your approval and acceptance hereof.
Very truly yours,
PROPERTIES INTERNATIONAL, allrent, INC
The foregoing is accepted /s/ SALLY MOSEMAN
and approved. By ___________________________________
Sally Moseman, President
ACUREX CORPORATION
/s/ [Signature Illegible]
By ___________________________________
Dated: October 23, 1976
<PAGE> 19
AGREEMENT
Reference is made to Paragraph 30 - Rental Adjustments - of that certain Lease,
as amended, dated October 23, 1976 between Richard N. Moseman, Bonnie Moseman
Miller, and Properties International, allrent, Inc., a California corporation,
Lessor, and Acurex Corporation, a California corporation, Lessee, demising the
property commonly referred to as 555 Clyde Avenue, Mountain View, California
94043.
It is hereby understood and agreed that any additional costs of interior
improvements in excess of $500,000.00 will be paid by Lessee in a timely manner
upon presentation of appropriate bills by the Contractor. All parties hereunder
are aware that a take-out commitment for a long term loan has been issued by
The Penn Mutual Life Insurance Company and expires on October 2, 1977. As a
result, interior improvements are to be made and paid for in a timely manner so
that the construction lender hereunder will have ample time to refinance its
loan according to the abovementioned take-out commitment.
Dated: February 1, 1977
Construction Lender: Lessor:
UNITED CALIFORNIA BANK ----------------------------------
Richard N. Moseman
/s/ Bonnie Moseman Miller by Sally
Moseman as attorney-in-fact
By /s/ R. B. DEWITT
--------------------------- ----------------------------------
R. B DeWitt, Vice President Bonnie Moseman Miller
Lessee:
Acurex Corporation, a Properties-International, allrent, Inc.
California corporation California corporation
By /s/ [Signature Illegible] By /s/ SALLY MOSEMAN
-------------------------- -------------------------------
Sally Moseman, President
<PAGE> 20
SECOND LEASE MODIFICATION AGREEMENT
THIS AGREEMENT is made and entered into as of October 14, 1992, by and
among RICHARD N. MOSEMAN, BONNIE MOSEMAN MILLER and PAULINE NYE MOSEMAN, as
Trustee of the Pauline Nye Moseman Trust dated October 3, 1983 (collectively
"Lessor"), ACUREX ENVIRONMENTAL CORPORATION, a California corporation ("Lessee")
and ACUREX CORPORATION, a California corporation ("Acurex").
W I T N E S S E T H
WHEREAS, Acurex and Richard N. Moseman, Bonnie Moseman Miller and
Properties International, Allrent, Inc., as lessor, entered into a lease, dated
October 23, 1976, for certain real property and improvements thereon located at
and commonly known as 555 Clyde Avenue, in the City of Mountain View, County of
Santa Clara, State of California (the "Real Property"), which lease has been
amended by a Letter Agreement dated October 23, 1976, an Agreement dated
February 1, 1977, an Agreement dated April 21, 1977 and a First Lease
Modification Agreement, dated August 11, 1977 (collectively, the "Lease");
WHEREAS, Acurex is transferring, effective as of December 28, 1991,
all of the assets of its Environmental
<PAGE> 21
Systems Division ("ESD") to Lessee, in exchange for (i) 100 shares of the common
stock of Lessee (being all of the issued and outstanding shares of Lessee), and
(ii) the assumption by Lessee of ESD's obligations and liabilities (the "ESD
Transactions");
WHEREAS, as a part of the ESD Transactions, Lessee has agreed pursuant
to the Contribution, Assignment and Assumption Agreement dated as of December
28, 1991 (the "Assignment and Assumption Agreement") to assume the liabilities
and obligations of Acurex as to the Lease;
WHEREAS, Acurex continues to remain liable under the Lease for the
performance of any and all covenants and obligations of the lessee therein;
WHEREAS, in July 1992, Pauline Nye Moseman, as Trustee of The Pauline
Nye Moseman Trust dated October 3, 1983 succeeded to the interest of Properties
International, Allrent, Inc. with regard to the Real Property; and
WHEREAS, Lessor has agreed to consent to the assignment and assumption
of the Lease by Acurex to AEC provided, inter alia, Lessee and Acurex agree to
the following modification and amendment to the Lease.
-2-
<PAGE> 22
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
1. The following four (4) sentences of the section of the Lease
titled "Term" are hereby deleted from the Lease in their entirety:
"Provided Lessee faithfully performs its obligations
hereunder, and is not then in default hereunder, Lessor
hereby grants to Lessee the option to extend the lease
term for sixty (60) months upon the expiration of the
initial lease term. The option to extend shall be
exercised by Lessee giving written notice of exercise
to Lessor not less than one hundred eighty (180) days
prior to the expiration of the initial lease term. Such
extended term shall be upon all except for the rental
which shall be determined by negotiations of the parties.
In the event that the parties are unable to agree upon
the rental within ninety (90) days after the exercise of the
option by Lessee, then such option shall be null and
void and of no force of effect, and the lease term shall
expire and terminate upon the expiration of the initial
lease term, if not sooner terminated pursuant to the
provisions hereof."
2. Except as modified and amended herein, the Lease shall remain in
full force and effect.
-3-
<PAGE> 23
3. This Agreement is effective as of the date set forth above.
IN WITNESS WHEREOF, the parties have executed this Agreement.
/s/ RICHARD N. MOSEMAN
-----------------------------------
Richard N. Moseman
/s/ BONNIE MOSEMAN MILLER
------------------------------------
Bonnie Moseman Miller
/s/ PAULINE NYE MOSEMAN
------------------------------------
Pauline Nye Moseman, as Trustee
of the Pauline Nye Moseman Trust
dated October 3, 1983
ACUREX ENVIRONMENTAL CORPORATION,
a California corporation
By /s/ [Signature Illegible] V.P. & CFO
------------------------------------
ACUREX CORPORATION,
a California corporation
By /s/ [Signature Illegible] V.P. & CFO
------------------------------------
-4-
<PAGE> 24
PARKING AGREEMENT
THIS AGREEMENT is made and entered into on August 8, 1977, by and between
RICHARD N. MOSEMAN, BONNIE MOSEMAN MILLER, and PROPERTIES INTERNATIONAL,
allrent, INC., a California corporation, hereafter collectively referred to as
"Moseman," and ACUREX CORPORATION, a California corporation, hereafter referred
to as "Acurex."
RECITALS:
A. Moseman, as lessor, and Acurex, as lessee, entered into a Lease dated
October 23, 1976, as amended August 8, 1977, hereafter referred to as the
"Lease," covering certain real property commonly known as 555 Clyde Avenue,
Mountain View, Santa Clara County, California, being Lot 3 as shown upon that
certain Map entitled "Tract No. 3813," which Map was filed for record December
28, 1964 in Book 189 of Maps, Page 32, in the Office of the Recorder of the
County of Santa Clara, State of California, hereafter referred to as the
"premises."
B. Acurex is constructing a tennis court and handball court on the
premises as part of the building improvements currently under construction on
the premises. The construction of the tennis court and handball court, plus
certain landscaping to be installed by Moseman, has resulted in the development
on the premises of twenty-five (25) parking spaces and one (1) loading zone
less than required by the zoning ordinance of the City
<PAGE> 25
of Mountain View.
C. Acurex has the use of certain Hetch-Hetchy property, hereafter referred
to as the "Hetch-Hetchy property," consisting of an eighty (80) foot wide
parcel extending four hundred (400) feet, more or less, easterly of Clyde Avenue
and located immediately to the south of the premises and contiguous thereto,
pursuant to a Land Use Permit dated march 14, 1973 granted to Acurex by the San
Francisco Water Department.
D. Moseman and Acurex now wish by this Agreement to provide for certain
parking rights over a portion of the Hetch-Hetchy property for the benefit of
the premises, upon the terms and conditions contained herein.
NOW THEREFORE, in consideration of the payment of the sum of Ten Dollars
($10.00) by Moseman to Acurex, and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:
1. Except as otherwise provided herein, so long as the lease is in full
force and effect, and so long as Acurex has the right to use the Hetch-Hetchy
property for parking pursuant to the Land Use Permit with the San Francisco
Water Department, the equivalent of twenty-five (25) parking spaces and one (1)
loading space on the Hetch-Hetchy area will be allocated and set aside for use
as parking area by the occupant or occupants of the premises, without cost or
expense to the owner of the premises, or the occupant of the premises if other
than Acurex.
2. Upon expiration or sooner termination of the
-2-
<PAGE> 26
Lease, so long as Acurex continues to have the right to use the Hetch-Hetchy
area for parking purposes pursuant to the Land Use Permit, the equivalent of
twenty-five (25) parking spaces and one (1) loading space on the Hetch-Hetchy
area will be allocated and set aside by Acurex for use as parking area by the
occupant or occupants of the premises, upon the payment to Acurex monthly in
advance on the first day of each calendar month of an amount equal to
thirty-eight percent (38%) of the monthly amount payable by Acurex to the San
Francisco Water Department pursuant to the Land Use Permit, as such amount may
be adjusted by the San Francisco Water Department from time to time. The owner
of the premises may discontinue such use of the Hetch-Hetchy property at any
time upon giving thirty (30) days prior written notice to Acurex, and thereafter
the owner of the premises shall be relieved from the obligation to make such
payments to Acurex and Acurex shall have no further obligations under this
Agreement.
3. Moseman acknowledges receipt of a copy of the Land Use Permit. The
rights of Moseman and the occupants of the premises hereunder shall be subject
to the terms and conditions of said Land Use Permit, including, but not limited
to, the right of the San Francisco Water Department to revoke such right to use
the Hetch-Hetchy area for parking at any time.
4. (a) Acurex shall use all reasonable effort to renew the Land Use
Permit when it expires, and to maintain said Permit in effect during the term of
the Lease; provided, however, that Acurex shall no longer be required to provide
the owner of the premises with parking spaces on the Hetch-Hetchy property,
-3-
<PAGE> 27
if at any time additional on-site parking area is placed on the premises in an
amount sufficient to satisfy the requirements of the City of Mountain View.
(b) Following the expiration or sooner termination of the Lease,
Acurex may surrender voluntarily its right to use the Hetch-Hetchy property for
parking at any time and thereupon the parties shall be relieved of their
obligations hereunder, provided that Acurex gives Moseman, or the then owner of
the premises, at least ninety (90) days prior written notice of its intention
to do so, in order that Moseman, or the then owner of the premises, may seek to
acquire the parking rights on the Hetch-Hetchy property from the San Francisco
Water Department.
5. Acurex shall be responsible for obtaining the approval of the City of
Mountain View to the necessary variance and site plan and architectural
approval to permit the installation of the tennis court and handball court on
the portion of the premises to be devoted to such uses in lieu of parking area.
Moseman shall have no liability to Acurex if the City of Mountain View fails to
grant such approval, or, if after such approval is granted, the tennis court or
handball court or both must be removed in the event the City of Mountain View
requires additional on-site parking and loading spaces on the premises in
accordance with the plans previously approved by the City of Mountain View's
site plan and architectural review (Application 354-76AA).
6. Nothing contained herein shall be deemed to modify
-4-
<PAGE> 28
or amend the Lease.
7. This Agreement shall inure to the benefit of and shall be binding upon
the respective heirs, personal representatives, successors, and assigns of the
parties hereto.
IN WITNESS WHEREOF, this Agreement has been entered into by the parties as
of the date set forth above.
----------------------------------------
Richard N. Moseman
/s/ BONNIE MOSEMAN MILLER
----------------------------------------
Bonnie Moseman Miller
PROPERTIES INTERNATIONAL, allrent, INC.,
a California corporation
By /s/ [Signature Illegible]
------------------------------------
ACUREX CORPORATION,
a California corporation
By /s/ TIMOTHY P. CARLSON
------------------------------------
-5-
<PAGE> 29
LESSEE'S STATEMENT
The undersigned lessee of premises situated at 555 Clyde Avenue, City of
Mountain View, State of California acknowledges receipt of notice that lessor
has assigned or is about to assign all existing leases on said premises or any
part thereof as additional collateral security for the payment of a certain
promissory note of even date herewith payable to the order of _____________,
(said assignment being subject however, to lessor's rights to collect the rents
until default in the performance of the obligations in said note and deed of
trust securing the same, said deed of trust as recorded or about to be recorded
being hereby referred to for all details).
The undersigned hereby certifies and represents to and covenants with the
said payee and the holder of said note from time to time as follows:
1. The undersigned, as lessee under a certain lease entered into with
Richard N. Moseman, Bonnie Moseman Miller, Properties International, allrent,
Inc., as lessor, and dated October 23, 1976.
See Addendum to Lessee's Statement attached hereto.
2. The initial term of the lease commenced on October __, 1977 and will
end two hundred and forty months later.
3. There have been no modifications or changes in the lease except as
follows:
First Lease Modification Amendment dated August 11, 1977.
4. No rent or other sum payable under said lease has been paid in advance
except as follows:
First month's rent $15,616.
Security Deposit $15,000.
5. The undersigned has accepted the leased premises and has no defense,
set-off or counter-claim against the lessor under the lease or otherwise except
as follows:
See Addendum to Lessee's Statement attached hereto.
6. The undersigned has received no notice of any assignment of the lease
to any person other than the payee of said note except as follows:
None
7. The undersigned acknowledges notice that no prepayment or reduction of
rent, or modification or cancellation of said lease, will be valid as to the
holder of said note without consent of such holder.
Yes
8. The undersigned certify and represent that the above statements,
including any exceptions which have been added thereto, are full and complete
and that the payee and the holder of said note may rely and act upon them.
Dated as of November 11, 1977.
Witness:
/s/ TIMOTHY P. CARLSON [SEAL]
- ----------------------------------- ----------------------------------------
Acurex Corporation
[SEAL]
- ----------------------------------- ----------------------------------------
<PAGE> 30
THIRD RENEWAL AMENDMENT TO LEASE
This Renewal Amendment to the Lease Agreement dated October 23, 1976
(the "Lease") is made and entered into as of this 23rd day of November, 1997,
by and between Richard N. Moseman, Bonnie Moseman, Miller, Pauline Nye Moseman,
as Trustee of Pauline Nye Moseman Trust ("Lessor"), and Acurex Environmental
Corporation ("Lessee"), collectively referred to as the "Parties."
RECITALS:
1. WHEREAS, Lessor and Lessee have entered into a Lease dated as of October
23, 1976 have, by amendment, renewed such Lease continuously through and
including November 22, 1997 with respect to certain premises located at
555 Clyde Avenue, Mountain View, California, and
2. WHEREAS the Parties wish to renew and amend the Sublease in terms of
basic rent, and
3. WHEREAS the Lessee continues to perform its obligations of the lease,
the Lessor shall grant to extend the lease term for sixty (60) months
upon the expiration of this amendment lease term.
4. WHEREAS the option to extend has been exercised by Lessee giving written
notice of exercise to Lessor six (6) months prior to the expiration of
the terms of this agreement and the terms of the rent have been duly
negotiated and agreed upon the parties
NOW THEREFORE, in consideration of the mutual promises and covenants,
and other good and valuable consideration contained herein, the Parties
agree as follows:
AGREEMENT:
1. TERM is renewed so as to extend the Lease for sixty (60)
calendar months commencing on the 23rd day of November, 1997 and
ending on the 22nd day of November, 2002.
2. RENTAL is amended so as to require payment of base rent at the
rate $38,400.00 per month during the Lease term.
3. Except as amended hereby, the Parties ratify and affirm that
each and all of the terms, covenants and conditions of the
Lease Agreement dated October 23, 1976, as amended, shall
remain in full force and effect.
IN WITNESS WHEREOF, the Lessor and Lessee execute this Amendment as of
the day and year first above written.
/s/ RICHARD N. MOSEMAN
----------------------------------------
Richard N. Moseman
/s/ BONNIE MOSEMAN MILLER
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Bonnie Moseman Miller
/s/ KENNA S. HELMS
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Vice President
& Senior Trust Officer
/s/ PAULINE NYE MOSEMAN
----------------------------------------
Pauline Nye Moseman as Trustee of
the Pauline Nye Moseman Trust
dated October 3, 1983
ACUREX ENVIRONMENTAL CORPORATION,
a California Corporation
/s/ HOWARD L. MORSE
----------------------------------------
Howard L. Morse
<PAGE> 1
EXHIBIT 10.14
NNN LEASE - GENERAL FORM
PLEASE READ THIS CAREFULLY; LANDLORD IT'S AGENTS OR EMPLOYEES, IS NOT
AUTHORIZED TO GIVE LEGAL, TAX OR ACCOUNTING ADVICE. IF YOU DESIRE SUCH ADVICE,
CONSULT YOUR ATTORNEY AND/OR ACCOUNTANT BEFORE SIGNING.
PARTIES: This Lease executed in duplicate this 8th day of February, 2000
between De Guigne Ventures, A California Limited Liability Corporation,
hereinafter called Landlord, and SkyStream Networks, Inc. a California
Corporation, hereinafter called Tenant,
PREMISES WITNESSETH: The Landlord does hereby lease unto Tenant and Tenant does
hereby hire and take from Landlord those certain premises situated in the City
of Sunnyvale, County of Santa Clara, State of California, and described as
follows, to wit:
An approximately 46,104 square feet two-story R&D/Office building commonly known
as 455 De Guigne, Sunnyvale, Ca.
USE: To be used solely for office, sales, research, development, shipping,
receiving, storage and for no other purposes whatsoever without Landlord's
prior written consent which shall not be unreasonably withheld.
TERM: The term shall be for ten (10) years, commencing on the 15th day of July,
2000 and ending on the 14th day of July, 2010 at a rental payable in lawful
money of the United States of America, which Tenant agrees to pay without
deduction, setoff, or demand at 306 Lorton Avenue, Burlingame, California 94010
or such place or places as may be designated in writing from time to time by
Landlord, in advance, in monthly installments as follows:
BASE RENTAL: The sum of One Hundred Twenty-six Thousand Seven Hundred and
Eighty-six and 00/100ths Dollars ($126,786.00) is hereby received representing
the first month's base rental due. Commencing August 1, 2000 the sum of
Sixty-nine Thousand Five Hundred and Twenty-seven and 81/100ths Dollars
($69,527.81) will be due for the pro rata share of July's base rental. The sum
of One Hundred Twenty-six Thousand Seven Hundred Eighty-six and 00/100ths
Dollars ($126,786.00) shall be due each and every month thereafter for the
balance of the first year of this lease. Commencing July 15, 2001 and each
succeeding July the base monthly rental shall increase by 3%.
ADDITIONAL RENTAL: Commencing on the Lease Commencement Date and continuing
throughout the Lease Term, in addition to the Base Monthly Rent, Tenant shall
pay to Landlord as additional rent tenant's proportionate share of all Building
Operating Expenses including Taxes, Insurance, Maintenance, and Common Area
Costs. Payment shall be made by one of the following methods: Landlord may bill
to Tenant, on a periodic basis not more frequently than monthly, Tenant's
proportionate share of such expenses as paid or incurred by Landlord, and Tenant
shall pay such share of such expenses within thirty days after receipt of a
written bill from Landlord; and/or Landlord may budget the annual projected
expenses and bill to tenant on a monthly basis, one-twelfth of the annual
amount. If landlord elects the latter of the alternatives, Landlord shall
reconcile the budgeted amounts with the
<PAGE> 2
actual amounts on an annual basis during the first quarter of the subsequent
year and bill tenant for any additional amounts or credit tenant any
overpayments against future rental amounts. The failure to pay any additional
rent as required by this lease when due shall be treated the same as a failure
by Tenant to pay base monthly rent when due and Landlord shall have the same
rights and remedies against Tenant as Landlord would have if Tenant failed to
pay the base monthly rent when due.
OPTION TO EXTEND: Subject to the terms and conditions set forth below, Tenant
may at its option extend the Terms of this Lease for (1) period of five (5)
years. Such period is called the "Renewal Term." The Renewal Term shall be upon
the same terms contained in this Lease, except that (i) Landlord shall have no
obligation to provide Tenant with any Tenant Improvement Allowance in
connection with the Renewal Term, (ii) the Base Rental during the Renewal Term
shall be calculated as set forth below, and (iii) any reference in the Lease to
the "Term" of the Lease shall be deemed to include the Renewal Term and apply
thereto, unless it is expressly provided otherwise. Tenant shall have no
additional extension options.
A. The Base Rent during the Renewal Term shall be at ninety-five percent
(95%) of the then fair market rate (defined hereinafter) for such space for a
term commencing of the first day of the Renewal Term. "Market Rate" shall mean
the then prevailing market rate for a comparable term commencing on the first
day of the Renewal Term for tenants of comparable size and creditworthiness for
comparable space in the Building and other first class R&D/Office buildings in
the vicinity of the Building. In no event shall the rent be less than the rent
paid during the last year of the initial term.
B. To exercise any option, Tenant must deliver a binding written notice to
Landlord not sooner than ten (10) months nor later than six (6) months prior to
the expiration of the initial Term of this Lease. Thereafter, the Market Rate
for the Renewal Term shall be calculated pursuant to Subsection A above and
Landlord shall inform Tenant of the Market Rate. If Tenant fails to timely give
its notice of exercise, Tenant will be deemed to have waived its option to
extend.
LATE PAYMENT DISHONORED CHECK: In the event that rent is not paid by the 5th
business day after Landlord's written notice of the delinquency, or in the
event of a dishonored bank check from Tenant to Landlord, because actual
damages for said late payments and all dishonored bank checks are extremely
difficult to ascertain. Tenant agrees to pay 10% of the base monthly rental as
liquidated damages for late payment and additionally shall pay to Landlord
interest at the maximum rate of interest not prohibited by law until paid.
SECURITY DEPOSIT: Landlord acknowledges receipt of an additional amount of Seven
Hundred and Fifty Thousand and 00/100ths Dollars ($750,000.00), as a security
deposit for the full and faithful performance of each and every term, covenant
and condition of this lease. Such Security Deposit shall be paid as follows:
The sum of Two Hundred Fifty Thousand and 00/100ths Dollars ($250,000.00) is
hereby received representing the cash Security Deposit. Upon the Initial Public
Offering or no later than June 15, 2000, Tenant shall deliver to Landlord an
unconditional irrevocable letter of credit in the amount of
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Five Hundred Thousand and 00/100ths Dollars ($500,000.00) issued by a bank which
shall be reasonably acceptable to Landlord and naming Landlord as beneficiary
thereunder, as security for the faithful performance by Tenant of all of
Tenant's obligations under this Lease. This letter of credit may be reduced in
half upon Tenant becoming a public company. This letter of credit will be
terminated upon tenant achieving one entire quarter (3 straight months) of
profitability. So long as no default by tenant then exists hereunder, upon
Tenant vacating the premises said security deposit shall be returned to Tenant
after first deducting any sums owing to Landlord. If this lease be sooner
terminated for reason other than default by Tenant, said sum shall likewise be
returned. Landlord shall not be required to keep the security deposit separate
from its general funds, and Tenant shall not be entitled to any interest on such
deposit. Landlord may use or apply or retain the whole or any part of the
security deposit as may be necessary to (a) to remedy Tenant's default in the
payment of any rent, (b) to repair damage to the Premises caused by Tenant, (c)
to clean the premises upon termination of this Lease, (d) to reimburse Landlord
for the payment of any amount which Landlord may reasonably spend or be required
to spend by reason of Tenant's default, or (e) to compensate Landlord for any
other loss or damage which Landlord may suffer by reason of Tenant's default.
TENANT IMPROVEMENTS: Landlord shall provide to Tenant a turn-key interior
improvement as described by the plans and specifications attached hereto as
"Exhibit A". Any additional improvements not included in Exhibit A shall be at
the sole cost and expense of the Tenant.
POSSESSION: Tenant agrees that in the event of the inability of Landlord to
deliver to Tenant Possession of said premises at the commencement of said term,
Landlord shall not be liable for any damage caused thereby, nor shall this
lease be void or voidable, but Tenant shall not be liable for rent until such
time as Landlord offers to deliver possession of said premises to Tenant. The
expiration date of the term shall be extended by the same number of days that
the Tenant's possession of the premises was delayed. If Tenant with Landlord's
consent takes possession prior to the commencement of the said term, Tenant
shall do so subject to all the covenants and conditions hereof, except the
obligation to pay rent.
HOLDING OVER: If Tenant holds possession hereunder after the expiration of the
term of this lease with consent of Landlord, Tenant shall become a tenant from
month-to-month upon all of the terms and conditions herein specified, at a
rental of one hundred and fifty percent (150%) of the last paid base monthly
rent due in this lease.
ENTRY BY LANDLORD: Landlord and the agents and employees of Landlord shall have
the right to enter upon said premises at all reasonable times to inspect the
same to see that no damage has been or is done and to protect any and all
rights of Landlord and to post such reasonable notices as Landlord may desire
to protect the rights of the Landlord. Landlord may for a period commencing
ninety (90) days prior to the end of the lease term, or any extension hereof,
have reasonable access to the premises for the purpose of exhibiting the same
to prospective tenants and may place upon said premises any usual or ordinary
"for sale" or "to lease" signs.
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CONDITION AND REPAIRS: Landlord represents and warrants to Tenant that, to the
best of Landlord's knowledge, as of the date that Landlord delivers possession
of the Premises to Tenant, all structural portions of the Premises, including,
without limitation, the roof, the foundation, exterior walls and interior
load-bearing walls; all paved surfaces; the roof membrane; and all sewer,
plumbing and HVAC systems currently serving the Premises will be in good
operating condition, order and repair. Subject to the foregoing representation
and warranty, by taking possession of the Premises, Tenant shall be deemed to
have accepted the Premises in its then current condition, "as is", subject to
all applicable laws. Landlord agrees to correct all items reasonably set forth
in Tenant's written punchlist which must be submitted to Landlord within thirty
days of Landlord turning over possession to Tenant. Tenant shall at Tenant's
sole cost and expense, maintain, repair and keep the interior of the premises
and each and every part thereof and all appurtenances thereto (including
without limitation, wiring including lamps and ballast's, ceiling grids and
acoustical tiles, plumbing, hot water system, sewage system, heating and air
condition installations, glass, storefront, window frames, doors (interior and
exterior), carpeting, interior walls (including drywall, wallpaper and paint)
and skylights, in or bordering the premises), in good condition and repair
during the term of this lease. This obligation by Tenant to maintain and to
repair the premises shall be binding upon Tenant whether said repair is caused
by normal wear and tear, sudden breakage, misuse, or any insured or uninsured
loss. Tenant shall procure and maintain at Tenant's expense a heating and air
conditioning maintenance contract. Landlord reserves the right to procure and
maintain the heating and air conditioning maintenance contract, and Tenant
shall reimburse Landlord, upon demand for the cost thereof. Tenant shall
furnish and install all expendables including light bulbs used in premises. In
the event that any alterations, repairs or acts of any kind shall be required
to be done by reason of Tenant's occupancy in connection with the premises or
any part thereof (including remodeling) under the provisions of any law,
ordinance or rule now in force of hereafter enacted by municipal, state or
national authority, the same shall be made at the cost and expense of Tenant.
All repairs, alterations and improvements that may be required under this lease
(except as stated in Exhibit A) shall be done at the cost and expense of Tenant
and only with the written consent of Landlord first obtained by Tenant and not
unreasonably withheld. All work shall be done using a licensed contractor and
in compliance with all laws and in a good and workmanlike manner using new
materials of good quality. Tenant agrees that if Tenant shall make any repairs,
alterations or improvements, excepting emergency repairs, Tenant will not take
such action until two (2) days after receipt by it of the written consent of
Landlord required by this paragraph. Tenant will at all times permit any
notices to be posted and to be remain posted until the completion and
acceptance of such work.
Tenant shall reimburse Landlord all costs and expenses paid or incurred by
Landlord in protecting, operating, maintaining, managing, repairing and
preserving the project and all parts thereof. Landlord shall maintain and
repair the structural roof elements, exterior wall, foundations, other
structural portions of the premises, and the electrical and plumbing systems
located outside of the leased premises without the right to recapture such cost
from Tenant.
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In the event Tenant should fail (after applicable notice and cure periods) to
make the repairs required of Tenant forthwith upon notice by Landlord,
Landlord, in addition to all other remedies available hereunder or by law, and
without waiving any alternative remedies, may make the same; and Tenant agrees
to repay Landlord as additional rent the cost as part of the rental payable on
the next day upon which rent becomes due. Tenant expressly waives the benefits
of the provisions of subsection 1 of Section 1932 and Sections 1941 and 1942 of
the Civil Code of California and all right to make repairs at the expense of
Landlord as provided in Section 1942 of that Code, and agrees upon the
expiration of the term of this lease or sooner termination to surrender the
premises in the same condition as received. Landlord, after written notice by
Tenant of the necessity thereof, and should the same not be caused by reason of
any negligent act or omission of the Tenant or its agents, servants or
employees, shall make necessary repairs to the roof, exterior walls (excluding
repair of glazing), foundations and other structural portions of the premises
within a reasonable time. Landlord shall not be liable to Tenant for injury to
Tenant, its employees, agents, invitees, damage to tenant's property or loss of
Tenant's business or profits nor shall Tenant be entitled to terminate this
lease or to any reduction in or abatement of rent by reason of Landlord's
failure to perform any maintenance or repairs to the project until tenant shall
have first notified Landlord, in writing, of the need for such maintenance or
repairs and then only after Landlord shall have had a reasonable period of time
following its receipt of such notice within which to perform such maintenance
or repairs.
WASTE AND ALTERATIONS: Tenant shall not do, or permit anything to be done in or
about the leased premises, the building, the common areas or the project which
does or could (i) interfere with the rights of any other tenants or occupants
of the building or complex, (ii) jeopardize the structural integrity of the
building, or (iii) cause damage to any part of the building or project. Tenant
shall not operate any equipment within the leased premises which does or could
(i) injure, vibrate or shake the premises or the building, (ii) damage,
overload, corrode, or impair the efficient operation of any electrical,
plumbing, sewer, heating and ventilating or air conditioning systems within or
servicing the premises or the building, or (iii) damage or impair the efficient
operation of the sprinkler system (if any) within or servicing the leased
premises or the building. Tenant shall not install any equipment or antennas on
or make any penetrations of the exterior walls or roof of the building. Tenant
shall not place any loads upon the floors, walls, ceiling or roof systems which
could endanger the structural integrity of the building or damage its floors,
foundations or supporting structural components. Tenant shall not place any
explosive, flammable or harmful fluids, including Hazardous Materials, or other
waste materials in the drainage systems of the building or the project. Tenant
shall not drain or discharge any fluids in the landscape areas or across the
paved areas of the project. Tenant shall not use any area located outside of
the leased premises for the storage of its materials, supplies, inventory or
equipment and all such materials, supplies, inventory and equipment in the
building or complex in which the demised premises shall at all times be stored
within the leased premises.
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Tenant shall not make or permit to be made any alterations of, charges in or
additions to the premises without the prior written consent of Landlord. All
alterations, additions and improvements, including fixtures, made to or on the
premises, except unattached movable business fixtures, shall be made at the
sole cost and expense of Tenant and, upon installation, shall be the property
of Landlord and shall become part of the premises and be surrendered to
Landlord. Tenant shall notify Landlord within thirty (30) days before the end
of the term to determine if Landlord desires to have Tenant remove all or any
part of the alterations or improvements and to restore the premises to the
condition existing prior to the alterations and improvements and to restore the
premises to the condition existing prior to the alterations and improvements,
at Tenant's sole cost and expense, reasonable wear and tear expected.
NOISE AND EMISSIONS: All noise generated by tenant in its use of the premises
shall be confined or muffled so that it does not interfere with the businesses
of or annoy other tenants of the building or the project. All dust, fumes,
odors and other emissions generated by Tenant's use of the premises shall be
sufficiently dissipated in accordance with sound environmental practices and
exhausted from the premises in such a manner so as not to interfere with the
businesses of or annoy other tenants of the project, or cause damage to the
premises or the project or component part thereof or the property of other
tenants of the building or project.
ABANDONMENT: Tenant shall not abandon the premises at any time during the term;
and if Tenant shall abandon, said premises, or be dispossessed by process of
law, or otherwise, any personal property belonging to Tenant and left on the
premises shall be deemed to be abandoned, at the option of Landlord, except
such property as may be mortgaged to Landlord.
ASSIGNMENT AND SUBLETTING: Tenant shall not assign this lease, nor any right
hereunder, nor sublet the premises, nor any part thereof, without the prior
written consent of Landlord. In exercising its reasonable discretion Landlord
may consider all commercially relevant factors involved in the leasing of the
premises including but not limited to the a) the creditworthiness and financial
stability of the prospective assignee or subtenant; b) references of prior
landlords; c) the past history of such subtenant, with respect to involvement
in litigation and bankruptcy proceedings; d) the impact of said subtenant or
assignee and proposed use of the premises on pedestrian and vehicular traffic,
other tenants, and parking; e) the use, generation or disposal of hazardous
materials. If tenant is a corporation, any dissolution, merger, consolidation
or other reorganization of tenant, or the sale or other transfer in the
aggregate over the lease term of a controlling percentage of the capital stock
of tenant, shall be deemed a voluntary assignment of tenant's interest in this
lease. The phrase "controlling percentage" means the ownership of and the right
to vote stock possessing more than fifty percent of the total combined voting
power of all classes of tenant's capital stock issued and outstanding and
entitled to vote for the election of directors. If tenant is a partnership, a
withdrawal or change, whether voluntary, involuntary or by operation of law, of
any general partner, or the dissolution of the partnership, shall be deemed a
voluntary assignment of Tenant's interest in this lease unless said fifty
percent (50%) is purchased by an entity which has a net worth greater than
tenant's or guarantor's.
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No consent to any assignment of this lease, or any subletting of said premises,
shall constitute a waiver or discharge of the provisions of this paragraph,
except as to the specific instance covered thereby; nor shall this lease nor
any interest therein be assignable by action of law including bankruptcy, both
involuntary and voluntary, and to Trustee, Sheriff, Creditor or Purchaser at
any judicial sale, or any officer of any court or receiver except if appointed
as herein specifically provided shall acquire any right under this lease or to
the possession or use of the premises or any part thereto without the prior
written consent of Landlord. The acceptance of rent by landlord from any person
or entity other than tenant or the acceptance of rent by landlord from tenant
with knowledge of a violation of the provisions of this article, shall not be
deemed to be a waiver by Landlord of any provision of this article or this
lease or to be a consent to any subletting by tenant or any assignment or
encumbrance of tenant's interest in this lease.
CONDITIONS TO LANDLORD'S CONSENT: If Landlord elects to consent, or shall have
been ordered to so consent by a court of competent jurisdiction, to such
requested assignment, subletting or encumbrance, such consent shall be
expressly conditioned upon the occurrence of each of the conditions below set
forth.
A. Landlord having approved in form and substance the assignment or
sublease agreement, which approval shall not be unreasonably withheld by
Landlord if the requirements of this lease are otherwise complied with.
B. No default by Tenant (after applicable notice and cure period) shall
then exist. Tenant having reimbursed to Landlord all reasonable costs and
attorneys fees incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting, assignment or encumbrance
not to exceed ($1,000) per transaction.
C. Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement, or assignment agreement,
and all related agreements.
D. Tenant having paid, or having agreed in writing to pay as future
payments, to Landlord fifty (50%) percent of all Assignment Consideration
or Excess Rentals to be paid to Tenant or to any other on Tenant's behalf
or for Tenant's benefit for such assignment or subletting as follows: If
Tenant assigns its interest under the Lease and if all or a portion of the
consideration for such assignment is to be paid by the assignee at the
time of the assignment, that Tenant shall have paid to Landlord and
Landlord shall have received an amount equal to Fifty (50%) percent of the
Assignment Consideration or Excess Rentals so paid or to be paid whichever
is the greater) at the time of the assignment by the assignee; or if
Tenant assigns its interest under this Lease and if Tenant is to receive
all or a portion of the consideration for such assignment in future
installments, that Tenant and Tenant's assignee shall have entered into a
written agreement with and for the benefit of Landlord reasonably
satisfactory to Landlord and its counsel whereby Tenant and Tenant's
assignee jointly agree to pay to
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Landlord an amount equal to Fifty (50%) percent of all such future
Assignment Consideration installments to be paid by such assignee as and
when such Assignment Consideration is so paid.
If Tenant subleases the Leased Premises, that Tenant and Tenant's
subtenant shall have entered into a written agreement with and for the
benefit of Landlord reasonably satisfactory to Landlord and its counsel
whereby Tenant and Tenant's subtenant jointly agree to pay to Landlord
Fifty (50%) percent of all Excess Rentals to be paid by such subtenant as
when such Excess Rentals are so paid.
The consent by Landlord to any subletting or assignment shall not
release Tenant from its primary obligations or alter the primary liability
of Tenant to pay the rent and perform and comply with all of the
obligations of Tenant to be performed under this lease.
INDEMNIFICATION OF LANDLORD: Tenant, shall, during the term of this lease,
indemnify and save harmless Landlord and any agents of Landlord from any and all
loss, damage, claims of damage, obligations, cause or causes of action, or
liabilities of any kind or nature (including reasonable costs of attorney's fees
if Landlord is made a party to any action which Tenant's indemnity runs
hereunder) by reason of injury or death of any person or persons or damage to
any property of any kind and to whomsoever belonging, including injury or death
to the person or damage to the property of Tenant, Tenant's officers, directors,
employees, agents, guests, subtenants and assignees, concessionaires and
licensees, and any other person, firm or corporation selling or manufacturing
merchandise or services upon or from the demised premises, or any part thereof,
from any cause or causes whatsoever which result from Tenant's use or from any
other activity done, permitted or suffered by Tenant. As a material part of the
consideration to Landlord, Tenant hereby assumes all risk of damage to property
or injury to persons in or about the Premises from any cause whatsoever (except
that which is caused by the sole active negligence or willful misconduct by
Landlord or its Agents or by the failure of Landlord or its agents to observe
any of the terms and conditions of this lease, if such failure has persisted for
an unreasonable period after written notice of such failure, against which
landlord shall indemnify, defend, and hold harmless tenant). Except as otherwise
provided in this lease, Landlord shall not be liable for injury or damage which
may be sustained by Tenant, or its employees, invitees or customers, goods,
wares, merchandise or property of tenant, its employees, invitees or customers
or any other person in or about the premises caused by or resulting from fire,
earthquake, steam, electricity, gas, water or rain, which may leak or flow from
or into any part of the premises, or from the breakage, leakage, obstruction or
other defects of the pipes, sprinklers, wires, appliances, plumbing, HVAC or
lighting fixtures of the same, whether the said damage or injury results from
conditions arising upon the premises or upon other portions of the building, or
from other sources. Landlord shall not be liable for any damage arising from any
act or neglect of any other tenant of the project. Tenant's obligations under
this paragraph shall survive the termination of this lease.
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INSOLVENCY BANKRUPTCY: Either (a) the appointment of a receiver (except a
receiver mentioned in paragraph 11 or hereof) to take possession of all or
substantially all of the assets of Tenant, or (b) a general assignment by
Tenant for the benefit of creditors, or (c) any action taken or suffered by
Tenant under any insolvency or bankruptcy act shall constitute a breach of this
lease by Tenant. Upon the happening of any such event this lease shall
terminate days after written notice of termination from Landlord to Tenant.
DEFAULT: In the event of any breach of this Lease by Tenant, then Landlord
besides other rights or remedies Landlord may have, shall have the immediate
right of re-entry and may remove all persons and property from the premises;
such property may be removed and stored in a public warehouse or elsewhere at
cost of, and for the account of Tenant. Should Landlord elect to re-enter, as
herein provided, or should Landlord take possession pursuant to legal
proceedings or pursuant to any notice provided for by the law, Landlord may
terminate this lease. No such re-entry or taking possession of said premises by
Landlord shall be construed as an election on its part to terminate this lease
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction. Landlord
may at any time thereafter elect to terminate this lease for such previous
breach. Should Landlord at any time terminate this lease for any breach, in
addition to other remedies Landlord may have, Landlord may recover from Tenant
all damages, including reasonable attorney's fees, which Landlord may incur by
reason of such breach, including costs of recovering the premises and any
attorney's fees incurred therein. Landlord may also recover from Tenant the
worth at the time of award of the amount, if any, by which the unpaid rent and
charges equivalent to rent for the balance of the term after the time of the
award exceeds the amount of such rental loss that Tenant proves could be
reasonably avoided, in accordance with California Civil Code Section 1951.2 or
other statute of similar effect. The foregoing remedies of Landlord shall not
be exclusive, but shall be cumulative and in addition to all remedies now or
hereafter allowed by law or elsewhere provided for. In addition to other
remedies Landlord may, if Tenant breaches this Lease and abandons the premises
before the end of the term, or if Tenant's rights to possession are terminated
by Landlord because of the breach of this Lease, then in either case, Landlord
may recover from the aggregate of all amounts Landlord is permitted to recover
from Tenant under Section 1951.2 of the California Civil Code and any other
applicable law, including:
(a) The worth at the time of award of the unpaid rent which had been
earned at the time of termination.
(b) The worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award
exceeds the amount of such rental loss that the Tenant proves could have
been reasonably avoided.
(c) The worth at the time of award of the amount by which the unpaid rent
for the balance of the term after the time of award exceeds the amount of
such rental loss that the Tenant proves could be reasonably avoided.
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(d)Any other amount necessary to compensate the Landlord for all the
detriment proximately caused by the Tenant's failure to perform its
obligations under the Lease, or which in the ordinary course of things
would be likely to result therefrom.
The "worth at the time of award" of the amounts referred to in the
foregoing subparagraphs (a) and (b) shall be computed by allowing
interest at the rate of Ten Percent (10%) per annum, but not more that
the maximum rate permitted by law on each rental installment from the
date the same was due hereunder, to the time of award. The "worth at
the time of award" of the amount referred to in the foregoing
subparagraph (c) shall be computed in accordance with Subdivision (b)
or Section 1951.2 of the California Civil Code. As used herein, the
term "time of award" shall mean either the date upon which the Tenant
pays to the Landlord the amount recoverable by Landlord as herein
above set forth, or the date of entry of any determination, order of
judgment of any court, other legally constituted body, or any
arbitrators determining the amount recoverable, whichever first
occurs. Any claim for damages pursuant to the foregoing provisions,
shall be immediately enforceable by Landlord against Tenant by suit,
and shall be provable in any bankruptcy or insolvency proceedings
involving Tenant.
In addition to the other rights and remedies set forth herein,
Landlord shall have the right to continue this Lease in effect, as
permitted by Section 1951.4 of the California Civil Code, to enforce,
by suit or otherwise, all covenants and conditions hereof to be
performed or complied by Tenant and exercise of all of Landlord's
rights and remedies under this Lease, including the right to recover
rent from Tenant as it becomes due under this Lease, even though
Tenant has breached this Lease and abandoned the premises. If as above
provided, a receiver is appointed for the account of Tenant, or
Landlord takes any other actions, whether accepting the keys to the
premises, or otherwise, no such actions shall constitute or be
construed as an election by Landlord to terminate this Lease or
Tenant's right to possession of the premises, unless a written notice
of such intention be given to Tenant.
RECEIVERSHIP: Neither the application for the appointment of a receiver nor
the appointment of a receiver shall be construed as an election by Landlord to
terminate this Lease or Tenant's right to possession of the premises, unless a
written notice of such intention is given to Tenant.
SURRENDER OF LEASE: The voluntary or other surrender of this lease by Tenant,
or a mutual cancellation thereof, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subleases or subtenancies, or
may, at the option of Landlord, operate as an assignment to Landlord of any or
all such subleases or subtenancies. Immediately prior to the expiration or
sooner termination of this Lease, Tenant shall remove all of Tenant's signs
from the exterior of the Building and shall remove all of Tenant's equipment,
trade fixtures, furniture, supplies, wall decorations and other personal
property from the Leased Premises, and shall vacate and surrender the Leased
Premises to Landlord in the same condition, broom clean freshly repainted, as
existed at the Lease Commencement Date.
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Landlord, at Tenant's expense shall retain a mechanical contractor to service
all heating, ventilation and air conditioning equipment, and Tenant shall pay
the cost to restore (or replace as required), said equipment to good working
order. Tenant shall repair all damage to the Leased Premises caused by Tenant
or by Tenant's removal of Tenant's property and all damage to the exterior of
the Building caused by Tenant's removal of Tenant's signs. Tenant shall patch
and refinish, to Landlord's reasonable satisfaction, all penetrations made by
Tenant or its employees to the floor, walls or ceiling of the Leased Premises,
whether such penetrations were made with Landlord's approval or not. Tenant
shall replace all stained or damaged ceiling tiles and shall repair or replace,
as necessary, all wall coverings and clean or replace, as may be required,
floor coverings to the reasonable satisfaction of Landlord. Tenant shall
replace all burned out light bulbs and damaged or stained light lenses, and
shall repaint all painted walls. Tenant shall repair all damage caused by
Tenant to the exterior surface of the Building and the paved surfaces of the
outside areas adjoining the Leased Premises and, where necessary, replace or
resurface the same. Additionally, Tenant shall, prior to the expiration or
sooner termination of this Lease, remove any improvements, constructed or
installed by Tenant which Landlord requests to be so removed by Tenant and
repair all damage caused by such removal. If the Leased Premises are not
surrendered to Landlord in the condition required by this Article at the
expiration or sooner termination of this Lease, Landlord may, at Tenant's
expense, so remove Tenant's signs, property and/or improvements not so removed
and make such repairs and replacements not so made or hire, at Tenant's
expenses, independent contractors to perform such work. Tenant shall be liable
to Landlord for all costs reasonably incurred by Landlord in returning the
Leased Premises to the required condition.
LITIGATION EXPENSES: If either party shall bring an action against the other by
reason of breach of any covenant, warranty or condition hereof, or otherwise
arising out of this lease, whether for declaratory or other relief, the
prevailing party in such suit shall be entitled to its costs of suit and
reasonable attorney fees, which shall be payable whether or not such action is
prosecuted to judgment. Prevailing party within the meaning of this paragraph
shall include, without limitation, a party who brings an action against the
other after the other's default, if such action is dismissed upon the other's
payment of the sums allegedly due or performance of the covenants allegedly
breached, or if the plaintiff or cross-complainant obtains substantially the
relief sought by it in the action.
UTILITIES: Tenant shall pay for all the fuel, gas, oil, heat, electricity,
water, trash, telephone, janitorial and all other materials and services which
may be furnished to or used in or about said premises during the term of the
lease. Landlord reserves the right to procure and maintain a common garbage
container, and/or common utilities; and Tenant shall reimburse Landlord, upon
demand for Tenant's pro-rata share of the cost thereof. Landlord shall not be
liable to Tenant for injury, damage to Tenant's property, loss of Tenant's
business or profits from any failure, interruption, rationing or other
curtailment in the supply of electric, gas, water or other utilities from
whatever cause.
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LIENS: Tenant shall keep the premises and building of which the premises are a
part free and clear of any liens and shall indemnify, hold harmless and defend
Landlord from any liens and encumbrances arising out of any work performed or
materials furnished by or at the direction of Tenant. In the event any lien is
filed, Tenant shall do all acts necessary to discharge any lien within ten (10)
days of filing, or if Tenant desires to contest any lien, then Tenant shall
deposit with Landlord one and one-half times the amount of said lien as security
for the payment of said lien claim. In the event Tenant shall fail to pay any
lien claim when due or shall fail to deposit the security with Landlord, then
Landlord shall have the right to expand all sums necessary to discharge the lien
claim, and Tenant shall pay as additional rental, when the next rental payment
is due, all sums expended by Landlord in discharging any lien, including
attorney fees and costs.
TAXATION: As additional rental Tenant agrees to pay to Landlord an amount equal
to the total real property taxes, assessments, levies and other charges of any
kind or nature whatsoever, general and special (including all installments of
principal and interest required to pay any general or special assessments for
public improvements) and any increases resulting from any reassessments, now or
hereafter imposed by any government, quasi-government, or special district
having the direct or indirect power to tax or levy assessments, which are levied
or assessed for whatever reason against the project or any portion thereof
including the land upon which said project is located and appurtenances thereto,
or landlord's interest therein, or the fixtures, equipment, and other property
of landlord that is an integral part of the project and located thereon. In the
event the leased premises shall be assessed with other property of Landlord,
Landlord shall use its best efforts to have the leased premises separately
assessed, but if Landlord cannot obtain such separate assessment, the Tenant
shall pay the total taxes assessed against all real property within such
assessment that the square footage of real property within the leased premises
bears to the total square footage of all rentable real property excluding common
areas within the assessment. A like calculation shall be made if the
improvements contained within the leased premises are assessed with other
improvements; however, Tenant shall be solely responsible for any increase in
taxes or assessments caused by their own construction or improvements to the
leased premises. If, during the term of this lease, any special tax or
assessment shall be levied solely against Landlord's individual parking spaces
adjacent to the building of which the leased premises are a part, Landlord shall
pay such special tax or assessment and Tenant shall reimburse Landlord upon
receipt of a copy of Landlord's tax or assessment bill its proportionate share
thereof in the ratio set forth above.
USER PROHIBITED: Tenant shall not use, or permit said premises, or any
part thereof, to the used, for any purpose of purposes other than the purpose or
purposes for which the said premises are hereby leased; and no use shall be made
or permitted to be made of the said premises, nor acts done, which will increase
the existing rate of insurance upon the building in which said premises may be
located, or cause a cancellation of any insurance policy covering said building,
or any part thereof, not shall Tenant sell, or permit to be kept, used, or sold,
in or about said premises, any article which may be prohibited by the standard
form of fire insurance policies. Tenant shall, at Tenant's sole cost and
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expense, comply with any and all requirements, pertaining to said premises, of
an insurance organization or company, necessary for the maintenance of
reasonable fire and public liability insurance, covering said building and
appurtenances.
INSURANCE: Tenant shall at all times maintain commercial general liability,
plate glass, worker's compensation and property damage insurance to protect
against any liability to the public, or to any employee, agent or invitee of
Tenant or Landlord, incident to the use of or resulting from any accident
occurring in or about the premises, with limits of liability of not less than
$3,000,000.00 per occurrence/$5,000,000.00 aggregate. All policies of insurance
provided for herein shall: (a) Be written in companies authorized to do
business in the State of California, and rated "A" or better in Best's
Insurance Reports, or as specifically otherwise accepted by Landlord by
written consent; (b) Be written as primary policies of insurance and not
contributing with or in excess of any coverage which Landlord may carry, and
cover, insurance and name Landlord as an additional assured; (c) Contain an
endorsement requiring thirty (30) days written notice to Landlord prior to
cancellation or any change in coverage. All public liability insurance and
property damage insurance shall insure performance by Tenant of the indemnity
provisions of this lease and the policies shall contain cross-liability
endorsements and a waiver of all rights of subrogation against landlord. In no
event shall the limits of said policies be considered as limiting the liability
of tenant under this lease.
Landlord shall purchase and keep in force insurance covering the building and
common areas. Said insurance shall include, if available, fire, public
liability, earthquake, flood, property damage, extended coverage perils, loss
of rents and similar coverage and in amounts as may be deemed necessary by
Landlord or as may be required by any mortgage lender. Landlord will not carry
insurance on Tenant's possessions or business operations. The provisions of
this paragraph shall in no way limit the right of Landlord to charge to tenants
of the project as additional rent the pro-rata costs incurred by Landlord,
including deductibles incurred by Landlord as a result of any insured and
uninsured loss, in providing such property insurance.
MUTUAL WAIVER OF SUBROGATION: Landlord hereby releases Tenant, and Tenant
hereby release Landlord and its respective partners and officers, agents,
employees and servants, from any and all liability for loss, damage or injury
to the property of the other in or about the Leased Premises which is caused by
or results from a peril or event or happening which would be covered by
insurance required to be carried under the terms of this Lease, or is covered
by insurance actually carried and in force at the time of the loss, by the party
sustaining such loss; provided, however, that such waiver shall be effective
only to the extent permitted by the insurance covering such loss and to the
extent such insurance is not prejudiced thereby.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS: Tenant shall, at his sole cost and
expense, comply with all of the requirements of all Municipal, State and
Federal authorities now in force, or which may hereafter be in force,
pertaining to the said premises, and shall faithfully observe in the use of the
premises all Municipal ordinances and State and Federal statutes now in force
or which may hereafter be in force. The judgment
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of any court of competent jurisdiction, or the admission of Tenant in any action
or proceeding against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any such ordinance or statute in the use of the premises,
shall be conclusive of that fact as between Landlord and Tenant.
EFFECTS OF CONVEYANCE: The term "Landlord" as used in this lease, means only
the owner for the time being of the land and building containing the premises.
In the event of any sale of said land or building, the Landlord shall be and
hereby is entirely freed and relieved of all covenants and obligations as the
Landlord hereunder accruing after the date of said transfer, and it shall be
deemed and construed, without further agreement between the parties that the
purchaser of said property shall assume and agree to carry out any and all
covenants of this lease on the part of the Landlord. The Landlord shall
transfer and deliver the security, as such, to the purchaser of said property,
and thereupon the Landlord shall be discharged from any further liability in
reference thereto.
ADVERTISEMENTS AND SIGNS: Landlord reserves the right to the use of the exterior
walls and the roof of the premises and of the building of which the premises
are a part. Tenant shall not inscribe, paint or affix any signs,
advertisements, place card or awnings on the exterior or roof of the premises
or upon the entrance doors, window, or the sidewalk on or adjacent to the
premises without the prior written consent of Landlord. Any signs so placed on
the premises shall be so placed upon the understanding and agreement that
Tenant will remove same at the termination of this lease and will repair any
damage or injury to the premises caused thereby, and if not so removed by
Tenant, then Landlord may remove it at Tenant's expense.
DESTRUCTION OF PREMISES: If the building in which the herein demised premises
is situated shall be damaged or destroyed by fire, earthquake, act of God, or
the elements, Tenant shall give immediate notice thereof to Landlord and
Landlord shall forthwith repair the same, provided that there are sufficient
proceeds from said insurance to cover the cost of restoration (assuming
Landlord is carrying the insurance required to be carried by landlord by this
lease), and provided such repairs can be made under the laws and regulations of
State, County or Municipal authorities, but such destruction or damage shall in
no event annul or void this lease. Tenant shall be entitled to a proportionate
deduction of rent while such repairs are being made, such proportionate
deduction to be based upon the extent to which the making of such repairs shall
interfere with the business carried on by the Tenant in the said premises. If
such repairs can not be made in said manner in sixty (60) days, the Landlord
may, at its option, make same within a reasonable time, this lease continuing
in full force and effect, but the Tenant shall be entitled to a proportionate
deduction of rent while such repairs are being made as herein above provided.
In the event that the Landlord does not so elect to make such repairs, this
lease may be terminated at the option of either party. In the event that the
Landlord within sixty (60) days of the date of the destruction does not notify
Tenant in writing of Landlord's intent to elect to make such repairs, this
lease may be terminated at the option of either party. In respect to any damage
or destruction which Landlord is obligated to repair or may elect to repair
under the terms of this paragraph, the provision of Section 1932, Subdivision
2, and of Section 1933,
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Subdivision 4, of the Civil Code of the State of California are waived by
Tenant.
CONDEMNATION: The word "condemnation" or "condemned" as used in this lease
shall mean the exercise of, or intent to exercise the power of eminent domain
expressed by the condemn in any writing as well as by the filing of any action
or proceeding for such purpose, by any entity having the right of power of
eminent domain, and shall include a voluntary sale by Landlord to any such
entity, either under threat of condemnation or while condemnation proceedings
are pending, and "condemnation" shall occur upon the actual physical taking of
possession by the condemnor. In the event the demised premises are condemned,
this lease shall terminate, and Landlord shall be entitled to and shall receive
the total amount of any award made with respect thereto, regardless of whether
the award is based on a single award or a separate award as between Landlord
and Tenant, and, if and to the extent that any such award or awards shall be
made to Tenant or to any person, firm, or corporation claiming through or under
Tenant. Tenant hereby irrevocably assigns to Landlord all of its right, title
and interest in and to any and all such awards. The foregoing notwithstanding,
Landlord shall turn over to Tenant that portion of any such award received by
Landlord hereunder which is attributable to Tenant's fixtures and equipment
which are condemned as part of the real property but which Tenant would
otherwise be entitled to remove, and the appraisal of the court, or the
condemning entity if the condemnation is not determined by a court, of the
amount of any such award allocatable to such items shall be conclusive. If
total award be fixed by negotiation and be greater than the condemning entity's
appraisal, the portion attributable to Tenant's fixtures and equipment
aforesaid shall be the same proportion of the actual award as said fixtures and
equipment were of the entity's appraisal.
WAIVER: No waiver by Landlord of any provision of this lease shall be deemed to
be a waiver of any other provisions hereof or of any subsequent breach by
Tenant of the same or any other provisions. Landlord's consent to or approval
of any act by Tenant requiring Landlord's consent or approval shall not be
deemed to render unnecessary the obtaining of Landlord's consent to or approval
of any subsequent act by tenant, whether or not similar to the act so consented
to or approved.
SUBORDINATION: Tenant agrees that this lease is and shall be subject and
subordinate to any mortgage, deed of trust or other instrument of security
which has been or shall be placed on the land and building or land or building
of which the premises form a part, and this subordination is hereby made
effective without any further act of Tenant. The Tenant shall, at any time
hereafter, within ten days, execute any commercially reasonable instruments,
releases or other documents that may be required by any mortgagee, mortgagor or
trustor or beneficiary under any deed of trust for the purpose of subjecting
and subordinating this lease to the lien of any such mortgagee, deed of trust
or other instrument of security, and the failure of the Tenant to execute any
such instruments, release or documents, shall constitute a default hereunder.
NOTICES: It is agreed between the parties hereto that any notice required
hereunder or by law to be served upon either of the parties shall be in
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writing and shall be delivered personally upon the other or sent by registered
or certified mail, postage prepaid, addressed to the demised premises, in the
instance of Tenant, and to the place where rental is paid, in the instance of
Landlord, or to such other address as may be from time to time furnished in
writing by Landlord to Tenant or by Tenant to Landlord, each of the parties
hereto waiving personal or any other service than as herein provided. Notice by
registered or certified mail shall be deemed to be communicated forty-eight
(48) hours from the time of mailing.
SUCCESSORS AND ASSIGNS: The covenants and agreements contained in this lease
shall be binding upon the parties hereto and upon their respective heirs,
executors, administrators, successors and assigns; and all of the parties
hereto shall be jointly and severally liable hereunder.
REMEDIES CUMULATIVE: The remedies available to Landlord under the terms of this
agreement and in law or equity shall be cumulative and the exercise of one
remedy shall not constitute an election of remedies.
SEVERABILITY: Any provision of this lease which shall prove to be invalid, void
or illegal shall in no way affect, impair or invalidate any other provision
hereof, and such remaining provisions shall remain in full force and effect.
TIME: Time is of the essence of this lease.
MARGINAL CAPTIONS: The captions in the margins of this lease are for
convenience only and are not a part of this lease and do not in any way limit or
amplify the terms and provisions of this lease.
TRASH: All trash containers belonging to Tenant are to be stored in the
supplied trash enclosure or within the Tenant's rented space.
LEASED PREMISES: The leasable area is measured to the outside edge of the
outside walls and drip lines to the centerline of any demising walls (if there
are any), including a pro rata share of the electrical room and other common
spaces and for purposes of this lease, agreed between Landlord and Tenant to
contain said number of square feet.
COMMON AREAS: Tenant shall have the exclusive right to use the common areas
solely for the purposes which they were intended and for no other purposes
whatsoever. Tenant and its employees and invitees shall have the exclusive
right to use all parking spaces. Tenant hereby authorizes Landlord at Tenants
sole expense to tow away from the project and store until redeemed by its owner
any vehicle belonging to Tenant, or Tenant's employees parked in violation of
these provisions. Tenant shall not, at any time, park or permit to be parked
any recreational vehicles, inoperative vehicles or equipment on any portion of
the property. Landlord shall at all times have exclusive control of the common
areas including without limitation the right to prohibit mobile food and
beverages or other vendors from entering the property.
HAZARDOUS & TOXIC SUBSTANCES: Tenant shall comply with all statutes, laws,
ordinances, rules regulations and precautions mandated or advised by any
federal, state or local or governmental agency with respect to the use,
generation, storage or disposal of hazardous, toxic or
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radioactive materials (collectively, "Hazardous Materials"). As herein used,
Hazardous Materials shall include, but not limited to, those materials,
identified in Sections 66680 through 66685 of Title 22 of the California
Administration Code, Division 4, Chapter 30, as amended from time to time, and
those substances defined as "hazardous substances", "hazardous material",
"hazardous wastes", or other similar designations in the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. Section 6901 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801 et seq. And any other governmental statutes, laws,
ordinances, rules, regulations and precautions concerning the environment.
Tenant shall not cause or allow anyone else to cause, any Hazardous Materials to
be used, generated, stored or disposed or on or about the premises, the building
or the project without the prior written consent of Landlord. Landlord shall not
unreasonably withhold approval. Any willful withholding from landlord of
information relating to hazardous materials used or stored by tenant shall
constitute a default under the terms of the lease and shall be cause for lease
termination at Landlord's option. Tenant's prior indemnity shall extend to all
liability, including all foreseeable and unforeseeable consequential damages,
directly or indirectly arising out of the use, generation, storage or disposal
of Hazardous Materials by Tenant or any person claiming under Tenant, including
without limitation, the cost of any required or necessary repairs, cleanup or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
termination of this lease, to the full extent that such action is attributable,
directly or indirectly, to the use, generation, storage or disposal of Hazardous
Materials by Tenant or any person claiming under Tenant in violation of
environmental laws. Neither the written consent by Landlord to the use,
generation, storage or disposal of Hazardous Materials nor the strict compliance
by Tenant with all statutes, laws, ordinances, rules, regulations and
precautions pertaining to Hazardous Materials shall excuse Tenant from Tenant's
obligation of indemnification pursuant to this subsection.
LIMITATION OF LIABILITY: Tenant agrees that in the event of any default or
breach by Landlord with respect to any of the terms of the Lease to be observed
and performed by Landlord (a) Tenant shall look solely to the estate and
property (which is the subject of this lease) of Landlord or any successor in
interest in the property and the Building, for the satisfaction of Tenant's
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord; (b) no other property or assets of Landlord,
its partners, shareholders, officers or any successor in interest shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of Tenant's remedies; (c) no personal liability shall at any time be asserted
or enforceable against Landlord, it's partner's or successors in interest
(except to the extent permitted in (a) above), and no judgment will be taken
against any partner, shareholder, officer or director of Landlord. The
provisions of this section shall apply only to the Landlord and the parties
herein described, and shall not be for the benefit of any insurer nor any other
third party.
SECURITY MEASURES: Tenant hereby acknowledges that Landlord shall have no
obligation whatsoever to provide guard service or any other security
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measures for the benefit of the Premises or the complex in which it is located.
Tenant assumes all responsibility for the protection of Tenant, its agents, and
invitees and the property of Tenant and of Tenant's agents and invitees from
acts of third parties.
ESTOPPEL CERTIFICATES. Upon written request of Landlord, Tenant shall within ten
(10) days execute, acknowledge and deliver to Landlord or its designee, a
written certificate stating (a) the date this Lease was executed, the
Commencement and Expiration Date of the Term; (b) the amount of Rent and
Security Deposit and the date to which such rent has been paid; (c) that this
Lease is in full force and effect and has not been assigned, modified,
supplemented or amended in any way (or if modified stating the nature of such
modification and certifying that this lease as so modified is in full force and
effect); (d) that this lease represents the entire agreement between the parties
and that all obligations, including Tenant Improvements, under this lease have
been performed by Landlord; (e) that on such date there exist no defenses or
offsets that Tenant has against the enforcement of this Lease by Landlord; (f)
or any other matters evidencing the status of this lease that may be required
either by a lender making a loan on the premises or by a purchaser of the
premises. If Tenant shall fail to provide such certificate within ten (10) days
of receipt by Tenant of a written request by Landlord as herein provided and a
second consecutive written request with five (5) days, such failure shall, at
Landlord's election, constitute a default under this lease, and Tenant shall be
deemed to have given such certificate as above provided without modification and
shall be deemed to have admitted the accuracy of any information supplied by
Landlord to a prospective purchaser or mortgagee.
AUTHORITY: If tenant is a corporation, tenant represents and warrants that each
individual executing this lease on behalf of said corporation is duly authorized
to execute and deliver this lease on behalf of tenant in accordance with the
bylaws and/or board of director's resolution of tenant that Tenant is validly
formed and duly authorized and existing, that Tenant is qualified to do business
in California, that Tenant has the full right and legal authority to enter into
this Lease, and that this lease is binding upon tenant in accordance with its
terms.
LANDLORD WARRANTIES: Tenant acknowledges that neither landlord nor any of its
agents made any representations or warranties respecting the project, the
buildings, or the leased premises, upon which tenant relied in entering into
this lease, which are not expressly set forth in this lease. Tenant further
acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the leased premises may be used for tenant's
intended use under existing law or; (ii) the suitability of the leased premises
for the conduct of tenant's business or; (iii) the exact square footage of the
leased premises; that tenant relied solely upon its own investigations
respecting said matters and that upon its execution of this lease, accepts the
leaseable area as specified herein. Tenant expressly waives any and all claims
for damage by reason of any statement, representation, warranty, promise or
other agreement of landlord or landlord's agent(s), if any, not contained in
this lease or in any addenda hereto.
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IN WITNESS WHEREOF the parties hereto have executed this lease agreement the
day and year first above written.
PLEASE READ THIS LEASE CAREFULLY: LANDLORD OR ITS AGENTS OR EMPLOYEES, ARE NOT
AUTHORIZED TO GIVE LEGAL, TAX OR ACCOUNTING ADVICE. IF YOU DESIRE SUCH ADVICE,
CONSULT YOUR ATTORNEY AND/OR ACCOUNTANT BEFORE SIGNING.
LANDLORD
De Guigne Ventures, A California LLC
By: David Dollinger Living Trust
Its: Managing Member
By: /s/ DAVID DOLLINGER
---------------------------------
David Dollinger
Trustee
TENANT
Skystream Corporation, Inc.
By: /s/ JAMES OLSON
--------------------------------
James Olson
President & CEO
By: /s/ DAVID OLSON
--------------------------------
David Olson
VP Operations
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FIRST ADDENDUM TO LEASE
-----------------------
THIS FIRST ADDENDUM TO LEASE (this "Addendum") is made by and between DE
GUIGNE VENTURES, a California limited liability company ("Landlord"), and
SKYSTREAM CORPORATION, a California corporation ("Tenant"), to be a part of
that certain Lease of even date herewith between Landlord and Tenant (the
"Lease") concerning approximately 46,104 rentable square feet of space (the
"Premises") of the building located at 455 De Guigne, Sunnyvale, California.
All terms with initial capital Letters used herein as defined terms shall have
the meanings ascribed to them in the Lease unless specifically defined herein.
Landlord and Tenant agree that, notwithstanding anything to the contrary in
the Lease, the Lease is hereby modified and supplemented as follows:
1. Commencement Date. The Lease shall commence on the date (the
"Commencement Date") that is the later of July 15, 2000, or (unless waived by
Tenant in writing) the date by which all of the following have occurred: (a)
Landlord has substantially completed the Tenant Improvements in accordance with
the Lease and this Addendum; (b) Landlord has delivered possession of the
Premises to Tenant; and (c) Landlord has obtained all approvals and permits
from the appropriate governmental authorities required for the legal occupancy
of the Premises (unless such approvals and permits are delayed because of work
being done by Tenant or the installation of Tenant's equipment). If the
Commencement Date has not occurred for any reason whatsoever on or before
September 30, 2000, then, in addition to Tenant's other rights or remedies,
Tenant may terminate the Lease by written notice to Landlord, whereupon any
monies previously paid by Tenant to Landlord shall be reimbursed to Tenant. In
the event the Commencement Date occurs on any date other than July 15, 2000,
the expiration date rent adjustment dates and similar dates shall be adjusted
to reflect the actual Commencement Date.
2. Premise; Conditions. Tenant shall also have the exclusive right to
use the entire parcel of land on which the Premises are situated, together with
all appurtenances thereto and improvements thereon (collectively, the
"Project"), including without limitation all parking spaces currently located
thereon. Landlord warrants and represents that, as of the Commencement Date,
(i) the Premises and the Project will comply with all applicable laws, rules,
regulations, codes, ordinances, underwriters' requirements, covenants,
conditions and restrictions ("Laws"), (ii) the Premises will be in good and
clean operating condition and repair, (iii) the electrical, mechanical, HVAC,
plumbing, sewer, elevator and other systems serving the Premises will be in
good operating condition and repair, and (iv) the roof of the Premises will be
in good condition and water tight. Landlord shall, promptly after receipt of
notice from Tenant, remedy any non-compliance with such warranty at Landlord's
sole cost and expense.
3. Building Operating Expenses. "Building Operating Expenses" shall not
include and Tenant shall in no event have any obligation to perform or to pay
directly, or to reimburse Landlord for, all or any portion of the following
repairs, maintenance, improvements, replacements, premiums, claims, losses,
fees, charges costs and expenses (collectively "Costs"): (a) Costs occasioned
by the act, omission or violation of any Law by Landlord or its agents,
employees or contractors; (b) Costs occasioned by fire, acts of God, or other
casualties or by the exercise of the power of eminent domain (except for the
deductibles as limited in (f) below; (c) Costs to correct any construction
defect in the Premises or the Project or to comply with any covenant,
condition, restriction, underwriter's requirement or law applicable to the
Premises or the Project on the Commencement Date; (d) Costs incurred in
connection with the violation by Landlord of the terms and conditions of any
lease or other agreement; (e) Costs for insurance deductibles for all risk in
excess of $10,000 and for earthquake in excess of $300,000 and co-insurance
payments; (f) Costs incurred in connection with the presence of any Hazardous
Material, except to the extent caused by the release or emission of the
Hazardous Material in question by Tenant; (h) Costs in the nature of
depreciation, amortization or other expense reserves; (i) Costs to repair,
replace, restore or maintain the structural portions of the Premises (including
roof); (j) lease payments and Costs for machinery and equipment, such as air
conditioners, elevators and the like in lieu of purchasing same and (k)
compensation for any employee of Landlord or any compensation retained by
landlord or its affiliates for management and administration of the
<PAGE> 21
Premises or the Project in excess of the reasonable management fee which would
be charged by an unaffiliated professional management service for operation of
comparable projects in the vicinity. Tenant shall have the right to audit
Building Operating Expenses one time per year. If the results of such audit
disclose that Tenant has overpaid Building Operating Expenses by more than five
percent (5%) of the accurate amount of Building Operating Expenses payable by
Tenant, then Landlord shall pay the cost of such audit, which cost shall not
exceed $1,000 in each instance.
4. Taxes. "Taxes" shall not include and Tenant shall not be required to
pay any tax or assessment expense or any increase therein (i) levied on
Landlord's rental income, unless such tax or assessment expense is imposed in
lieu of real property taxes; (ii) in excess of the amount which would be payable
if such tax or assessment expense were paid in installments over the longest
possible term; (iii); (iv) attributable to Landlord's net income, inheritance,
gift, estate or state taxes; or (v) resulting from the change of ownership or
transfer of any interest in the Premises or the Project in excess of one time
every five (5) years or from the improvement of any of the Premises or the
Project for the sole use of other occupants.
5. Renewal Option. If Landlord and Tenant are unable to reach agreement
as to the Market Rate within thirty (30) days after Landlord's receipt of
Tenant's notice of exercise of Tenant's Renewal Option, then either party may
demand an appraisal by giving written notice to the other party, which demand
must state the name, address and qualifications of an appraiser selected by the
party demanding an appraisal (the "Notifying Party"). The Market Rate shall then
be determined as follows:
(a) Within ten (10) business days following the Notifying Party's
appraisal demand, the other party (the "Non-Notifying Party") shall either
approve the appraiser selected by the Notifying Party or select a second
properly qualified appraiser by giving written notice of the name, address and
qualifications of such other appraiser to the Notifying Party. If the
Non-Notifying Party fails to select an appraiser within such ten (10) business
day period, then the Notifying Party's appraiser shall be deemed selected by
both parties and no other appraiser shall be selected. If two appraisers are
selected, such two appraisers shall select a third qualified appraiser within
ten (10) business days following selection of the second appraiser. If the two
appraisers fail to select a third qualified appraiser, then the third appraiser
shall be appointed by the then presiding judge of the Superior Court of Santa
Clara County upon application by either party.
(b) If only one appraiser is selected, then that appraiser shall
notify the parties in simple letter form of its determination of the Market Rate
within fifteen (15) business days following his/her selection, which appraisal
shall be conclusive and binding on the parties as the Market Rate. If multiple
appraisers are selected, the appraisers shall meet not later than fifteen (15)
business days following the selection of the last appraiser. At such meeting,
the appraisers shall attempt to determine the Market Rate as of the termination
date of the Lease by agreement of at least two (2) of the appraisers. If two (2)
or more of the appraisers agree on the Market Rate at the initial meeting, such
agreement shall be determinative and binding upon the parties and the agreeing
appraisers shall, in simple letter form executed by the agreeing appraisers,
forthwith notify both Lessor and Lessee of the amount set by such agreement. If
multiple appraisers are selected and two (2) appraisers are unable to agree on
the Market Rate, then all appraisers shall submit to Lessor and Lessee an
independent appraisal of the Market Rate within twenty (20) business days
following appointment of the final appraiser. The parties shall then determine
the Market Rate by averaging the appraisals, provided that any high or low
appraisal, differing from the middle appraisal by more than ten percent (10%) of
the middle appraisal, shall be disregarded.
(c) All appraisers shall be members of the American Institute of Real
Estate Appraisers and shall have at least five (5) years experience appraising
properties comparable to, and in the vicinity of, the Premises. If only one
appraiser is selected, then each party shall pay one-half (1/2) of the fees of
that appraiser. If three appraisers are selected, each party shall bear the fees
of the appraiser that it selected and one-half (1/2) of the fees of the third
appraiser.
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(d) Notwithstanding the foregoing, in no event shall the Market Rate
be less than eighty-five percent (85%) of the Base Rent for the last year of the
Term and the Market Rate shall be increased three percent (3%) per year during
the Option Term.
6. Tenant Improvements.
(a) Landlord shall cause proposed final plans for the Tenant
Improvements to be prepared as quickly as possible, all of which shall conform
to and represent logical evolutions of or developments from Exhibit A to the
Lease. The plans shall be delivered to Tenant immediately upon completion.
Within ten (10) working days after receipt thereof, Tenant may, at its election
(i) approve the plans, or (ii) deliver to Landlord specific written changes to
such plans as are necessary, in Tenant's opinion, to conform such plans to such
Exhibit A. If Tenant desires to make changes to such plans, Landlord shall not
unreasonably withhold its approval of such changes and the parties shall confer
and negotiate in good faith to reach agreement on modifications to the plans as
a consequence of such changes. As soon as approved by Landlord and Tenant,
Landlord shall submit the approved plans to all appropriate governmental
agencies and thereafter Landlord shall use its best efforts to obtain all
required governmental approvals as soon as possible. No changes may be made in
the approved plans without Landlord's and Tenant's approval (not to be
unreasonably withheld). Notwithstanding the foregoing, if Tenant makes any
changes to the plans after the execution date of the Lease, Tenant shall pay for
the costs, if any, of these changes. Any changes that increase the cost of the
Tenant Improvements shall be referred to as Extras.
(b) Landlord shall select the general contractor to construct the
Tenant Improvements (the "General Contractor"). The General Contractor is the
contractor of Landlord only, and Tenant shall have no liability to the General
Contractor under the construction contract. Notwithstanding the foregoing,
Tenant shall have the right to select its own general contractor for performing
any Extras.
(c) Landlord shall pay all costs associated with the Tenant
Improvements, subject to the specifications and plans attached hereto as Exhibit
A. In addition, Landlord shall pay and Tenant shall have no responsibility for,
the following costs associated with any improvements made by Tenant: (i) costs
attributable to improvements installed outside the demising walls of the
Premises unless such improvements are requested by Tenant; (ii) costs incurred
to remove Hazardous Materials from the Premises or the Project; (iii) costs
incurred as a consequence of delay (unless the delay is caused by Tenant),
construction defects or defaults by any contractor; (iv) costs recoverable by
Landlord on account of warranties or insurance; (v) restoration costs in excess
of insurance proceeds as a consequence of casualties; (vii) penalties and late
charges attributable to Landlord's failure to pay construction costs; (vii)
costs to bring the Premises or the Project into compliance with applicable Laws,
including, without limitation, the Americans with Disabilities Act and Hazardous
Materials Laws; and (viii) Landlord's construction supervision costs or other
general overhead costs.
(d) Effective upon delivery of the Premises to Tenant, Landlord
warrants that (i) construction of the Tenant Improvements was performed in
accordance with all Laws and the final approved plans and in a good and
workmanlike manner, and (ii) all material and equipment installed in the
Premises conformed to such approved plans and was new and otherwise of good
quality.
(e) So long as such occupancy does not interfere with Landlord's
construction of the Tenant Improvements, Tenant shall have the right to occupy
the Premises prior to substantial completion of the Tenant Improvements for the
purpose of installing Tenant's equipment, data and telecommunications systems,
and trade fixtures. Any such occupancy shall be subject to all of the terms of
the Lease except the obligation to pay rent.
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<PAGE> 23
7. Repairs and Maintenance. Landlord shall perform and construct, and
Tenant shall have no responsibility to perform or construct, any repair,
maintenance or improvements (a) necessitated by the acts or omissions of
Landlord, or its respective agents, employees, contractors or invitees, (b)
occasioned by fire, acts of God or other casualty or by the exercise of the
power of eminent domain, (c) required as a consequence of any violation of any
Laws or construction defects in the Premises or the Project as of the
Commencement Date and (d) for which Landlord has a right of reimbursement from
others. In performing all repair and maintenance, Landlord shall use its best
efforts to minimize any disruption to Tenant. Tenant shall not be required to
comply with or cause the Premises or the Project to comply with any Laws unless
such compliance is necessitated solely due to Tenant's alterations. Tenant shall
not be required to comply with any rule or regulation unless the same does not
unreasonably interfere with Tenant's use of, access to, or parking at the
Premises, and does not materially increase the obligations or decrease the
rights of Tenant under the Lease.
8. Capital Improvements. If a capital improvement to the Premises or
Building is required pursuant to this Lease for any reason, except as a result
of Tenant's alterations or improvements (but not the Tenant Improvements), then
within fifteen (15) business days after Tenant delivers evidence reasonably
satisfactory to Landlord substantiating Tenant's payment of such capital
improvement, Landlord shall reimburse Tenant for the cost of the improvement
less that portion of the cost equal to the product of such total cost multiplied
by a fraction, the numerator of which is the number of years remaining in the
Term, the denominator of which is the useful life (in years) of the capital
improvement as reasonably determined by Landlord in accordance with generally
accepted accounting principles. If the above referenced capital improvement is
made during the initial Term, Tenant's share shall initially be based on the
initial Term and if Tenant thereafter exercises its Renewal Option, then upon
the commencement of the Option Term, after deducting amounts previously paid by
Tenant on account of such capital improvements, an adjustment shall be made so
that during the Option Term Tenant shall pay the balance of its share determined
by multiplying the cost of the capital improvement by a fraction, the numerator
of which is the number of years remaining in the Lease Term including the Option
Term and the denominator of which is the useful life of the capital improvement.
Notwithstanding the foregoing, Landlord shall have the right to reasonably
approve such capital improvement and to perform such capital improvement instead
of Tenant.
9. Alterations; Tenant's Property. Tenant may construct non-structural
alterations, additions and improvements ("Alterations") in the Premises without
Landlord's prior approval, if the cost of any such project does not exceed
Twenty-Five Thousand Dollars ($25,000). Alterations and Tenant's trade fixtures,
furniture, equipment and other personal property installed in the Premises
("Tenant's Property") shall at all times be and remain Tenant's property. Except
for Alterations which cannot be removed without structural injury to the
Premises, at any time Tenant may remove Tenant's Property from the Premises,
provided that Tenant repairs all damage caused by such removal. Landlord shall
have no right to require Tenant to remove any Alterations unless it notifies
Tenant at the time it consents to such Alteration that it shall require such
Alteration to be removed. Landlord shall have no security interest or lien on
any item of Tenant's Property. Within ten (10) days following Tenant's request,
Landlord shall execute documents reasonably acceptable to Tenant to evidence
Landlord's waiver of any right, title, lien or interest in Tenant's Property and
giving any lenders holding a security interest or lien on Tenant's Property
reasonable rights of access to the Premises to remove such Tenant's Property,
provided that such lenders repair any damage caused by such removal.
10. Utilities; Services. If there is any interruption, failure, stoppage or
interference of the utilities, services or access to be furnished by Landlord to
the Premises under the Lease due to the presence of any Hazardous Materials in,
on or about the Building or the Project (except to the extent released by
Tenant), and such interruption continues for seven (7) consecutive calendar
days, then Tenant shall be entitled to an equitable abatement of rent to the
extent of the interference with Tenant's use of the Premises occasioned
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<PAGE> 24
thereby. If the interference persists for more than thirty (30) consecutive
calendar days, then Tenant shall have the right to terminate the Lease.
11. Assignment and Subletting. Tenant may, without Landlord's prior written
consent and without payment of any amount to Landlord, sublet the Premises or
assign the Lease to (a) a subsidiary, affiliate, division or corporation
controlling, controlled by or under common control with Tenant, (b) a successor
corporation related to Tenant by merger, consolidation, nonbankruptcy
reorganization, or government action, or (c) a purchaser of substantially all of
Tenant's assets, provided that in each instance the entity has a net worth that
is greater than or equal to that of Tenant at the time of the event. Neither the
sale or transfer of Tenant's capital stock, including, without limitation, a
transfer in connection with the merger, consolidation or nonbankruptcy
reorganization of Tenant and any sale through any private or public offering,
nor the pledge of or grant of a security interest in any of the Tenant's capital
stock, shall be deemed an assignment, subletting or other transfer of the Lease
or the Premises. Assignment Consideration and Excess Rental shall be determined
by deducting from the gross amounts thereof all brokerage commissions and other
marketing expenses paid or payable by Tenant in connection with such assignment
or sublease, all costs of alterations and improvements to the Premises in
connection with such sublease or assignment.
12. Default. Tenant shall not be deemed to be in default, nor shall any
late charge be imposed, on account of Tenant's failure (a) to pay rent to
Landlord, unless such failure to pay continues for five (5) days after Tenant's
actual receipt of written notice of the delinquency or (b) to perform any other
covenant of the Lease, unless such failure continues after Tenant's actual
receipt of written notice for a period of thirty (30) days or such longer time
as may reasonably be required to cure the default. No default by Tenant shall be
deemed to occur as a result of any involuntary appointment of a receiver or the
institution of any involuntary bankruptcy or similar actions of creditors unless
the same has not been vacated or dismissed within sixty (60) days.
13. Surrender. Tenant's obligations with respect to the surrender of the
Premises shall be fulfilled if Tenant surrenders possession of the Premises in
the condition existing at the Commencement Date, excepting ordinary wear and
tear, acts of God, casualties, condemnation, Hazardous Materials (other than
those released by Tenant), and Alterations or other interior improvements which
Tenant is not required to remove at the termination of the Lease. Under no
circumstance shall Tenant be required to remove any of Tenant's initial
improvements constructed at the Premises.
14. Landlord's Insurance; Waiver of Subrogation. Landlord shall maintain
"all risk" property insurance insuring against risk of loss of damage to the
Project and the Premises for the full replacement cost thereof. Notwithstanding
anything in the Lease to the contrary, Landlord and Tenant hereby release each
other and their respective agents, employees, successors, assignees and
sublessees from all liability for injury to any person or damage to any property
that is caused by or results from a risk which is actually insured against,
which is required to be insured against under the Lease, or which would normally
be covered by "all risk" property insurance, without regard to the negligence or
willful misconduct of the person or entity so released. All of Landlord's and
Tenant's repair and indemnity obligations under the Lease shall be subject to
the waiver and release contained in this paragraph. Each party shall cause each
insurance policy it obtains to provide that the insurer thereunder waives all
recovery by way of subrogation as required herein in connection with any injury
or damage covered by such policy.
15. Damage; Condemnation. Landlord shall not have the right to terminate
the Lease and shall repair and restore the Premises and the Project if the
damage to the Premises or the Project is (a) due to a risk required to be
insured against by Landlord under the Lease to the extent of the proceeds
available to Landlord from such insurance or (b) relatively minor (e.g., repair
or restoration would cost less than ten percent (10%) of the replacement cost of
the Premises). If the Premises are damaged by any peril, then Tenant shall have
the option to terminate the Lease if the Premises and the Project cannot be, or
are not in fact, fully restored by
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<PAGE> 25
Landlord to their prior condition within nine (9) months after the damage.
Whenever Base Rent is to be abated under the Lease, all Base Rent and
Additional Rent shall be equitably abated based upon the extent to which
Tenant's use of the Premises is diminished. Additionally, if there is a taking
of 25% or more of the Building or 20% or more of the land, then Tenant Base
Rent and Additional Rent shall be equitably abated based upon the extent to
which Tenant's use of the Premises is diminished. Notwithstanding the foregoing,
Landlord shall not be required to repair or restore the Premises during the
last two years of the Term unless Tenant exercises its Renewal Option or during
the last two years of the Option Term.
16. Subordination. The subordination of Tenant's rights and
interest under the Lease to any mortgage or deed of trust shall be contingent
upon Tenant's having received from any such mortgagee or beneficiary of any
deed of trust a written recognition agreement in form reasonably satisfactory
to Tenant providing that Tenant's rights and interest shall not be disturbed in
the event of any foreclosure of any such mortgage or deed of trust and
confirming that Tenant shall receive all of the rights and services provided
for under the Lease. Prior to the Commencement Date, Landlord shall deliver to
Tenant such a written recognition agreement from any mortgagee or beneficiary
of any deed of trust currently encumbering the Premises.
17. Hazardous Materials. To the best knowledge of Landlord, (a) no
Hazardous Material is present in the Premises or at the Project or the soil,
surface water thereof, (b) no underground storage tanks are present on the
Premises or the Project, and (c) no action, proceeding or claim is pending or
threatened regarding the Project or the Premises concerning any Hazardous
Material or pursuant to any environmental Law. Under no circumstance shall
Tenant be liable for, and Landlord shall indemnify, defend, protect and hold
harmless Tenant, its agents, contractors, stockholders, directors, successors,
representatives, and assigns from and against, all losses, costs, claims,
liabilities and damages (including attorneys' and consultants' fees) of every
type and nature, directly or indirectly arising out of or in connection with
any Hazardous Material present at any time in, on or about the Project, the
Premises, or the soil, air, improvements, groundwater or surface water thereof,
or the violation of any environmental Law, except to the extent that any of the
foregoing actually results from the release or emission of Hazardous Material
by Tenant or Tenant's Agents in violation of applicable environmental Laws.
Tenant shall have the right to use and store at the Premises reasonable
quantities of Hazardous Materials used by Tenant as cleaning and office
supplies.
18. Approvals. Whenever the Lease requires an approval, consent,
designation, determination, selection or judgment by either Landlord or Tenant,
such approval, consent, designation, determination, selection or judgment and
any conditions imposed thereby shall be reasonable and shall not be
unreasonably withheld or delayed and, in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith.
19. Reasonable Expenditures. Any expenditure by a party permitted
or required under the Lease, for which such party is entitled to demand and
does demand reimbursement from the other party, shall be limited to the fair
market value of the goods and services involved, shall be reasonably incurred,
and shall be substantiated by documentary evidence available for inspection and
review by the other party or its representative during normal business hours.
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IN WITNESS WHEREOF, the parties have executed this Addendum.
LANDLORD: TENANT:
DE GUIGNE VENTURES, SKYSTREAM CORPORATION,
a California limited liability company a California corporation
By: /s/ D. Dollinger By: /s/ James D. Olson
------------------------------------ ----------------------------
Name: D. Dollinger Name: James D. Olson
---------------------------------- ---------------------------
Title: Managing Member Title: President & CEO
---------------------------------- --------------------------
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EXHIBIT "A"
TENANT IMPROVEMENT SPECIFICATIONS
SKYSTREAM CORPORATION
455 DE GUIGNE ST.
SUNNYVALE, CALIFORNIA
The landlord shall provide a generic turnkey office improvement as per the
attached plan. The following are some specific specifications to amplify the
plans where not stated otherwise:
WALLS
1. All interior walls shall be built as shown on the plan and have steel
studs covered in 5/8" sheetrock, taped, topped and textured.
2. All exterior walls will be insulated per energy requirements and furred
out.
3. All columns will be furred out.
4. All walls will be spray textured and painted Kelly Moore bone white unless
otherwise specified in advance by tenant.
5. All walls will extend above the adjoining ceiling grids.
6. If tenant chooses to install wallpaper on certain walls then landlord will
only tape and sand those walls.
7. The wall of the demo room facing the lobby to be as much glass as
possible.
8. The wall of the classroom to have a window as shown.
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9. The low wall on the second floor balcony shall be sheetrock open above
except on the sides where an office is adjacent is located it shall have
glass above the low wall to the ceiling.
10. Any strange shaped walls, any soffit structures, any strange ceiling
configurations shall be paid for by tenant.
11. Any multiple paint configurations, murals shall be paid for by tenant,
except that Tenant shall be permitted to have some accent walls (provided
the wall has one accent color) and rooms of different colors (provided the
room is one color).
CEILINGS
1. All ceilings, except the restrooms and warehouse, are to be new white
metal t-bar suspension system with 2'x4' acoustical grid.
2. Tiles shall be white Armstrong acoustical 24" by 48" lay-in tiles second
look II.
3. Restroom, and shower ceilings to be new water resistant sheetrock, taped
and finished.
4. All ceilings to have new bracing and seismic ties.
5. Ceiling shall be level and in a flat plane and at their current height (10
feet on the first floor and 9 feet on the second Floor).
PAINTING
1. All paint to cover regardless of how many coats may be necessary.
2. All offices to be painted Kelly Moore bone white flat.
Doors
1. All doors to be 9' prefinished hollow core birch with all the necessary
building hardware required to complete the job.
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2. All doors to have three butts by Stanley or equivalent.
3. All locks by Schlage. (lever locks-26d finish)
4. All miscellaneous door hardware by Schlage.
5. All doors to have proper signage per applicable codes.
6. All conference rooms, training rooms to have 4 foot glass sidelights where
possible (as shown on plan) with aluminum frames.
7. All exterior doors will have door closures (surface mounted Norton or
equal).
8. All outside doors will be keyed with one master key.
9. All doorframes to be in aluminum.
10. Doors to labs and warehouse to be double doors as shown.
PLUMBING
1. Existing restrooms and showers to remain and made to be ADA compliant (if
needed). Any changes to the existing restroom cores will be split 50/50
between the tenant and the landlord.
2. Landlord to install lockers in the shower areas, new sheetrock ceilings
and new doors.
3. Landlord will create a lunchroom. This room will have approximately 35
feet of cabinets both top and bottom cabinets (with adjustable height
shelves with doors) with a double sink that has hot water Top surface will
be laminated plastic with backsplash. Colors to be selected by tenant.
4. Landlord will also create a small coffee bar on both floors as shown on
the plan. This coffee bar will consist of a small Cabinet (nine feet) with
upper and lower cabinets with adjustable height shelves with doors and a
single sink with instahot water.
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5. Tenant will provide and install all appliances and catering equipment and
their related hoods.
6. Landlord will create a very slightly curved 15 foot counter with a
laminated top for the second floor coffee bar
7. Landlord will create a very slightly curved counter with a laminate top as
shown on the plan for the second floor copy room
HVAC
1. Landlord will provide approximately 1 ton of HVAC per 400 sq. ft. of space
or as determined by Landlords engineer for tenant's office environment.
These will be prepackaged gas/electric units in roughly 20 ton increments
made by Trane, Carrier or their equivalent. Landlord will provide
additional tonnage to cool the main lobby if the mechanical engineer
determines it is needed. Landlord to provide all interior soft ducting so
as to make a completely operational system with proper circulation and
zoning. Landlord to make sure that tenant's lab area and server room is
separately zoned. Any additional HVAC loads or hard ducting will be paid
for by tenant.
2. Each unit to have separate thermostats for zoning. Thermostat to switch
from hot to cool automatically. Thermostats to be Robertshaw or equivalent
with blind-locking covers.
3. All grilles to be white and flush with ceiling.
4. All systems will be started, tested and balanced.
ELECTRICAL
1. The building will have a J-Box for the exterior on building sign. Tenant
shall provide and install their own sign.
2. All room walls will have an outlet six feet from the door and spaced 12'
thereafter. Tenant to be providing voice and data cabling and face plates.
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3. in the open areas Landlord to provide extra J-Boxes above the ceiling grid
for tenant to connect their cubicle systems and provide outlets every 12
feet around the perimeter walls. All plugs shall be wall mounted at code
required heights.
4. All trim shall be ivory.
5. All subpanels shall be recessed in the walls. Landlord will provide a
blank panel on the first and second floors for up to 25 circuits (G.E. or
equal)
6. All distribution shall be overhead.
7. All parking lot lights, soffit lights, decorative lights and bollards are
to be provided, wired and installed.
8. Landlord to provide 20 20 amp circuits dropped from the ceiling or in
floor outlets (provided Tenant specifies floor outlets prior to Landlord's
pouring of the second floor concrete) per future tenant plans per each of
the five lab areas.
9. Tenant to connect and install their own equipment including all
partitions.
10. Landlord to install extra plugs in the lunch room for a possible
refrigerator, microwaves (4) and vending machines (which will require 20
or 30 amp circuits).
11. Landlord to install extra plugs at the coffee stations, copy stations and
reception areas.
12. The Board room will have two extra J-Boxes in the ceiling and a twenty amp
circuit with five outlets in the floor. Landlord will install a J-Box for
an electronic projection screen
13. The customer training room will have one J-Box in the ceiling and 3 20amp
circuits each with 3 outlets. Landlord will install a J-Box for an
electronic projection screen
14. The fitness room will have one J-Box in the ceiling. Three walls will have
outlets every 6 feet on the walls.
15. The theater room will have an outlet every 6 feet.
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16. The server room will have 4 30 amp circuits
17. Storage room on second floor near the QA lab to have a J-box in the
ceiling and two twenty amp circuits.
18. All lights, except restrooms, warehouse and open work areas, to be
Lithonia 2PM or Columbia P4 3 tube, 2x4 drop in fluorescent fixtures, F32,
SP35s with T8 energy saving ballasts with parabolic lenses.
19. All lights in the open areas shall be indirect lighting by Dona Fineline
Series Five controlled by a sensor at the front and rear doors.
20. Lights will be installed in the office area to provide 1.5 watts per
square foot.
21. Lights in the warehouse to be 8' fluorescent chain hung with wire guards
22. Landlord will provide 3-4' conduits between the server room and the IDF
23. The Lobby will have 2 20 amp circuits and 4 outlets
24. First floor central copy area will have 1 30amp circuit and 3 20amp
circuits
25. IDF will have 2-30amp circuits
26. Second floor copy room will have 3 20amp circuits
27. Demo room to have 2 20 amp circuits
GLASS
1. Doors-Manufacturers standard hardware and mailslots, narrow stile,
cylinder lock outside, thumbturn inside, concealed overhead closures,
push/pull bar inside, pull handle outside. Weather-stripped all four
sides, thresholds.
2. Center glaze, full height tempered glass as required.
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3. The main lobby shall have clear glass with blue tint. All other glass will
be blue reflective.
4. All colored metal to be factory finish.
MISCELLANEOUS
1. Landlord to provide all fire extinguishers required.
2 Landlord to provide all handicap signs.
3. Landlord to provide all other signs required by City such as "meter room",
"doors to remain unlocked", "door numbering front and back". Tenant names
not included.
4. Landlord to provide generic concrete monument sign as designed. Tenant to
provide and install their own logo or sign on this monument sign subject
to city codes.
5. Landlord to provide standard horizontal white mini-blinds at all windows.
6. Any roof mounted equipment must be located within the roof screen provided
by landlord. Any additional roof screen needed due to specialized tenant
improvements will be at tenant's sole cost.
7. All alterations or equipment installations shall be performed by Tenant to
code and will be a tenant's sole cost and expense.
8. All telephone, computer, networking, satellite, audio visual or security
equipment shall be provided and installed at tenant's sole cost and
expense.
9. Any drapes, or special wall coverings to be provided by tenant.
10. Any specialized cabinets except those outlined specifically in these specs
shall be paid for by tenant. These include the A/V cabinets in the
boardroom, the round shape seating structures by, the coffee bars and
lobby and the main reception structure.
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FIRE PROTECTION
1. The entire building will be sprinkled for fire in accordance with City or
County fire codes. Include all items necessary for a complete working
system and including, piping, switches, valves, permit fees, inspection
fees, detector check valve, post indicator valve, tamper switches, water
flow switches, bells, gauges, separate shut off valves, flow valves, UL
central station monitoring equipment, temper switches, risers, etc. as
required by the appropriate Fire Department.
2. All visible sprinkler drops shall have semi-recessed heads unless
specified differently by the Fire Department.
3. Landlord will include everything for a complete system that may be
required by the fire department and obtain final fire department approval.
4. Landlord will conceal all piping as close to the roof as possible.
5. Landlord will include installation of fire sprinkler supervisory system,
monthly maintenance fee to be paid by Tenant.
6. All bells to be screened from view as much as possible.
7. Any area needing specialized needs (such as the server room) attention
such as a dry system will be paid for by tenant.
FLOORING
1. Landlord to provide and install all flooring.
2. The entire building except as specified shall be glued down nylon carpet
(30 ounce Designweave or equivalent) with a 4" topset rubber base.
3. All lab areas and lunch room to have VCT flooring with 4" topset rubber
base.
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4. The entry lobby shall be limestone, or equivalent only (not to exceed $10
per foot for materials) where the ceiling is two stories, the balance to
be carpet. Landlord shall provide a matching walk-off mat
5. Bathroom floor tile to remain.
6. Warehouse floor to be sealed concrete.
7. Tenant shall pay the increased cost for any specialized or raised computer
floors including any anti-static or coved needs on any other floors.
8. All rooms to have one color carpet at the same height. Tenant shall pay
the increased cost for any interwoven multiple color schemes, borders,
accents, or height variations.
SITE WORK
1. Landlord to install all walkways, ramps, curbs etc on plans.
2. Landlord to provide new trash enclosure.
3. Landlord will re-strip and reseal the lot and provide evacuation circles
for the tenant.
LANDSCAPING
1. New landscaping around perimeter of building. All plants shall be healthy
and with all trees properly double staked.
CORE
1. Landlord to create a new dramatic lobby. This lobby will be open to the
second floor as shown on the plan.
2. Landlord will install a new AIDA compliant (dover marquis plan #1 or
equivalent) elevator in the lobby as shown.
3. Freight elevator in rear to remain.
4. Landlord will install a new standard staircase behind the lobby as shown.
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5. Landlord will install a third standard staircase as shown an the plan in
the right rear corner.
6. Landlord will install three twenty amp outlets and three (3) phone outlet
along the back wall of lobby where receptionist will be located.
Any changes to the plans will be billed to the tenant at developer's cost as
charged by the General Contractor, if any. As landlord is allowing tenant to
choose all color combinations, except the restrooms and outside building
elevations, a strict time schedule must be maintained as will be outlined by the
General Contractor. If a decision is not made in a timely manner after 48 hour
written notice has been given to tenant, then the Landlord's decision will be
final. Any upgrades in materials from those specified will be paid for by tenant
directly with the General Contractor.
Landlord shall keep tenant apprised of the construction progress. Landlord shall
give tenant 30 days written notice of the anticipated delivery of the space. At
the end of the 30 day period, and upon the space being substantially completed,
the tenant shall commence paying rent. At this time the Tenant is to provide to
the General Contractor, with a copy to the landlord, of a punchlist of any item
needed to be corrected. All punchlist items will be corrected as quickly as
possible. Landlord shall warrant that upon Tenant taking possession, that all
building systems and Tenant Improvements shall be in good, working condition and
shall warrant them for a period of one year.
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EXHIBIT 10.15
SKYSTREAM CORPORATION
NONEXCLUSIVE INTERNATIONAL
VALUE ADDED RESELLER ("VAR") AGREEMENT
This Agreement, dated May 16, 1999, is made between SkyStream Corporation
("SKYSTREAM"), a California corporation doing business at 555 Clyde Avenue,
Suite B, Mountain View, California 94043 and Miralite Communications, a
California corporation ("Reseller"), doing business at 4041 MacArthur Blvd.,
suite 490 Newport Beach CA 92660.
RECITALS
A. SKYSTREAM sells those certain digital broadcast networking products known
as the Integrator product family, as defined in Exhibit C ("Products" as
further defined below).
B. Reseller wishes to have certain non-exclusive rights to market and
distribute such Products worldwide in combination with Reseller's products.
THEREFORE, SKYSTREAM and Reseller agree as follows:
1. DEFINITIONS.
1.1 Dollars. "Dollars" means United States Dollars.
1.2 End User. "End User" means a customer of Reseller, who is authorized
by an end user software license agreement to use the Software on the
purchased Products for the End User's internal business purposes.
1.3 Effective Date. "Effective Date" means the date first written above.
1.4 Intellectual Property Rights. "Intellectual Property Rights" means
patent rights (including but not limited to rights in patent
applications or disclosures and rights of priority), copyright
(including but not limited to rights in audiovisual works and moral
rights), trade secret rights, and any other intellectual property
rights recognized by the law of each applicable jurisdiction.
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1.5 Marks. "Marks" means SKYSTREAM's trademarks, trade names, service
marks, and/or service names.
1.6 Reseller Products. "Reseller Products" means the computer software
and/or hardware and related documentation that are distributed by
Reseller in combination with the Products.
1.7 Products. "Products" means SKYSTREAM Integrators, as listed in Exhibit
C, including accompanying Software and any additions and enhancements
provided for use with the units.
1.8 Software. "Software" means SKYSTREAM Integrator software as listed in
Exhibit C.
1.9 Source Code. "Source Code" means software in human-readable form,
including programmers' comments, data files and structures, header and
includes files, macros, object libraries, programming tools not
commercially available, technical specifications, flowcharts and logic
diagrams, schematics, annotations and documentation reasonably
required or necessary to enable an independent third party programmer
with reasonable programming skills to create, operate, maintain,
modify and improve the software without the help of any other person.
2. DISTRIBUTION OF PRODUCTS
2.1 Reseller Appointment. SKYSTREAM hereby appoints Reseller as a
nonexclusive reseller of the Products to End-Users for End User's
internal use in conjunction with Reseller Products.
2.2 Added Value. In the exercise of Reseller's rights under this
Agreement, Reseller will sell the Products to the End User singularly
or in combination with Reseller Products.
2.3 Relabeling. Subject to prior approval by SKYSTREAM, Reseller may
relabel the Products with Reseller's name and logo.
2.4 Documentation. Subject to the terms of this Agreement, SKYSTREAM
grants Reseller a nonexclusive license during the term of this
Agreement to use, modify, create derivative works of and distribute
SKYSTREAM's documentation for the Products to the End User. SKYSTREAM
will make available SKYSTREAM's End User documentation to Reseller, as
it is updated and modified from time to time, without additional
charge. Reseller will provide copies of such modifications to
SKYSTREAM upon SKYSTREAM's request.
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2.5 Marketing Collateral. SKYSTREAM agrees to sell, subject to
availability, copies of its marketing literature to reseller on an
at-cost basis. SKYSTREAM reserves all rights associated with such
marketing literature. Reseller agrees to obtain prior written approval
of SKYSTREAM's Vice President of Marketing for all marketing literature
it shall prepare that pertain to the Products.
2.6 Grant of License. Subject to the terms of this Agreement, SKYSTREAM
grants Reseller a limited license to use the Software in connection with
the demonstration of the products and in connection with the
configuration and support of the Products for End Users. All such use
shall be subject to the terms of the End User Software License attached
hereto as Exhibit A.
2.7 No Sale of Services. Reseller will not use the Products in any manner to
provide service bureau, time sharing, or other computer services to
third parties.
2.8 No Reverse Engineering. Reseller will not disassemble, decompile, or
reverse engineer the Products.
2.9 Limited Rights. Reseller's rights in the Products will be limited to
those expressly granted in this Agreement.
2.10 Terms and Conditions of Sale. Except as modified herein, all sales to
Reseller are subject to SKYSTREAM's Terms and Conditions of Sale, a copy
of which is attached hereto as Exhibit B, and which is made a part of
this Agreement as if set forth herein.
2.11 Pricing to Reseller. The price paid by Reseller to SKYSTREAM shall be
established at the time of acceptance of Reseller's purchase order. A
list of SKYSTREAM's current prices for sales to Reseller is attached
hereto as Exhibit D. SKYSTREAM reserves the right to adjust the prices
paid by Reseller at SKYSTREAM's discretion. Nothing in this Agreement
will be construed to restrict Reseller's ability to set prices to its
customers.
3. SOFTWARE
3.1 Limited Distribution. Reseller is permitted to market and distribute
SKYSTREAM Software only in connection with the sale of the Products to
the End User.
3.2 End User Software License.
(a) Reseller agrees:
(i) to include the following language in all sales
quotations and offers to
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sell the Products;
"The [name of Product] is sold subject to the terms on an
End User Software License. The use of the [name of Product]
is contingent upon the acceptance by the purchaser of the
terms of the End User Software License."
(ii) to provide a copy of the End User Software License, in the
form attached hereto as Exhibit A, to any potential
purchaser who shall request a copy prior to sale;
(iii) to package and to install the Products in such a manner
that Reseller's customer is provided with a meaningful
opportunity to review and agree to the End User Software
License before installing or using any of the Products; and
(iv) to agree to accept for return and refund any unused
Products in the event that Reseller's customer does not
agree to accept any of the terms of the End User Software
License or of the terms of any other software license
required to use the Products.
(b) In connection of SkyStream's not requiring a written End-User
Software License signed by Reseller's customer as a precondition to
the sale or transfer of the Products, Reseller agrees to indemnify
SkyStream for any and all damages that may arise as a result of (i)
Reseller's breach of Section 3.2(a) or (ii) the failure for any
reason of a customer of Reseller to be bound by the terms of the End
User Software License.
3.3 License Only. Notwithstanding the use herein of the word "sell" and
variants thereof, all Software is licensed to the Reseller and the End
User and is not sold. SKYSTREAM, or the licensors through which SKYSTREAM
obtained the rights to distribute Software, retain title to the Software,
whether the Software is separate or combined with any other products,
including Reseller Products, and Reseller shall transfer Software only to
the extent that such transfer is incidental to the resale or lease of the
Products. The End User is licensed by SKYSTREAM directly to use the
Software solely in conjunction with the use of the Products and further
subject to the terms of the End User Software License.
3.4 Proprietary Software. The Software is proprietary to SKYSTREAM and/or its
suppliers and is copyrighted. Without SKYSTREAM's prior written approval,
Reseller shall not separate the Software from the Products as shipped by
SKYSTREAM, nor shall Reseller disassemble, de-compile, reverse-engineer,
copy, modify, or otherwise change any of the Software or its form.
Reseller shall protect
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the Software from any disclosure or use in violation of this Agreement.
Reseller shall not be entitled to receive Source Code.
3.5 Software Revisions. In the event SKYSTREAM, at its sole discretion,
provides Reseller with revised copies of the Software, Reseller shall,
according to SKYSTREAM's instructions, replace copies of the Software from
the Products with the revised Software. Reseller shall dispose of the
replaced Software in accordance with SKYSTREAM's instructions. SKYSTREAM
shall have the right to inspect Reseller's inventory of Software and
replaced Software at any time on reasonable notice.
4. MAINTENANCE, SUPPORT, AND TRAINING.
4.1 By Reseller. Reseller will be responsible for providing the following
support to the End User: installing the Products as needed; training the
End User; and providing all direct first level technical support to the
End User, including problem analysis and using its reasonable efforts
to provide solutions and error correction for the products consistent with
Reseller's standard service and support policies and procedures. Reseller
agrees to provide a substantially similar level of support to that
SkyStream provides to its direct customers, which must include, at a
minimum, 24x7 telephone support, and at least 2 hours of on-site training
to the End User. A copy of SkyStream's direct SkySupport service agreement
is attached in Exhibit E. Reseller agrees to use best efforts to ensure
that training of Reseller's personnel occurs within the first 90 days of
the execution of this Agreement. Reseller agrees to maintain a minimum of
2 fully trained service personnel at all times, which personnel must
attend training, to be paid for by Reseller, at least once every 6 months.
4.2 By SKYSTREAM. SKYSTREAM will not be responsible for providing support to
the End User. SKYSTREAM will provide Reseller with:
(i) commercially reasonable efforts to correct any non-conformity with
the Software Feature Specification Documents for the applicable
version of the Software;
(ii) technical training, to consist of one training class given over one
and one-half (1 1/2) eight-hour days and which may be attended by up
to three Reseller personnel onsite at SKYSTREAM's Mountain View,
California office, provided that Reseller pays the travel and living
expenses of such personnel designated to receive the training, or at
Reseller's headquarters, provided that Reseller pays the travel and
living expenses of SKYSTREAM's training personnel; training class for
additional personnel will be quoted by SKYSTREAM separately;
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(iii) upon continued payment of an annual Maintenance Fee (the
"Maintenance Fee") in the amount currently set forth on Exhibit
D, as SKYSTREAM may change from time to time, payable in full
with each sale to Reseller and thereafter on the nearest of
February 15, May 15, August 15 and November 15 following the one
year anniversary of the date of each sale to Reseller, SKYSTREAM
agrees to provide reasonable access to SKYSTREAM's technical
personnel for inquiries from Reseller relating to the Products
during standard SKYSTREAM business hours, generally Monday
through Friday from nine a.m. to five p.m. Pacific Standard
Time, and access to SKYSTREAM's technical call center 24 hours a
day, 7 days a week, where SKYSTREAM agrees to respond to any
Reseller inquiry within four business hours of initial call
placement. In the case of upgrades to a previously purchased
Product, the Maintenance Fee shall be payable on the upgrade at
the time of sale to Reseller and thereafter at the time the
Maintenance Fee is payable on the Product for which the upgrade
was purchased. Payment of this recurring Maintenance Fee does
not entitle Reseller or End User to, and shall not be construed
as either full or partial payment for, software upgrades with
new functionality as defined by SKYSTREAM;
(iv) upon fourteen days notice, technical consulting services at a
location to be designated by Reseller, at SKYSTREAM's current
hourly rate for such services as may be adjusted by SKYSTREAM
from time to time, provided that Reseller shall also reimburse
SKYSTREAM for all associated travel and living expenses in
connection with such services. SKYSTREAM's current technical
consulting hourly rate is included on SKYSTREAM's price list for
sales to Resellers, a copy of which is attached hereto as
Exhibit D;
5. CONFIDENTIALITY.
5.1 Obligations. Each party agrees that it will not disclose to any third
party or use any Products or other Confidential Information disclosed
to it by the other party, except to carry out its rights and
obligations under this Agreement, and that it will take all
reasonable measures to maintain the confidentiality of all
Confidential Information in its possession or control, which will in
no event be less than the measures it uses to maintain the
confidentiality of its own information of similar importance.
Confidential Information includes all information designated by a
party as confidential or proprietary within a reasonable time of its
disclosure or which a reasonable person would expect to be treated as
confidential.
5.2 Exceptions. "Confidential Information" will not include information
that:
(i) is in or enters public domain without breach of this Agreement;
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(ii) is lawfully obtained by the receiving party without breach of
a nondisclosure obligation;
(iii) is independently developed or already in the possession of
the receiving party as shown by the receiving party's
contemporaneous records; or,
(iv) is required by law to be disclosed, provided that the
receiving party gives prompt written notice of such
requirement prior to disclosure.
5.3 Injunctive Relief. Each party acknowledges that the improper
disclosure of the other's confidential information could cause
substantial harm to the other party that could not be remedied by
the payment of damages alone. Accordingly, either party will be
entitled to preliminary and permanent injunctive relief and other
equitable relief for any breach of this Agreement or misuse of
Confidential Information by SKYSTREAM, Reseller or the End User, as
applicable.
6. INTELLECTUAL PROPERTY RIGHTS.
6.1 Notices. Reseller will not delete or in any manner alter the
Intellectual Property Rights notices of SKYSTREAM and its
suppliers, if any, appearing on the Products as delivered to
Reseller.
6.2 Reseller's Duties. Reseller will take customary measures in the
marketing and distribution of the Products to protect SKYSTREAM's
Intellectual Property Rights in the Products, no less than the
extent to which Reseller protects its Intellectual Property Rights
in Reseller's Products, and will, to the extent lawful, report
promptly to SKYSTREAM any confirmed infringement of such rights of
which Reseller becomes aware.
6.3 Trademarks. Subject to the terms and conditions of this Agreement,
SKYSTREAM grants Reseller a nonexclusive license for the term of
this Agreement to use the Marks in Reseller's marketing of the
Products, providing that such use is in accordance with SKYSTREAM's
trademark usage guidelines then in effect. Such use must reference
the Marks as being owned by SKYSTREAM. Nothing in this Agreement
grants Reseller ownership or any rights in or to use the Marks,
except in accordance with this license, and Reseller's use of the
Marks will inure to the benefit of SKYSTREAM. The rights granted to
Reseller in this license will terminate upon any termination or
expiration of this Agreement. Upon such termination or expiration,
Reseller will no longer make any use of any Marks. SKYSTREAM will
have the exclusive right to own, use, hold, apply for registration
for, and register the Marks during the term of, and after the
expiration or termination of, this Agreement; Reseller will neither
take nor authorize any activity inconsistent with such exclusive
right.
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7. INFRINGEMENT INDEMNITY
7.1 Reseller Warranty.
(a) Reseller warrants that it owns all the rights to the
Confidential Information provided to SKYSTREAM, and that such
items are free of any restrictions, settlements, judgments, or
adverse claims. Reseller warrants that it has the full power
and authority to supply and to disclose such information to
SKYSTREAM.
(b) Reseller warrants that it has not improperly or unlawfully
acquired the information and processes submitted to SKYSTREAM.
7.2 Reseller Indemnification. Reseller agrees to indemnify SKYSTREAM
against, and to hold SKYSTREAM harmless of and from, any loss, cost,
damage, liability, suit, judgment, or expense, including legal fees
(collectively, "Harm") arising out of any breach of the warranties
set forth in Section 7.1.
7.3 SKYSTREAM Indemnification and Defense. Subject to the limitations
hereinafter set forth, Reseller agrees that SKYSTREAM has the right
to defend, or at its option to settle, and SKYSTREAM agrees, at its
own expense, to defend or at its option to settle, any claim, suit or
proceeding (collectively, "Action") brought against Reseller alleging
that the use or distribution of the Products infringes or
misappropriates any copyright or trade secret. SKYSTREAM shall have
sole control of any such Action or settlement negotiations, and
SKYSTREAM agrees to pay, subject to the limitations set forth in
Sections 7 and 8, any settlement costs or final judgment entered
against Reseller as a result of such infringement. Reseller agrees
that SKYSTREAM at its sole option shall be relieved of the foregoing
obligations unless Reseller notifies SKYSTREAM promptly in writing of
such Action and gives SKYSTREAM authority to proceed as contemplated
herein, and, at SKYSTREAM's expense, gives SKYSTREAM proper and full
information and assistance to settle and/or defend any such Action.
If the Products, or any part thereof, are, or in the opinion of
SKYSTREAM may become, the subject of any Action for infringement of
any intellectual property right, or if a judicial or other
governmental authority enjoins the use or distribution of Products as
a result of an Action defended by SKYSTREAM, then SKYSTREAM may, at
its option and expense: (i) procure for Reseller the right to
distribute or use, as appropriate, the Products; (ii) replace the
Products with other suitable Products; (iii) suitably modify the
Products; or (iv) if the foregoing alternatives cannot be
accomplished on a commercially reasonable basis as determined in
SKYSTREAM's sole discretion, require Reseller to return such Products
and refund the aggregate payments paid therefor by Reseller, less a
reasonable sum for use and damage. Reseller shall indemnify and hold
harmless SKYSTREAM from and against any and all third party claims
arising out of the
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distribution of Products after SKYSTREAM has required Reseller to
return such Products or arising out of any exclusions to SKYSTREAM's
indemnification obligations set forth in Section 7.4. SKYSTREAM shall
not be liable for any costs or expenses incurred without its prior
written authorization.
7.4 SKYSTREAM limitations.
(a) Notwithstanding the provisions of Section 7.3 above, SKYSTREAM
assumes no liability for (i) any infringement claims (including
without limitation combination or process patents) arising out
of the combination of a Product or use with other hardware,
software or other items not provided by SKYSTREAM to the extent
such infringement would not have occurred absent such
combination or use; (ii) the modification of the Products, or
any part thereof, unless such modification was made by
SKYSTREAM; or (iii) any infringement claims arising out of
SKYSTREAM's compliance with Reseller's specifications or designs.
(b) SKYSTREAM's obligation to indemnify Reseller does not extend to
any Action arising from a claim of infringement by the
manufacture, use or sale of Products that conform to any
technical standard adopted by an international organization such
as the International Organization for Standardization, the
International Electrotechnical Commission, and the CCITT/ITU,
including, without limitation, the MPEG, JPEG and H.261
standards.
7.5 Entire Liability. THE FOREGOING PROVISION OF THIS SECTION 7 STATE THE
ENTIRE LIABILITY AND OBLIGATION OF SKYSTREAM AND THE EXCLUSIVE REMEDY
OF RESELLER AND ITS CUSTOMERS WITH RESPECT TO ANY ALLEGED
INFRINGEMENT OF COPYRIGHTS, TRADEMARKS, PATENTS OR OTHER INTELLECTUAL
PROPERTY RIGHTS BY THE PRODUCTS.
8. LIMITATIONS OF LIABILITY.
8.1 Total Liability. Except as set forth in Section 7 each party's
liability for a breach of this Agreement under this Agreement will be
limited to the Payments received or due from Reseller under this
Agreement.
8.2 Exclusion of Damages. Except as set forth in Section 7 neither party
will be liable to the other for any special, incidental, or
consequential damages, whether based on breach of contract, tort
(including negligence), product liability, or otherwise, and whether
or not such party has been advised of the possibility of such damage.
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8.3 No Warranty. Except as set forth in Section 7 and except as set
forth in Section 13 of the Terms and Conditions of Sale,
attached as Exhibit B, SkyStream makes no warranty, express or
implied, in connection with the Products, including the results
and performance thereof, including without limitation any
implied warranties of merchantability or fitness for a
particular purpose or noninfringement.
9. TERMINATION.
9.1 Term. The term of this Agreement will begin on the Effective
Date and will continue for a period designated in Exhibit D,
unless it is terminated earlier in accordance with the
provisions hereof. This Agreement may be renewed for additional
periods upon the mutual written agreement of the parties,
although each party acknowledges that the other is under no
obligation to do so.
9.2 Events of Termination. Either party will have the right to
terminate this Agreement (i) for convenience and without cause,
upon thirty (30) days written notice to the other party, or
(ii) if the other party breaches any material term or condition
of this Agreement and fails to cure such breach within thirty
(30) days after written notice.
9.3 Effect of Termination.
(a) Upon termination or expiration of this Agreement,
Reseller will (except as specified in subsection (b)
below) immediately return to SKYSTREAM or (at
SKYSTREAM's request) destroy all Source Code, Software
(except for Software residing on a SKYSTREAM Product)
and other Confidential Information in its possession or
control, and an officer of Reseller will certify to
SKYSTREAM in writing that Reseller has done so.
(b) Upon termination or expiration of this Agreement,
SKYSTREAM will have the option, in its sole discretion,
of:
(i) electing, at any time, to offer maintenance and
support for the Products directly to End Users
in accordance with SKYSTREAM's then applicable
terms and conditions for such services; or
(ii) permitting Reseller to continue to provide
maintenance and support for the Products to its
End Users upon the terms and conditions of
Section 4.
9.4 Nonexclusive Remedy. The exercise by either party of any remedy
under this Agreement will be without prejudice to its other
remedies under this Agreement or otherwise.
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9.5 Survival. The rights and obligations of the parties contained in
Sections 5, (Confidentiality), 6 (Intellectual Property Rights), 7
(Infringement Indemnity), 8 (Limitations of Liability), 9
(Termination) and 10 (General) will survive the termination or
expiration of this Agreement.
10. GENERAL.
10.1 Publicity. Reseller agrees to use best efforts in the preparation of
a press release announcing the execution of this Agreement.
10.2 Binding Effect. This Agreement will bind and inure to the benefit of
each party's permitted successors and assigns.
10.3 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California applicable to
agreements between California residents entered into and to be
performed entirely within California, without reference to conflict of
law principles. Any dispute or claim arising out of this Agreement
will be resolved by binding arbitration in the county of Santa Clara
in accordance with the complex commercial litigation rules of the
American Arbitration Association. The arbitrator will have the power
to grant any form of relief, including preliminary and permanent
injunctive relief, which a judge in California with jurisdiction could
fashion, and judgment on any award may be entered in any court in
California with jurisdiction. Nonetheless, the parties may seek
temporary or permanent injunctive relief from any court in California
with jurisdiction without breaching this Section 10.3 or otherwise
abridging the authority of the arbitrator.
10.4 Severability. If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent
permissible and the other provisions of this Agreement will remain
in force.
10.5 Force Majeure. Except for payments due under this Agreement, neither
party will be responsible for any failure to perform due to causes
beyond its reasonable control (each a "Force Majeure"), including,
but not limited to, acts of God, war, riot, embargoes, acts of civil
or military authorities, denial of or delays in processing of export
license applications, fire, floods, earthquakes, accidents, strikes,
or fuel crises, provided that such party gives prompt written notice
thereof to the other party. The time for performance will be extended
for a period equal to the duration of the Force Majeure, but in no
event longer than sixty days.
10.6 Notices. All notices under this Agreement will be deemed given when
delivered personally, sent by confirmed facsimile transmission, or
sent by certified or registered U.S. mail or recognized express
courier, return receipt requested, to the address as
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first shown on this Agreement or as may otherwise be specified by
either party to the other in accordance with this section.
10.7 Independent Contractors. The parties to this Agreement are
independent contractors. There is no relationship of partnership,
joint venture, employment, franchise, or agency between the parties.
Neither party will have the power to bind the other or incur
obligations on the other's behalf without the other's prior written
consent.
10.8 Waiver. No failure of either party to exercise or enforce any of its
rights under this Agreement will act as a waiver of such rights.
10.9 Entire Agreement. This Agreement and its exhibits (A, B and C) are
the complete and exclusive agreement between the parties with respect
to the subject matter hereof, superseding and replacing any and all
prior agreements, communications, and understandings (both written
and oral) regarding such subject matter. This Agreement may only be
modified, or any rights under it waived, by a written document
executed by both parties.
[Remainder of Page Intentionally Left Blank]
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The parties have caused this Agreement to be executed by their duly authorized
representatives as of the Effective Date.
RESELLER SKYSTREAM CORPORATION
Signature: /s/ KEVIN KNICKERBECKER Signature: /s/ DAN RIORDAN
------------------------- -------------------------
Name: Kevin Knickerbecker Name: Dan Riordan
------------------------------ ------------------------------
Title: V.P. Sales Title: VP Sales
----------------------------- -----------------------------
Date: 5/13/99 Date: 5/26/99
------------------------------ ------------------------------
Facsimile: Facsimile:
------------------------- -------------------------
[Signature Page to Nonexclusive VAR Agreement]
-13-
<PAGE> 14
EXHIBIT A
SKYSTREAM CORPORATION
END USER SOFTWARE LICENSE
SOFTWARE LICENSE AND WARRANTY
ATTENTION!
Use of the software program on the enclosed disks and/or installed on the
computer is subject to the terms of the License Agreement printed on the
license card, in the license booklet, or in the user documentation. You should
not use this software until you have read the License Agreement.
By using the software, you signify that you have read the License Agreement and
accept its terms.
LICENSE
SkyStream hereby grants to the Customer a limited, non-exclusive license to use
the Software provided solely on the terms and conditions contained herein.
"Software" means each software program provided by SkyStream in machine
readable, object, printed or interpreted form.
LIMITATIONS ON USE
The Software is licensed to the Customer solely for Customer's internal use on
the purchased SkyStream equipment and may not be used for any other purpose or
application.
The customer is licensed to use the Software only on the designated SkyStream
equipment. The Software may not be used by Customer on any other computer, on
any other SkyStream or similar equipment, or at any other location, except as
agreed by SkyStream in writing.
Customer will not:
-- Copy all or any part of the Software, except that Customer may make one copy
of the Software solely for backup purposes for its own exclusive use,
provided that customer shall reproduce and include on such backup copy
SkyStream's proprietary rights notice.
-- Use, print, copy, modify or display the software, in whole or in part,
except as specifically authorized by this Agreement.
-- Sublicense, assign, resell, or otherwise transfer the Software to any third
party. Any attempted such sublicense, sale, assignment or transfer shall be
void and shall be deemed a material breach of this agreement.
-- Reverse engineer, duplicate or otherwise reproduce the Software.
<PAGE> 15
Customer acknowledges that this Agreement does not grant to Customer, and
Customer will not acquire hereby, any rights to patents, copyrights, trade
secrets, trade names, trademarks (whether registered or unregistered), or any
other proprietary rights in or to the Software, all of which are expressly
retained by SkyStream.
Customer acknowledges that the laws and regulations of the United States may
restrict the export and re-export of the Software or media in any form without
appropriate United States and foreign government approval.
If Customer is a unit or agency of the United States Government or is acquiring
the Software and Documentation for any such unit or agency, the following apply:
o If the unit or agency is the Department of Defense (DOD), the Software and
its accompanying documentation are classified as "commercial computer
software" and "commercial computer software documentation," respectively,
and, pursuant to DFAR Section 227.7202, the Government is acquiring the
Software and such documentation with terms of the Agreement.
o If the unit or agency is other than DOD, the Software and its accompanying
documentation are classified as "commercial computer software" and
"commercial computer software documentation," respectively, and pursuant to
FAR Section 12.212, the Government is acquiring the Software and such
documentation in accordance with the terms of this Agreement.
WARRANTY
SkyStream makes no warranty, express or implied, in connection with the
Software, including the results and performance thereof, including without
limitation any implied warranties of merchantability or fitness for a
particular purpose or non-infringement.
LIMITATION OF LIABILITY
The maximum liability of SkyStream to Customer for damages relating to this
agreement for any and all causes whatsoever, and Customer's maximum remedy,
regardless of the form of action, whether in contract, tort or otherwise, shall
be limited to the total fees paid by Customer to SkyStream hereunder. In no
event shall SkyStream be liable for any lost data or content, lost profits, or
business interruption, or for any indirect, incidental, special, consequential,
exemplary or punitive damages arising out of or relating to the Software
provided hereunder, even if SkyStream has been advised of the possibility of
such damages.
TECHNICAL SUPPORT
For technical support, contact SkyStream Customer Support through the World
Wide Web (www.skystream.com) or via e-mail ([email protected]).
<PAGE> 16
EXHIBIT B
SKYSTREAM CORPORATION
TERMS AND CONDITIONS OF SALE
1. Applicability of Terms and Conditions of Sale
THE FOLLOWING TERMS AND CONDITIONS OF SALE ("AGREEMENT") APPLY TO ALL
QUOTATIONS FOR PRODUCTS ("PRODUCTS") ISSUED BY SKYSTREAM CORPORATION
("SKYSTREAM") TO BUYER. SKYSTREAM'S ACCEPTANCE OF ANY BUYER PURCHASE ORDER
IS EXPRESSLY CONDITIONED ON BUYER'S ASSENT TO THIS AGREEMENT. NO TERMS OR
CONDITIONS SET FORTH IN BUYER'S PURCHASE ORDER, TO WHICH NOTICE OF
OBJECTION IS HEREBY GIVEN, OR IN ANY FUTURE CORRESPONDENCE BETWEEN BUYER
AND SKYSTREAM SHALL ALTER OR SUPPLEMENT THIS AGREEMENT UNLESS BOTH PARTIES
HAVE AGREED IN WRITING TO MODIFY THIS AGREEMENT. Neither SKYSTREAM's
commencement of performance nor delivery shall be deemed or construed as
acceptance of Buyer's additional or different terms and conditions.
2. Price
2.1 Unless otherwise stated in writing by SKYSTREAM, all prices quoted are
in U.S. Dollars and expire 30 days after the date of a quotation.
2.2 Unless otherwise stated in writing by SKYSTREAM, all prices quoted
shall be exclusive of transportation, insurance, federal, state,
local, use, sales, property (ad valorem) and similar taxes or duties
now in force or hereafter enacted. Buyer agrees to pay all taxes, fees
or charge of any nature whatsoever imposed by any governmental
authority on, or measured by, the transaction between Buyer and
SKYSTREAM, in addition to the prices quoted or invoiced. In the event
that SKYSTREAM is required to collect the foregoing, such amounts will
appear as separate items on SKYSTREAM's invoice. Buyer agrees to
provide SKYSTREAM with a valid resale certificate for the Products
purchased for resale.
2.3 Notwithstanding anything to the contrary herein, in the event a
quotation is issued pursuant to a current written purchase agreement
between SKYSTREAM and Buyer, the quotation shall remain valid for the
period specified or until the expiration date of the ordering period
of any such purchase agreement, whichever occurs first.
3. Payment Terms
<PAGE> 17
3.1 All invoices are payable thirty (30) days from date of invoice. No
discounts are authorized. Interest on late payments shall accrue at
the rate of one and one half percent (1.5%) per month or the highest
legal rate, whichever is lower. SKYSTREAM may at any time require that
shipments be made on a C.O.D. or cash-with-order basis.
3.2 Until the purchase price and all other charges payable to SKYSTREAM
hereunder have been received in full, SKYSTREAM hereby retains, and
Buyer hereby grants to SKYSTREAM, a security interest in the Products
delivered to Buyer and any proceeds therefrom. Buyer agrees to
promptly execute all documents reasonably requested by SKYSTREAM to
perfect and protect such security interest. In the event Buyer fails
promptly to execute such documents, Buyer hereby appoints SKYSTREAM
its attorney-in-fact for the sole purpose of executing such documents,
which appointment shall be a power coupled with an interest and shall
be irrevocable.
3.3 Should Buyer become delinquent in the payment of any sum due
hereunder, SKYSTREAM shall not be obligated to continue performance
hereunder, including without limitation shipment of any previously
accepted orders.
3.4 Buyer warrants to SKYSTREAM that it is financially solvent on the date
on which it places an order and expects to be solvent on the date of
receipt of shipment. SKYSTREAM reserves the right to change the credit
terms provided herein, when in SKYSTREAM's opinion the financial
condition or previous payment record of Buyer so warrants.
4. Delivery Dates
4.1 All shipments are subject to SKYSTREAM's availability schedule.
SKYSTREAM will use commercially reasonable efforts to meet any
delivery date(s) requested in Buyer's order; provided however, that
SKYSTREAM will not be liable under any circumstances for its failure
to meet such delivery date(s). Any delivery dates provided by
SKYSTREAM to Buyer are best estimates only.
4.2 SKYSTREAM shall have the right to make partial shipments and payment
therefore shall be made in the manner described in Section 3.1 above.
4.3 SKYSTREAM shall have the right to make shipments at any time before or
after the requested delivery date and payment therefore shall be made
in the manner described in Section 3.1 above.
5. Packing
All Products shall be packed, if appropriate, for shipment and storage in
accordance with standard commercial practices. All packing will conform to
requirements of carrier's
<PAGE> 18
tariffs. When special or export packaging is requested or, in the
opinion of SKYSTREAM, required under the circumstances, the cost of
such special import packaging, if not set forth on the invoice, will be
separately invoiced.
6. Shipment & Acceptance
6.1 F.O.B. Point. All prices are F.O.B. (as defined in the Uniform
Commercial Code as implemented by the state of California,
U.S.A.) SKYSTREAM's Mountain View location unless otherwise
agreed to in writing. Buyer will pay all transportation and
insurance charges after delivery to the F.O.B. point. Unless
otherwise indicated by SKYSTREAM, Buyer is obligated to obtain
insurance covering damage to the goods being shipped.
6.2 Method of Shipment. Subject to this Section 6.2, SKYSTREAM will
ship in accordance with Buyer's shipping instructions. In the
absence of specific instructions or if Buyer's instructions are
deemed unsuitable, SKYSTREAM reserves the right to ship by the
most appropriate method.
6.3 Title and Risk of Loss. Title to the Products and risk of loss
and damage shall pass to Buyer upon delivery to the F.O.B.
point.
6.4 Acceptance. Products shall be deemed to have been accepted by
Buyer unless Buyer provides written notice to SKYSTREAM to the
contrary within thirty (30) days from the date of delivery to
the F.O.B. point. Such written notice shall request a Return
Material Authorization ("RMA") number and the terms and
conditions that apply to warranty returns under Section 13.2
shall apply to returns under this Section 6.4.
7. Changes and Cancellations
7.1 Subject to the additional charges set forth below and to
Section 7.2, standard Product orders may be canceled per the
following schedule:
<TABLE>
<CAPTION>
DAYS PRIOR TO SCHEDULED PERCENTAGE OF ORDER WHICH
SHIPMENT DATE TO F.O.B. POINT MAY BE CANCELED
<S> <C>
0-30 Days 0%
31-60 days 25%
61-90 days 50%
91+ days 100%
</TABLE>
In the event that Buyer cancels any order more than thirty (30) days but fewer
than ninety (90) days prior to the scheduled delivery date (to the F.O.B.
point) for such order, Buyer
<PAGE> 19
shall promptly pay to SKYSTREAM a restocking/cancellation fee equal
to fifteen percent (15%) of the purchase price for the Product subject to
such order.
7.2 Standard Product orders may be rescheduled per the following schedule:
<TABLE>
<CAPTION>
DAYS PRIOR TO SCHEDULED PERCENTAGE OF ORDER WHICH
SHIPMENT DATE TO F.O.B. POINT MAY BE RESCHEDULED
----------------------------- --------------------------
<S> <C>
0-30 days may not be rescheduled
31-60 days 25% may be rescheduled up to four weeks out
61-90 days 50% may be rescheduled up to four weeks out
91+ days 100% may be rescheduled
</TABLE>
7.3 Non-standard Products (customer special and certain designated
Products) may have different cancellation and reschedule terms, and
require advance payment.
7.4 If Buyer terminates individual orders in whole or in part because of
SKYSTREAM's failure to timely deliver, Buyer's sole remedy shall be
entitlement to cancel the undelivered quantity of any individual
order.
7.5 No cancellation of any purchase order for default shall be effective
unless SKYSTREAM has failed to correct such alleged default within
thirty (30) days after receipt by SKYSTREAM of a written notice by
Buyer of such default.
8. Software
"Software" shall mean each software program provided by SKYSTREAM in
machine-readable, object, printed, or interpreted form. SKYSTREAM shall
retain all right, title and ownership of any Software provided to Buyer or
its end users. SKYSTREAM sells its products to Buyer only to the extent
that such products consist of non-software items on the terms specified
herein. Use of the terms "sell," "purchase," "purchase price" and similar
terms are to be interpreted in accordance with this Section. Use of
Software is governed by the provisions of the Software License, a copy of
which Buyer has received and executed.
9. Confidential Information
9.1 It is understood that during the term of this Agreement, parties may
receive Confidential Information belonging to the other party. If any
Confidential Disclosure Agreements have been executed, such
Agreements are incorporated herein by reference.
<PAGE> 20
9.2 Confidential Information shall include information submitted in
writing, and covers, but is not limited to, Software, designs,
performance data, system bugs, and test programs.
9.3 The parties shall protect the disclosed Confidential Information, by
using the same degree of care, but not less than a reasonable degree
of care, to prevent the unauthorized use, dissemination or
publication of the Confidential Information, as the recipient party
uses to protect its own Confidential Information of a like nature.
Both SKYSTREAM and Buyer shall restrict the dissemination of such
Confidential Information only to those personnel of each who require
access thereto, in order to perform this Agreement.
9.4 The obligation to protect the Confidential Information shall survive
for three (3) years following the expiration or termination of this
Agreement.
9.5 The obligation to protect the Confidential Information shall not
extend to information which:
(a) Was already lawfully known or acquired by the receiving party
prior to the receipt from the disclosing party;
(b) Is or becomes generally known to the public through no wrongful
act of the receiving party;
(c) Is received from a third party without similar restriction and
without breach of these or similar conditions; or
(d) Is independently developed by the receiving party by personnel
without access to the Confidential Information.
10. Intellectual Property Warranty and Indemnity
10.1 Buyer warrants that it owns all the rights to the information and
processes including specifications, designs, instructions and
Confidential Information provided to SKYSTREAM, and that such items
are free of any restrictions, settlements, judgments, or adverse
claims. Buyer warrants that it has the full power and authority to
supply and to disclose such information to SKYSTREAM.
10.2 Buyer warrants that it has not improperly or unlawfully acquired the
information and processes submitted to SKYSTREAM.
10.3 Buyer agrees to indemnify SKYSTREAM against, and to hold SKYSTREAM
harmless of and from, any loss, cost, damage, liability, suit,
judgment, or expense,
<PAGE> 21
including legal fees (collectively, "Harm") arising out of any breach of
the warranties set forth in Section 10.1 or Section 10.2.
10.4 Subject to the limitations hereinafter set forth, Buyer agrees that
SKYSTREAM has the right to defend, or at its option to settle, and
SKYSTREAM agrees, at its own expense, to defend or at its option to
settle, any claim, suit or proceeding (collectively, "Action") brought
against Buyer alleging that the use or distribution of the Products in
the United States infringes or misappropriates any copyright or trade
secret. Notwithstanding the above, SKYSTREAM's obligations with respect
to any claims to the object code within Products are subject to the
Software License. SKYSTREAM shall have sole control of any such Action
or settlement negotiations, and SKYSTREAM agrees to pay, subject to the
limitations set forth in Section 14, any final judgment entered against
Buyer as a result of such infringement in any such Action defended by
SKYSTREAM. Buyer agrees that SKYSTREAM at its sole option shall be
relieved of the foregoing obligations unless Buyer notifies SKYSTREAM
promptly in writing of such Action and gives SKYSTREAM authority to
proceed as contemplated herein, and, at SKYSTREAM's expense, gives
SKYSTREAM proper and full information and assistance to settle and/or
defend any such Action. If the Products, or any part thereof, are, or in
the opinion of SKYSTREAM may become, the subject of any Action for
infringement of any intellectual property right, or if a judicial or
other governmental authority enjoins the use or distribution of Products
as a result of an Action defended by SKYSTREAM, then SKYSTREAM may, at
its option and expense: (i) procure for Buyer the right to distribute or
use, as appropriate, the Products; (ii) replace the Products with other
suitable Products; (iii) suitably modify the Products; or (iv) if the
foregoing alternatives cannot be accomplished on a commercially
reasonable basis as determined in SKYSTREAM's sole discretion, require
Buyer to return such Products and refund the aggregate payments paid
therefor by Buyer, less a reasonable sum for use and damage. Buyer shall
indemnify and hold harmless SKYSTREAM from and against any and all third
party claims arising out of the distribution of Products after SKYSTREAM
has required Buyer to return such Products or arising out of any
exclusions to SKYSTREAM's indemnification obligations set forth in
Section 10.5. SKYSTREAM shall not be liable for any costs or expenses
incurred without its prior written authorization.
10.5 Notwithstanding the provisions of Section 10.4 above, SKYSTREAM assumes
no liability for (i) any infringement claims (including without
limitation combination or process patents) arising out of the
combination of a Product or use with other hardware, software or other
items not provided by SKYSTREAM to the extent such infringement would
not have occurred absent such combination or use; (ii) the modification
of the Products, or any part thereof, unless such modification was made
by SKYSTREAM; or (iii) any infringement claims arising out of
SKYSTREAM's compliance with Buyer's specifications or designs.
<PAGE> 22
10.6 SKYSTREAM's obligation to indemnify Buyer does not extend to any
Action arising from a claim of infringement by the manufacture, use
or sale of Products that conform to any technical standard adopted by
an international organization such as the International Organization
for Standardization, the International Electrotechnical Commission,
and the CCITT/ITU, including, without limitation, the MPEG, JPEG and
H.261 standards.
10.7 THE FOREGOING PROVISIONS OF THIS SECTION 10 STATE THE ENTIRE
LIABILITY AND OBLIGATION OF SKYSTREAM AND THE EXCLUSIVE REMEDY OF
BUYER AND ITS CUSTOMERS WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF
COPYRIGHTS, TRADEMARKS, PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS
BY THE PRODUCTS.
10.8 SKYSTREAM shall have the right but, except as provided by Section
10.4, not the obligation, to exclusively settle any claim, suit or
proceeding brought against Buyer so far as it is based on an
allegation that any Product or service furnished hereunder infringes
a patent, copyright or other intellectual property right of any
country. Buyer shall provide SKYSTREAM with prompt notice of any such
claim, suit or proceeding.
11. Intellectual Property Rights
11.1 Buyer hereby grants SKYSTREAM a license under any patent required to
enable SKYSTREAM to perform its obligations pursuant to this
Agreement. This license shall extend for the duration of this
Agreement.
11.2 No provision in this Agreement shall be interpreted as a grant by
SKYSTREAM to Buyer of a license to use SKYSTREAM's service marks or
trade marks.
11.3 The Products are offered for sale and are sold by SKYSTREAM subject
in every case to the condition that such sale does not convey any
license expressly or by implication, to manufacture, reverse
engineer, duplicate or otherwise copy or reproduce any of the
Products or any part thereof.
12. Termination by SKYSTREAM
12.1 In the event of any proceedings, voluntary or involuntary, in
bankruptcy or insolvency by or against Buyer, or in the event of the
appointment, with or without Buyer's consent, of an assignee for the
benefit of creditors, or of a receiver, SKYSTREAM may elect to
immediately cancel any purchase order previously accepted by
SKYSTREAM.
12.2 In the event Buyer has materially breached this Agreement, including
but not limited to failure to comply with credit terms, and has not
cured such breach
<PAGE> 23
within 30 days after receiving notice thereby by SKYSTREAM,
SKYSTREAM may immediately cancel any purchase order previously
accepted by SKYSTREAM.
13. Limited Warranty
13.1 The Products are warranted against defects in material and
workmanship for a period of ninety (90) days from the date of
shipment to the F.O.B. point provided that the foregoing
warranty shall not apply to defects that reasonably could have
been discovered by Buyer during the 30 day period following
delivery to the F.O.B. point. This limited warranty does not
cover the results of accident, abuse, neglect, improper
testing, vandalism, acts of God, use contrary to specifications
or instructions, or repair or modification by anyone other than
SKYSTREAM or SKYSTREAM's authorized agents. SKYSTREAM SHALL
HAVE NO OBLIGATION UNDER THIS WARRANTY, AND MAKES NO
REPRESENTATIONS AS TO PRODUCTS THAT HAVE BEEN MODIFIED BY BUYER
OR ITS CUSTOMERS. The foregoing warranty extends only to Buyers
who are SKYSTREAM customers, and not Buyer's customers or other
users of Buyers' Products. The foregoing warranty does not
apply to any used or modified Products, or software within the
Products, which is subject to the Software License.
13.2 If the Product does not conform to the foregoing warranties,
Buyer may, at its own risk and expense, return the allegedly
defective Product directly to SKYSTREAM during the Warranty
Period. In order to do so, Buyer must first notify SKYSTREAM in
writing of the alleged defect and request a return material
authorization ("RMA") number. Within five (5) days of its
receipt of the RMA number, Buyer shall ship to SKYSTREAM the
allegedly defective Product, freight prepaid, to SKYSTREAM, and
shall include a notation of the RMA number. Any Products
returned to SKYSTREAM without an authorized RMA number may be
returned to Buyer, freight collect. Upon receipt of the
Product, SKYSTREAM, at its option, will repair or replace the
Product and ship the repaired or replaced Product to Buyer at
SKYSTREAM's expense and risk, or refund the purchase price. If
SKYSTREAM determines that any returned Product conformed to the
warranties, SKYSTREAM will return the Product to Buyer at
Buyer's expense and risk, along with a written statement
setting forth the basis for SKYSTREAM's conclusion that the
returned Product was not defective, and Buyer agrees to pay
SKYSTREAM's reasonable costs of handling and testing.
13.3 THE REMEDIES PROVIDED HEREIN ARE BUYERS' SOLE AND EXCLUSIVE
REMEDIES FOR BREACH OF WARRANTY BY SKYSTREAM. SKYSTREAM
SPECIFICALLY DISCLAIMS ALL OTHER EXPRESS, IMPLIED OR STATUTORY
WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE, IMPLIED WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY OR NONINFRINGEMENT. NO
PERSON IS
<PAGE> 24
AUTHORIZED TO MAKE ANY OTHER WARRANTY OR REPRESENTATION
CONCERNING THE PERFORMANCE OF THE PRODUCTS OTHER THAN AS PROVIDED
IN THIS SECTION
14. Limitation of Liability
NEITHER SKYSTREAM NOR ITS SUPPLIERS SHALL BE LIABLE TO BUYER FOR ANY
DAMAGES WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
(i) FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OF ANY
SORT EVEN IF SKYSTREAM OR ITS SUPPLIERS HAVE BEEN INFORMED OF THE
POSSIBILITY OF SUCH DAMAGES; (ii) FOR COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY OR SERVICES; OR (iii) FOR LOSS OR CORRUPTION OF DATA OR
INTERRUPTION OF USE. SKYSTREAM SHALL NOT BE LIABLE FOR ANY AMOUNTS IN
EXCESS OF THE TOTAL AMOUNT ACTUALLY PAID TO SKYSTREAM HEREUNDER FOR THE
PARTICULAR PRODUCTS THAT ARE SUBJECT TO A CLAIM. THESE LIMITATIONS SHALL
APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY. THE LIMITATION OF LIABILITY SET FORTH IN THIS SECTION SHALL NOT
APPLY TO LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICATION
LAW PROHIBITS SUCH LIMITATION.
15. Import/Export
Buyer agrees that it will not in any form export, re-export, resell, ship
or divert directly or indirectly any Product or technical data or Software
furnished hereunder to any country for which the United States Government
or any government agency requires an export license or other governmental
approval without first obtaining such license or approval.
16. Restricted Use
SKYSTREAM's Products may produce a reduction and loss of data and therefore
are not sold for use in medical equipment, avionics, nuclear applications,
or other high risk applications where malfunctions or loss of data could
result directly in personal injury to human beings. Buyer agrees to not to
use, to contractually bind its customers not to use, and to forbid all
third parties from using the Products in such applications, and Buyer
agrees to indemnify SKYSTREAM and to hold SKYSTREAM harmless from and
against any liability arising out of Buyer's failure to contractually bind
its customers in the manner previously described.
17. Term. This Agreement will govern in perpetuity all of Buyer's purchases of
Products.
18. Publicity
<PAGE> 25
Buyer consents to the use of Buyer's name and purchase order data for use
by SKYSTREAM at SKYSTREAM's discretion for the purpose of preparing press
releases and promotional materials. Buyer agrees to use best efforts in
assisting in the preparation of any such press releases or promotional
materials.
19. Miscellaneous
19.1 Any notice required to be given hereunder shall be given in writing at
the address of each part set forth in an attached quotation or
purchase agreement, or to such other address as either party may
substitute by written notice to the other.
19.2 Any attempt by Buyer to assign or transfer any of the rights, duties,
or obligations herein shall render such attempted assignment or
transfer null and avoid.
19.3 SKYSTREAM's failure to exercise any of its rights hereunder shall not
constitute or be deemed a waiver or forfeiture of such rights.
19.4 No U.S. Government Procurement Regulations shall be binding on either
party unless specifically agreed to in writing prior to incorporation
herein.
19.5 Stenographic, typographical and clerical errors are subject to
correction.
19.6 Governing Law and Jurisdiction. This Agreement will be governed by and
construed in accordance with the laws of the State of California
applicable to agreements entered into, and to be performed entirely,
within California between California residents, without reference to
conflict of law principles. Any dispute or claim arising out of this
Agreement will be resolved by binding arbitration in the city and
county of Santa Clara in accordance with the complex commercial
litigation rules of the American Arbitration Association. The
arbitrator will have the power to grant any form of relief, including
preliminary and permanent injunctive relief, which a judge in
California with jurisdiction could fashion, and judgment on any award
may be entered in any court in California with jurisdiction.
Nonetheless, the parties may seek temporary or permanent injunctive
relief from any court in California with jurisdiction without
breaching this Section 19.6 or otherwise abridging the authority of
the arbitrator.
19.7 In the event any proceeding or lawsuit is brought by either party to
enforce its rights hereunder, the prevailing party shall be entitled
to recover its costs, including expert witness fees and reasonable
attorneys' fees.
19.8 All disputes between the parties of any kind arising out of or related
to this Agreement shall be brought within one (1) year after the
accrual of the dispute.
<PAGE> 26
19.9 THE TERMS AND CONDITIONS SET FORTH HEREIN REPRESENT THE ENTIRE
AGREEMENT BETWEEN SKYSTREAM AND BUYER WITH RESPECT TO THE SUBJECT
MATTER AND BUYER AGREES THAT ALL PRIOR QUOTATIONS, INVOICES,
NEGOTIATIONS, UNDERSTANDINGS, REPRESENTATIONS AND/OR AGREEMENTS OF
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF, EXCLUDING THE
SOFTWARE LICENSE, WHETHER ORAL OR WRITTEN, ARE MERGED HEREIN AND
SUPERSEDED IN THEIR ENTIRETY. BUYER ACKNOWLEDGES THAT IT HAS NOT
ENTERED INTO THIS AGREEMENT IN RELIANCE ON ANY WARRANTY OR
REPRESENTATION BY ANY PERSON OR ENTITY EXCEPT FOR THE WARRANTIES AND
REPRESENTATIONS SPECIFICALLY SET FORTH HEREIN. No change or
modification of any of the terms or conditions herein shall be valid
or binding on either party unless in writing and signed by an
authorized representative of each party.
19.10 Neither party shall be liable to the other for its failure to
perform any of its obligations hereunder during any period in which
such performance is delayed by circumstances beyond its reasonable
control including, but not limited to, fire, flood, earthquake, war,
embargo, strike, riot, inability to secure materials and
transportation facilities, or the intervention of any governmental
authority.
<PAGE> 27
EXHIBIT C
PRODUCTS TO BE COVERED UNDER THIS AGREEMENT:
PRODUCT DESCRIPTION
DBN-xx To be determined
SOFTWARE RELEASES TO BE COVERED UNDER THIS AGREEMENT:
Release x, y and successor versions thereof
<PAGE> 28
EXHIBIT D
PRODUCT PRICING MATRIX
PRODUCTS AND UPGRADE PRICING WITH INITIAL INTEGRATOR PURCHASE
[Insert price list]
UPGRADE PRICING AFTER INITIAL INTEGRATOR HAS BEEN PURCHASED
[Insert upgrade price list]
ANNUAL MAINTENANCE FEES
[*]% of the invoiced price to the Reseller on a per unit, per year basis.
SkySupport service is renewed automatically every 12 months, unless otherwise
noted by the Reseller.
HOURLY CONSULTING RATE FOR CHARGEABLE SERVICES
$[*] per hour, not including travel or lodging expenses
RESELLER'S TERM
Term. The term of this Agreement will begin on the Effective Date and will
continue for a period of [specify time] unless it is terminated earlier in
accordance with the provisions hereof. This Agreement may be renewed for
additional periods upon the mutual written agreement of the parties, although
each party acknowledges that the other is under no obligation to do so.
* 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> 29
EXHIBIT E
[ATTACH SKYSUPPORT DOCUMENT HERE]
<PAGE> 1
EXHIBIT 10.16
SKYSTREAM CORPORATION AND HARRIS CORPORATION
INTERNATIONAL
MARKETING, DISTRIBUTION AND SUPPORT AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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1. DEFINITIONS......................................................... 1
1.1 Acceptance................................................. 1
1.2 Data Broadcast Solution.................................... 1
1.3 Dollars.................................................... 1
1.4 End-User................................................... 1
1.5 Effective Date............................................. 1
1.6 Exclusive Market........................................... 2
1.7 Exclusive Products......................................... 2
1.8 Intellectual Property Rights............................... 2
1.9 Marketing Collateral....................................... 2
1.10 Marks...................................................... 2
1.11 Non-Exclusive Products..................................... 2
1.12 Parties.................................................... 2
1.13 Performance Criteria....................................... 2
1.14 Products................................................... 2
1.15 Purchase Order............................................. 2
1.16 Reseller Products.......................................... 2
1.17 Software................................................... 2
1.18 Source Code................................................ 3
2. DISTRIBUTION OF PRODUCTS............................................ 3
2.1 Reseller Appointment....................................... 3
2.2 Grant of Exclusivity by SKYSTREAM.......................... 3
2.3 Grant of Exclusivity by HARRIS............................. 3
2.4 Relabeling................................................. 3
2.5 Documentation.............................................. 4
2.6 Marketing Collateral....................................... 4
2.7 Quarterly Meetings......................................... 4
2.8 Grant of License........................................... 4
2.9 Limited Rights............................................. 4
2.10 Future Products............................................ 5
3. SOFTWARE............................................................ 5
3.1 Authorization.............................................. 5
3.2 Limited Distribution....................................... 5
3.3 End User Software License.................................. 5
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<PAGE> 3
TABLE OF CONTENTS
(continued)
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3.4 License Only............................................... 6
3.5 Proprietary Software....................................... 6
4. TERMS AND CONDITIONS OF SALE........................................ 6
4.1 Applicability of Terms and Conditions of Sale.............. 6
4.2 Price...................................................... 7
4.3 [*]........................................................ 7
4.4 Payment Terms.............................................. 7
4.5 Forecast and Delivery Dates................................ 8
4.6 Packing.................................................... 9
4.7 Shipment & Acceptance...................................... 9
4.8 Changes and Cancellations.................................. 10
4.9 Limited Warranty........................................... 11
4.10 Import/Export.............................................. 12
4.11 Restricted Use............................................. 12
4.12 Spares available for 7 Years............................... 12
4.13 Product Changes............................................ 13
4.14 Price Protection........................................... 13
4.15 Service Agreements......................................... 14
5. MAINTENANCE, SUPPORT, AND TRAINING.................................. 14
5.1 By HARRIS.................................................. 14
5.2 By SKYSTREAM............................................... 14
6. CONFIDENTIALITY..................................................... 15
6.1 Obligations................................................ 15
6.2 Exceptions................................................. 15
6.3 Injunctive Relief.......................................... 16
6.4 Disclosure Warranty........................................ 16
6.5 Disclosure indemnification................................. 16
7. INTELLECTUAL PROPERTY RIGHTS........................................ 16
7.1 Ownership.................................................. 16
7.2 Limited Use................................................ 17
7.3 Notices.................................................... 17
7.4 HARRIS' Duties............................................. 17
7.5 Trademarks................................................. 17
8. INFRINGEMENT INDEMNITY.............................................. 17
8.1 SKYSTREAM Indemnification and Defense...................... 17
8.2 SKYSTREAM limitations...................................... 18
</TABLE>
* 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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TABLE OF CONTENTS
(continued)
<TABLE>
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8.3 Entire Liability........................................... 18
9. YEAR 2000 COMPLIANCE................................................ 18
10. LIMITATIONS OF LIABILITY............................................ 19
10.1 Total Liability............................................ 19
10.2 Exclusion Of Damages....................................... 19
10.3 No Warranty................................................ 19
11. TERMINATION......................................................... 20
11.1 Term....................................................... 20
11.2 Events of Termination...................................... 20
11.3 Review of Exclusivity...................................... 20
11.4 Effect of Termination...................................... 20
11.5 Nonexclusive Remedy........................................ 21
11.6 Survival................................................... 21
12. GENERAL............................................................. 21
12.1 Publicity.................................................. 21
12.2 Assignment................................................. 21
12.3 Governing Law.............................................. 21
12.4 Severability............................................... 22
12.5 Force Majeure.............................................. 22
12.6 Notices.................................................... 22
12.7 Independent Contractors.................................... 22
12.8 Waiver..................................................... 22
12.9 Counterparts............................................... 22
12.10 Entire Agreement........................................... 22
EXHIBIT A - END USER SOFTWARE LICENSE................................... 24
EXHIBIT B - PRODUCTS.................................................... 26
EXHIBIT C - PERFORMANCE CRITERIA........................................ 27
EXHIBIT D - SKYSUPPORT PLAN AND PRODUCT/SERVICE PRICING................. 28
EXHIBIT E - SPARE PARTS................................................. 35
EXHIBIT F - NON-EXCLUSIVE PRODUCTS...................................... 36
</TABLE>
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<PAGE> 5
SKYSTREAM CORPORATION and HARRIS CORPORATION
INTERNATIONAL
MARKETING, DISTRIBUTION AND SUPPORT AGREEMENT
This Agreement, dated __________ __ 1999, is made between SKYSTREAM Corporation
("SKYSTREAM"), a California corporation doing business at 555 Clyde Avenue,
Suite B, Mountain View, California 94043 and HARRIS Corporation, a Delaware
Corporation, acting through its Broadcast System Division, doing business at
4770 Duke Drive, Suite 200, Cincinnati, OH 45040 (hereinafter referred to as
"HARRIS").
RECITALS
A. WHEREAS, SKYSTREAM sells those certain digital broadcast networking
products listed in Exhibit B ("Products" as further defined below).
B. WHEREAS, HARRIS is a major supplier of radio and television products,
systems and services, and desires to distribute the SKYSTREAM Products.
THEREFORE, SKYSTREAM and HARRIS agree as follows:
1. DEFINITIONS.
1.1 Acceptance. "Acceptance" shall mean SKYSTREAM's document that
acknowledges SKYSTREAM's acceptance of HARRIS' Purchase Order.
1.2 Data Broadcast Solution. "Data Broadcast Solution" shall mean
any product or system that injects, encapsulates, or encrypts data into an
MPEG-2 transport stream.
1.3 Dollars. "Dollars" means United States Dollars.
1.4 End-User. "End-User" means a customer of HARRIS, who is
authorized by an end user software license agreement to use the Software on the
purchased Products for the End User's internal business purposes.
1.5 Effective Date. "Effective Date" means the date first written
above.
<PAGE> 6
1.6 Exclusive Market. "Exclusive Market" shall mean End-Users that
are television stations that broadcast a terrestrial ATSC (Advanced Television
Systems Committee) television signal.
1.7 Exclusive-Products. "Exclusive Products" means all Products
that have been affixed with HARRIS trademarks or logos.
1.8 Intellectual Property Rights. "Intellectual Property Rights"
means patent rights (including but not limited to rights in patent applications
or disclosures and rights of priority), copyright (including but not limited to
rights in audiovisual works and moral rights), trade secret rights, and any
other intellectual property rights recognized by the law of each applicable
jurisdiction.
1.9 Marketing Collateral. "Marketing Collateral" includes
brochures, sales literature, advertising, trade shows, trade support, public
relations and promotions.
1.10 Marks. "Marks" means SKYSTREAM's trademarks, trade names,
service marks, and/or service names.
1.11 Non-Exclusive Products. "Non-Exclusive Products" means those
products, listed on Exhibit F, which may not become Exclusive Products.
1.12 Parties. The "Parties" shall mean HARRIS and SKYSTREAM.
1.13 Performance Criteria. "Performance Criteria" shall mean the
specific objectives listed in Exhibit C that HARRIS commits to achieving for
sustaining any exclusive arrangement with SKYSTREAM.
1.14 Products. "Products" means the SKYSTREAM products listed in
Exhibit B, the Exclusive Products, and the Non-Exclusive Products listed in
Exhibit F, including accompanying Software and any additions and enhancements
provided for use with the units.
1.15 Purchase Order. "Purchase Order" shall mean a HARRIS purchase
order that is submitted for acceptance by SKYSTREAM.
1.16 Reseller Products. "Reseller Products" means the computer
software and/or hardware and related documentation that are distributed by
HARRIS in combination with the Products
1.17 Software. "Software" shall mean each software program provided
by SKYSTREAM (including vendor software) in machine-readable, object, printed,
or interpreted form, including upgrades and documentation.
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<PAGE> 7
1.18 Source Code. "Source Code" means software in human-readable
form, including programmers' comments, data files and structures, header and
includes files, macros, object libraries, programming tools not commercially
available, technical specifications, flowcharts and logic diagrams, schematics,
annotations and documentation reasonably required or necessary to enable an
independent third party programmer with reasonable programming skills to create,
operate, maintain, modify and improve the software without the help of any other
person.
2. DISTRIBUTION OF PRODUCTS
2.1 Reseller Appointment. SKYSTREAM hereby appoints HARRIS as a
nonexclusive reseller of the Products to End-Users for End User's internal use,
provided, however, that the Non-Exclusive Products may not be resold as
Exclusive Products.
2.2 Grant of Exclusivity by SKYSTREAM. SKYSTREAM further grants
HARRIS worldwide exclusive distribution rights of the Exclusive Products to
End-Users inside the Exclusive Market, subject, however, to SKYSTREAM's right to
sell during the term of this Agreement up to [*] Products per [*] period (the
"SKYSTREAM Exception"), beginning upon the effective date of this Agreement,
through other distribution channels, [*] to the Exclusive Market. This SKYSTREAM
Exception may be increased by a written consent, signed by HARRIS, which consent
HARRIS agrees shall not be unreasonably withheld. In the event of a failure by
HARRIS to consent to an increase in the SKYSTREAM Exception, SKYSTREAM may, at
its sole discretion, immediately terminate the Agreement. SKYSTREAM shall not
market or solicit sales of Products to End-Users in the Exclusive Market. On a
quarterly basis, SKYSTREAM shall notify HARRIS of the total number of Products
sold by SKYSTREAM to parties other than HARRIS pursuant to the SKYSTREAM
Exception.
2.3 Grant of Exclusivity by HARRIS. HARRIS agrees not to sell
products other than the Products as HARRIS' Data Broadcast Solution to End-Users
in the Exclusive Market, subject, however, to HARRIS' right to sell during the
term of this Agreement up to [*] products in lieu of the Products per [*]
period (the "HARRIS Exception"), beginning upon the effective date of this
Agreement, as a Data Broadcast Solution to End-Users in the Exclusive Market.
This HARRIS Exception may be increased by a written consent, signed by
SKYSTREAM, which consent SKYSTREAM agrees shall not be unreasonably withheld. In
the event of a failure by SKYSTREAM to consent to an increase in the HARRIS
Exception, HARRIS may, at its sole discretion, immediately terminate the
Agreement. HARRIS agrees to market only the Products for Data Broadcast Solution
uses to End-Users in the Exclusive Market. On a quarterly basis, HARRIS shall
notify SKYSTREAM of the total number of products sold by HARRIS in lieu of the
Products pursuant to the HARRIS Exception.
2.4 Relabeling. Except for those Products designated Non-Exclusive
Products, SKYSTREAM shall allow HARRIS to brand the Products with HARRIS' logo
and trademarks.
* 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> 8
SKYSTREAM will be responsible for affixing the HARRIS logo and trademark during
the manufacturing process pursuant to HARRIS guidelines and instructions and may
pass on any additional costs, if any, associated with adhering to Harris'
guidelines. SKYSTREAM shall also label such Product packages with HARRIS' logo
and markings and may pass on any additional costs, if any, associated with
adhering to Harris' guidelines.
2.5 Documentation. SKYSTREAM will make available SKYSTREAM's End
User documentation to HARRIS, as it is updated and modified from time to time,
without additional charge. SKYSTREAM grants HARRIS a nonexclusive license during
the term of this Agreement to use, modify, reproduce, make derivative works of
and distribute SKYSTREAM's documentation for the Products to the End-User.
HARRIS will provide copies of such modifications to SKYSTREAM upon SKYSTREAM's
request.
2.6 Marketing Collateral.
(a) HARRIS agrees to develop and pay for all Marketing
Collateral associated with the Exclusive Products. SKYSTREAM grants HARRIS a
nonexclusive license during the term of this Agreement to use, modify,
reproduce, make derivative works of and distribute SKYSTREAM's Marketing
Collateral for the Products; provided, however, that HARRIS will obtain prior
written approval from SKYSTREAM before use of any Marketing Collateral
concerning the Products. SKYSTREAM reserves all rights associated with such
Marketing Collateral subject to the license granted herein. SKYSTREAM will
provide commercially reasonable efforts to support HARRIS in the development of
Marketing Collateral supporting the Exclusive Products.
(b) SKYSTREAM agrees to provide, at no additional charge,
sufficient Marketing Collateral, as requested, to HARRIS to support HARRIS'
non-exclusive reseller appointment pursuant to Section 2.1.
2.7 Quarterly Meetings. SKYSTREAM and HARRIS agree to hold
quarterly meetings (i) to discuss product features and product development, (ii)
set development timelines for next generation product(s), and (iii) to review
the current market conditions, competitive climate, pricing strategies, and
other marketing programs.
2.8 Grant of License. Subject to the terms of this Agreement,
SKYSTREAM grants HARRIS a limited license to use the Software in connection with
the demonstration of the Products and in connection with the configuration and
support of the Products for End Users. All such use shall be subject to the
terms of the End User Software License attached hereto as Exhibit A.
2.9 Limited Rights. HARRIS' rights in the Products will be limited
to those expressly granted in this Agreement.
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<PAGE> 9
2.10 Future Products.
SKYSTREAM agrees to use commercially reasonable efforts to
develop a conditional access scrambling product for ATSC transmission. The
specifications for such product are to be established by mutually agreement of
the Parties by August 31, 1999. HARRIS shall have the right to include such
product, as an Exclusive Product under the terms of this Agreement at a mutually
agreed upon price and such product shall become a Product hereunder.
3. SOFTWARE
3.1 Authorization. SKYSTREAM warrants and represents that, as of
the date of this Agreement and as of the date of delivery of any Products
hereunder, SKYSTREAM has the authority to sell the Products and distribute all
the software accompanying the Products to HARRIS and End-User customers of
HARRIS, subject only to the acceptance of the terms of such end-user software
licenses as may accompany the Products by the End User.
3.2 Limited Distribution. HARRIS is permitted to market and
distribute SKYSTREAM Software, and any other software accompanying the Products,
only in connection with the sale of the Products to the End User.
3.3 End User Software License.
(a) HARRIS agrees:
(i) to include the following language in all sales
quotations and offers to sell the Products:
"THE [NAME OF PRODUCT] IS SOLD SUBJECT TO THE TERMS OF ONE OR MORE END USER
SOFTWARE LICENSES. THE USE OF THE [NAME OF PRODUCT] IS CONTINGENT UPON THE
ACCEPTANCE BY THE PURCHASER OF THE TERMS OF SUCH END USER SOFTWARE LICENSES."
(ii) to provide a copy of the "End User Software
License", in the form attached hereto as Exhibit A, and such other end user
software licenses required for use of the Products, as may be provided by
SKYSTREAM from time to time, to any potential purchaser who shall request a copy
prior to sale;
(iii) to package and to install the Products in such a
manner that HARRIS' customer is provided with a meaningful opportunity to review
and agree to the End User Software License and other end user software licenses
accompanying the Products before installing or using any of the Products; and
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<PAGE> 10
(iv) to accept for return and refund any unused
Products in the event that HARRIS' customer does not agree to accept any of the
terms of the End User Software License or the terms of any other software
license required to use the Products. SKYSTREAM shall accept the return such
unused Product and refund the Price to HARRIS.
(b) In consideration of SKYSTREAM's not requiring a written
End-User Software License signed by HARRIS' customer as a precondition to the
sale or transfer of the Products, HARRIS agrees to indemnify SKYSTREAM for any
and all damages that may arise as a result of HARRIS' breach of Section 3.3(a).
3.4 License Only. Notwithstanding the use herein of the word
"sell" and variants thereof, all Software is licensed to HARRIS and the End User
and is not sold. SKYSTREAM, or the licensors through which SKYSTREAM obtained
the rights to distribute Software, retain title to the Software, whether the
Software is separate or combined with any other products, including HARRIS'
products, and HARRIS shall transfer Software only to the extent that such
transfer is incidental to the resale or lease of the Products. The End User is
licensed by SKYSTREAM directly to use the Software solely in conjunction with
the use of the Products and further subject to the terms of the End User
Software License.
3.5 Proprietary Software. The Software is proprietary to SKYSTREAM
and/or its suppliers and is copyrighted. Without SKYSTREAM's prior written
approval, HARRIS shall not separate the Software from the Products as shipped by
SKYSTREAM, nor shall HARRIS disassemble, de-compile, reverse-engineer, copy,
modify, or otherwise change any of the Software or its form. HARRIS shall
protect the Software from any disclosure or use in violation of this Agreement
in accordance with Exhibit A. HARRIS shall not be entitled to receive Source
Code.
4. TERMS AND CONDITIONS OF SALE
4.1 Applicability of Terms and Conditions of Sale.
(a) SKYSTREAM agrees to sell Products to HARRIS in
accordance with the terms and conditions of this Agreement. Specific quantities
of the Products shall be ordered by HARRIS for purchase by the placement of a
Purchase Order. In the event HARRIS requests a cancellation of a Purchase Order
prior to SKYSTREAM's acceptance, SKYSTREAM shall accept HARRIS' cancellation
with no cancellation fees accessed.
(b) Within five (5) business days after the receipt of the
Purchase Order, SKYSTREAM shall by facsimile either accept or reject the
Purchase Order. Unless otherwise specified in this Agreement, any Purchase Order
accepted by SKYSTREAM ("Order"), shall be binding upon the Parties and (except
as permitted herein) may not be altered, amended, modified or canceled without
the prior written consent of HARRIS and SKYSTREAM. In the event SKYSTREAM
rejects a Purchase Order, the Parties agree to discuss mutually acceptable
conditions
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<PAGE> 11
for the Purchase Order and Acceptance. In the event HARRIS requests a
cancellation of an accepted Purchase Order, the Parties agree to discuss a
mutually equitable settlement as a result of said cancellation.
(c) No terms or conditions set forth in the Purchase Order,
to which notice of objection is hereby given, or is stated in any future
correspondence between HARRIS and SKYSTREAM shall alter or supplement this
agreement unless both Parties have agreed in writing to modify this Agreement,
which requirement may be satisfied by acceptance of a term contrary to this
Agreement in a Purchase Order by confirmatory memorandum from SKYSTREAM.
Neither SKYSTREAM's commencement of performance or delivery shall be deemed or
construed as acceptance of additional or different terms and conditions
contained in a Purchase Order.
4.2 Price.
(a) Unless otherwise stated in writing by SKYSTREAM, all
prices quoted shall be exclusive of transportation, insurance, federal, state,
local, use, sales, property (ad valorem) and similar taxes or duties now in
force or hereafter enacted. HARRIS agrees to pay all taxes, fees or charge of
any nature whatsoever imposed by any governmental authority on, or measured by,
the transaction between HARRIS and SKYSTREAM, in addition to the prices quoted
or invoiced. In the event that SKYSTREAM is required to collect the foregoing,
such amounts will appear as separate items on SKYSTREAM's invoice. HARRIS agrees
to provide SKYSTREAM with a valid resale certificate for the Products purchased
for resale. The initial pricing paid by HARRIS to SkyStream for Products is
listed in Exhibit D. Nothing in this Agreement will be construed to restrict
HARRIS' ability to set prices to its customers.
4.3 [*]
[*]
4.4 Payment Terms
(a) SKYSTREAM shall invoice HARRIS upon shipment of the
Order to HARRIS. All invoices are payable by draft or wire transfer in Dollars
thirty (30) days from date of invoice. No discounts are authorized. Interest on
late payments may, at SkyStream's discretion, accrue at the rate of [*] per
month or the highest legal rate, whichever is lower, provided, however that no
interest shall accrue on amounts resulting from an invoice or other errors by
SKYSTREAM.
(b) For payments by wire transfer, SKYSTREAM'S bank
information is:
[*]
* 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> 12
[*]
HARRIS should supply the sending Bank Information, ABA & Account # to show
where the money is coming from.
(c) Until the purchase price and all other charges payable
to SKYSTREAM hereunder have been received in full, SKYSTREAM hereby retains, and
HARRIS hereby grants to SKYSTREAM, a security interest in the Products delivered
to HARRIS and any proceeds therefrom. HARRIS agrees to promptly execute all
documents reasonably requested by SKYSTREAM to perfect and protect such security
interest.
(d) Should HARRIS become delinquent in the payment of any
undisputed sum due hereunder, SKYSTREAM shall not be obligated to continue
performance hereunder, including without limitation shipment of any previous
Orders.
(e) HARRIS warrants to SKYSTREAM that it is financially
solvent on the date on which it places a Purchase Order and expects to be
solvent on the date of receipt of shipment. SKYSTREAM reserves the right to
change the credit terms provided herein, when in SKYSTREAM's opinion the
financial condition or previous payment record of HARRIS so warrants.
4.5 Forecast and Delivery Dates.
(a) Standard lead times for Purchase Orders placed by HARRIS
shall be [*] for Products included in the purchase forecast provided to
SKYSTREAM pursuant to Section 4.4(c), and [*] for all other Purchase Orders.
(b) Within fifteen (15) days from the effective date of this
Agreement, HARRIS agrees to place a Purchase Order covering requested shipments
for delivery by June 30, 1999.
(c) In order for SKYSTREAM to maintain a continuous flow of
long lead-time material, HARRIS agrees to provide a purchase forecast to
SKYSTREAM, broken out by month, Product, and the probability being converted to
a sale, at the end of each month that covers
* 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> 13
an additional ninety (90) day period beyond the date of open Purchase Orders
that exist at any given time.
(d) Subject to Section 4. 1 (c), all shipments are subject
to SKYSTREAM's availability schedule. SKYSTREAM will use commercially reasonable
efforts to meet any delivery date(s) requested in Purchase Order; provided
however, that SKYSTREAM will not be liable under any circumstances for its
failure to meet such delivery date(s). Any delivery dates provided by SKYSTREAM
to HARRIS pursuant to a Purchase Order are best estimates only, however delivery
date in an Order which has been confirmed in writing by SKYSTREAM shall be firm.
SKYSTREAM shall have the right to make partial shipments and payment therefore
shall be made in the manner described in Section 4.3 above.
(e) In the event HARRIS requests an acceleration in the
delivery of the Products SKYSTREAM will make reasonable efforts to accommodate
accelerations impacted by materials constraints; which may include without
limitation: material availability, capacity, and personnel resources. SKYSTREAM
and HARRIS will mutually agree on the applicable price adjustments if
accelerations result in increased costs due to procurement of material from
distribution and express handling.
4.6 Packing. All Products shall be packed, if appropriate, for
shipment and storage in accordance with standard commercial practices. All
packing will conform to requirements of carrier's tariffs. When special or
export packaging is requested or, in the opinion of SKYSTREAM, required under
the circumstances, the cost of such special export packaging, if not set forth
on the invoice, will be separately invoiced. SKYSTREAM shall label such packages
with HARRIS' logo and markings including the number of Purchase Order, shipment
weight, name of Products, handling and loading instructions and an itemized
packing list specifying the number of units, Purchase Order, serial numbers with
each shipment by pallet. SKYSTREAM will provide test date of bulk packaging for
evaluation and approval. The units shall be individually packed in HARRIS
labeled boxes.
4.7 Shipment & Acceptance.
(a) F.O.B. Point. All prices are F.O.B. (as defined in the
Uniform Commercial Code as implemented by the state of California, U.S.A.)
SKYSTREAM's Mountain View location unless otherwise agreed to in writing. HARRIS
will pay all transportation and insurance charges after delivery to the F.O.B.
point. Unless otherwise indicated by SKYSTREAM HARRIS is obligated to obtain
insurance covering damage to the goods while in transit.
(b) Method of Shipment. Subject to this Section 4.6,
SKYSTREAM will ship in accordance with HARRIS' shipping instructions. In the
absence of specific instructions or if
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<PAGE> 14
HARRIS' instructions are deemed unsuitable, SKYSTREAM reserves the right to ship
by the most appropriate method.
(c) Title and Risk of Loss. Title to the Products and risk
of loss and damage shall pass to HARRIS upon delivery to the F.O.B. point.
(d) Acceptance. Products shall be deemed to have been
accepted by HARRIS unless HARRIS provides written notice to SKYSTREAM to the
contrary within thirty (30) days from the date of delivery to the F.O.B. point.
Such written notice shall request a Return Material Authorization ("RMA") number
and the terms and conditions that apply to warranty returns under Section 4.8
shall apply to returns under this Section 4.6.
4.8 Changes and Cancellations.
(a) Subject to the additional charges set forth below and to
Section 4.7(b), Orders may be canceled per the following schedule:
<TABLE>
<CAPTION>
DAYS PRIOR TO SCHEDULED PERCENTAGE OF ORDER WHICH MAY BE CANCELED
SHIPMENT DATE TO F.O.B. POINT
<S> <C>
0-30 days [*]
31-60 days [*]
61+ days [*]
</TABLE>
In the event that HARRIS cancels any Order more than thirty (30) days but
fewer than sixty (60) days prior to the scheduled delivery date (to the F.O.B.
point) for such order, HARRIS shall promptly pay to SKYSTREAM a
restocking/cancellation fee equal to fifteen percent (15%) of the purchase
price for the Products subject to such Order.
(b) Orders may be rescheduled per the following schedule:
<TABLE>
<CAPTION>
DAYS PRIOR TO SCHEDULED PERCENTAGE OF ORDER WHICH MAY BE RESCHEDULED
SHIPMENT DATE TO F.O.B. POINT
<S> <C>
0-30 days [*]
31-60 days [*]
61+ days [*]
</TABLE>
Orders may only be rescheduled once. Rescheduled orders may not be later
canceled.
* 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> 15
(c) If HARRIS terminates Orders in whole or in part because
of SKYSTREAM's failure to timely deliver, HARRIS' sole remedy shall be
entitlement to cancel the undelivered quantity of any Order.
(d) No cancellation of any Order for default shall be
effective unless SKYSTREAM has failed to correct such alleged default within
thirty (30) days after receipt by SKYSTREAM of a written notice by HARRIS of
such default and no cancellation fee shall be accessed against HARRIS.
4.9 Limited Warranty
(a) The Products are warranted against defects in material,
design and workmanship for a period of fourteen months from the date of delivery
to FOB point. This limited warranty does not cover the results of accident,
abuse, neglect, improper testing, vandalism, acts of God, use contrary to
specifications or instructions, or repair or modification by anyone other than
SKYSTREAM, HARRIS or SKYSTREAM's authorized agents. SKYSTREAM SHALL HAVE NO
OBLIGATION UNDER THIS WARRANTY, AND MAKES NO REPRESENTATION AS TO PRODUCTS THAT
HAVE BEEN MODIFIED CONTRARY TO PRODUCT SPECIFICATIONS ("MODIFIED") BY HARRIS OR
ITS END USERS. The foregoing warranty extends only to HARRIS and End Users
purchasing Products through an authorized sales channel of HARRIS, and not other
End Users. The foregoing warranty does not apply to any used or Modified
Products, or software within the Products, which is subject to the end user
software licenses.
(b) If the Product does not conform to the foregoing
warranties, HARRIS or HARRIS' End User may, at its own risk and expense, return
the allegedly defective Product directly to SKYSTREAM during the Warranty
Period. In order to do so, HARRIS or HARRIS' End User must first notify
SKYSTREAM in writing of the alleged defect and request a return material
authorization ("RMA") number. Within five (5) days of its receipt of the RMA
number, HARRIS or HARRIS' End User shall ship to SKYSTREAM the allegedly
defective Product, freight prepaid, to SKYSTREAM, and shall include a notation
of the RMA number. Any Products returned to SKYSTREAM without an authorized RMA
number may be returned to HARRIS or HARRIS' End User, freight collect. Upon
receipt of the Product, SKYSTREAM, at its option, will repair or replace the
Product and ship the repaired or replaced Product to HARRIS at SKYSTREAM's
expense and risk, or refund the purchase price. If SKYSTREAM determines that any
returned Product conformed to the warranties, SKYSTREAM will return the Product
to HARRIS or HARRIS' End User, at their expense and risk, along with a written
statement setting forth the basis for SKYSTREAM's conclusion that the returned
Product was not defective, and HARRIS or HARRIS' End User agrees to pay
SKYSTREAM's reasonable costs of handling and testing.
(c) THE REMEDIES PROVIDED HEREIN ARE HARRIS' AND HARRIS' END
USERS' SOLE AND EXCLUSIVE REMEDIES FOR BREACH OF WARRANTY BY
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SKYSTREAM. SKYSTREAM SPECIFICALLY DISCLAIMS ALL OTHER EXPRESS, IMPLIED OR
STATUTORY WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF FITNESS FOR A
PARTICULAR PURPOSE, MERCHANTABILITY OR NONINFRINGEMENT. NO PERSON IS AUTHORIZED
TO MAKE ANY OTHER WARRANTY OR REPRESENTATION CONCERNING THE PERFORMANCE OF THE
PRODUCTS OTHER THAN AS PROVIDED IN THIS SECTION.
4.10 Import/Export.
HARRIS agrees that it will not in any form export, re-export,
resell, ship or divert directly or indirectly any Product or technical data or
Software furnished hereunder to any country for which the United States
Government or any government agency requires an export license or other
governmental approval without first obtaining such license or approval.
4.11 Restricted Use.
SKYSTREAM's Products may produce a reduction and loss of data
and therefore are not sold for use in medical equipment, avionics, nuclear
applications, or other high-risk applications where malfunctions or loss of data
could result directly in personal injury to human beings. HARRIS agrees not to
use, to contractually bind its customers not to use, the Products in such
applications, and HARRIS agrees to indemnify SKYSTREAM and to hold SKYSTREAM
harmless from and against any liability arising out of HARRIS' failure to
contractually bind its customers in the manner previously described.
4.12 Spares available for 7 Years.
(a) SKYSTREAM shall continue to make available to HARRIS
Spare Parts identified in Exhibit E, for a period of seven (7) years after the
discontinuance of manufacturing of the Product by SKYSTREAM, at SKYSTREAMs
current prices for such Spare Parts as SKYSTREAM may change from time to time
(current prices as of the Effective Date are listed on Exhibit E), and HARRIS
may order such Spare Parts for delivery during such period. If after expiration
of this seven (7) year period, SKYSTREAM decides to discontinue manufacture of
any Spare Parts manufactured directly by it, SKYSTREAM shall immediately provide
written notice to HARRIS of its intention. Upon receipt of SKYSTREAM's written
notice, HARRIS shall have sixty (60) days in which to order additional
quantities of any such Spare Parts for delivery by SKYSTREAM not later than six
(6) months after receipt of the notice.
(b) Within 90 days of such notice and if HARRIS desires to
have Spare Parts manufactured after SKYSTREAM has discontinued manufacture of
the parts, SKYSTREAM shall either manufacture them for HARRIS at a reasonable
Cost Plus Fee basis or SKYSTREAM shall provide HARRIS with appropriate
documentation, tooling and the rights to use the documentation and tooling to
have the parts manufactured by HARRIS and/or it's contractor.
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4.13 Product Changes.
(a) SKYSTREAM may, at any time prior to shipment, make
changes in NonExclusive Products. SKYSTREAM may modify the Non-Exclusive Product
drawings and specifications, as they may be set forth in the relevant product
specification sheet (the "Specifications"), or substitute products of later
design. SKYSTREAM guarantees that such modifications or substitutions will not
impact upon form, fit, or function under normal and proper use of the ordered
Product as provided in the Specifications. With respect to changes,
modifications, and substitutions that do impact the form, fit, or function of
Non-Exclusive products, SKYSTREAM shall notify HARRIS in writing thirty (30)
days prior to the date the changes become effective and HARRIS shall notify
SKYSTREAM of any objections thereto before the effective date of the change; if
HARRIS fails to notify SKYSTREAM of any such objections, HARRIS shall be deemed
to have consented to such change.
(b) SKYSTREAM shall inform HARRIS on a periodic basis of any
planned changes to the form, fit or function of Exclusive Products. Any changes,
modifications, and substitutions that impact the form, fit, or function of
Exclusive Products shall be mutually agreed upon by the Parties. HARRIS reserves
within its sole discretion, the right to accept or reject any such proposed
changes and to require SKYSTREAM to deliver the Exclusive Products in accordance
with the original Specifications of this Agreement.
(c) Notice of any technical change to the Products shall be
provided to:
HARRIS Corporation
Director of Customer Service
3200 Wismann Lane
Quincy, Illinois 62301
(217) 222-8200
SkyStream
Product Marketing Manager
555 Clyde Avenue
Mountain View, California 94043
(650) 390-8800
4.14 Price Protection.
(a) The Parties shall have established commercially viable
pricing for the purchase of the Products by HARRIS for resale. Commercial
viability shall be based on the competitiveness of the price paid by HARRIS to
SKYSTREAM and based on such purchase price, the ability of HARRIS to resell the
Products in the market place at a reasonable margin to HARRIS. In the event that
HARRIS believes that the purchase price no longer is commercially viable,
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HARRIS shall notify SKYSTREAM in writing, and the Parties shall engage in good
faith negotiations to restructure the purchase price between them in order to
meet the goal of the commercial viability of the purchase price. The intent of
such good faith negotiations is the reduction of the purchase price between the
Parties which will enable HARRIS to meet resale market forces. At no time shall
such discussions or agreements allow SKYSTREAM to affect in any way, the HARRIS
resale price or other factors of the resale. Once SKYSTREAM accepts the Purchase
Order in Writing, at the quoted price, this price shall remain fixed as defined
in the Order unless the parties mutually agree to reduce the price.
(b) Any adjustment in the price of the Products shall be
effective on Products not yet delivered to HARRIS by SKYSTREAM under outstanding
Orders. SKYSTREAM agrees to amend the Order accordingly.
4.15 Service Agreements.
HARRIS shall have the opportunity to purchase, for resale to
End Users, the first year of SkySupport Service customer service, as listed in
Exhibit D under SkySupport Plan, at the time of each sale by Harris to an End
User. Such SkySupport may then be renewed on the nearest of February 15, May 15,
August 15 and November 15 following the one yew anniversary of the date of each
sale by Harris to End User. In the case of upgrades to a previously purchased
Product, in order for SkySupport to extend to the upgrade, the End User must
have purchased SkySupport on the Product, and must pay for SkySupport on the
upgrade. Where SkySupport is ordered on an upgrade, the first year of SkySupport
shall be assessed on the upgrade at the time of order by Harris and invoiced
with the upgrade, and thereafter collected at the time the SkySupport renewal is
payable on the Product for which the upgrade was purchased.
5. MAINTENANCE, SUPPORT, AND TRAINING.
5.1 By HARRIS.
HARRIS agrees to offer all End-Users one of two maintenance and support
plans to technically support the Products sold to the End-Users as follows:
(a) a service plan that is substantially similar to the
SkySupport customer service program that is offered by SKYSTREAM to its direct
customers. A copy of the plan, as well as the fee structure is listed in Exhibit
D under SKYSUPPORT PLAN.
(b) a standard 12-month warranty period, of which the
services available to the End-Users as well as the fee structure are listed in
Exhibit D under STANDARD WARRANTY.
5.2 By SKYSTREAM.
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SKYSTREAM will not be responsible for providing support to the End User.
SKYSTREAM will provide HARRIS with:
(a) commercially reasonable efforts to correct any
non-conformity with the software Feature Specification Documents for the
applicable versions of the software;
(b) every six (6) months, at a mutually agreeable location
at no cost to HARRIS: factory and field service training, to consist of a
minimum of two business days of training, and sales and product line staff
training, to consist of at least one, four-hour session. Factory and field
service training sessions given pursuant to this section may be attended by up
to 5 HARRIS personnel. Sales and product line staff training shall be attended
by a reasonable number of HARRIS personnel or HARRIS distributors. Each Party
agrees to pay the travel and living expenses of such Party's own personnel
associated with the training;
(c) SKYSTREAM agrees to provide reasonable access to
SKYSTREAM's technical personnel for inquiries from HARRIS relating to the
Products during standard SKYSTREAM business hours, generally Monday through
Friday from 9:00 am. to 5:00 p.m. Pacific Standard Time, and SKYSTREAM agrees to
respond to any HARRIS inquiry within eight business hours;
(d) additional training and support services as the Parties
shall negotiate in good faith and mutually agree upon.
6. CONFIDENTIALITY.
6.1 Obligations. Each party agrees that it will not disclose to
any third party or use any Products or other Confidential Information disclosed
to it by the other party, except to carry out its rights and obligations under
this Agreement, and that it will take all reasonable measures to maintain the
confidentiality of all Confidential Information in its possession or control,
which will in no event be less than the measures it uses to maintain the
confidentiality of its own information of similar importance. "Confidential
Information" includes (i) all written information labeled confidential or
proprietary and (ii) oral information that is designated by a party as
confidential or proprietary in writing within a reasonable time of its
disclosure.
6.2 Exceptions. "Confidential Information" will not include
information that:
(i) is in or enters the public domain without breach
of this Agreement;
(ii) is lawfully obtained by the receiving party
without breach of a nondisclosure obligation;
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<PAGE> 20
(iii) is independently developed or already in the
possession of the receiving party as shown by the receiving party's
contemporaneous records; or,
(iv) is required by law to be disclosed, provided that
the receiving party gives prompt written notice of such requirement prior to
disclosure: or
(v) was known to the receiving party at the time it
was submitted;
The obligations and restriction contained in this Section 6.1 shall expire
10 years after the Effective Date or 3 years after expiration or termination of
this Agreement, which ever is later.
6.3 Injunctive Relief. Each party acknowledges that the improper
disclosure of the other's Confidential Information could cause substantial harm
to the other party that could not be remedied by the payment of damages alone.
Accordingly, either party will be entitled to preliminary and permanent
injunctive relief and other equitable relief for any breach of this Agreement or
misuse of Confidential Information by SKYSTREAM, HARRIS or the End User, as
applicable.
6.4 Disclosure Warranty. Each party warrants that it has the full
power and authority to supply and to disclose Confidential Information to the
other party, and that such Confidential Information has not been improperly or
unlawfully acquired.
6.5 Disclosure Indemnification. Each party agrees to indemnify the
other party against, and to hold the other party harmless of and from, any loss,
cost, damage, liability, suit, judgment, or expense, including legal fees
(collectively, "Harm") arising out of any breach of the warranties set forth in
Section 6.4.
7. INTELLECTUAL PROPERTY RIGHTS
7.1 Ownership. SKYSTREAM and/or its vendors shall own all right,
title, and interest in the Software and documentation, all Intellectual Property
Rights therein, and all Intellectual Property Rights in the Products, including
all changes and improvements requested or suggested by HARRIS in the support and
maintenance of the Products. SKYSTREAM acknowledges that HARRIS shall own all
right, title, interest and Intellectual Property Rights in all products or
inventions developed entirely by HARRIS except those which are based upon or
derived from the Products, Software, documentation, Confidential Information or
trade secret information of SKYSTREAM, or those developed by Harris personnel
who have used the Products and/or Software that are based upon or derived from
the Products and/or Software at the time of conception or reduction to practice
of the invention to the Products, or from research or development of SKYSTREAM
that has been a subject of public disclosure or disclosure to Harris pursuant to
this Agreement.
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7.2 Limited Use. The Products are offered for sale and are sold by
SKYSTREAM subject in every case to the condition that such sale does not convey
any license expressly or by implication, to manufacture, reverse engineer,
duplicate or otherwise copy or reproduce any of the Products or any part
thereof.
7.3 Notices. HARRIS will not delete or in any manner alter the
Intellectual Property Rights notices of SKYSTREAM and its suppliers, if any,
appearing on the Products as delivered to HARRIS.
7.4 HARRIS' Duties. HARRIS will take customary measures in the
marketing and distribution of the Products to provide notices of SKYSTREAM's
copyrights and trademarks in the Products, no less than the extent to which
HARRIS protects its copyrights and trademarks in HARRIS' Products, and will, to
the extent lawful, report promptly to SKYSTREAM any infringement of such rights
of which HARRIS becomes aware.
7.5 Trademarks. Subject to the terms and conditions of this
Agreement, SKYSTREAM grants HARRIS a nonexclusive license for the term of this
Agreement to use the Marks in HARRIS' marketing of the Products, provided that
such use is in accordance with SKYSTREAM's trademark usage guidelines then in
effect. Such use must reference the Marks as being owned by SKYSTREAM. Nothing
in this Agreement grants HARRIS ownership or any rights in or to use the Marks,
except in accordance with this license, and HARRIS' use of the Marks will inure
to the benefit of SKYSTREAM. The rights granted to HARRIS in this license will
terminate upon any termination or expiration of this Agreement. Upon such
termination or expiration, HARRIS will no longer make any use of any Marks.
SKYSTREAM will have the exclusive right to own, use, hold, apply for
registration for, and register the Marks during the term of, and after the
expiration or termination of, this Agreement; HARRIS will neither take nor
authorize any activity inconsistent with such exclusive right.
8. INFRINGEMENT INDEMNITY
8.1 SKYSTREAM Indemnification and Defense. Subject to the
limitations hereinafter set forth, HARRIS agrees that SKYSTREAM has the right to
defend, or at its option to settle, and SKYSTREAM agrees, at its own expense, to
defend or at its option to settle, any claim, suit or proceeding (collectively,
"Action") brought against HARRIS, its customers or its End Users alleging that
the use or distribution of the Products infringes or misappropriates any United
States patent, copyright or trade secret. SKYSTREAM shall have sole control of
any such Action or settlement negotiations shall, and SKYSTREAM agrees to pay,
subject to the limitations set forth in Sections 7 and 8, all related costs,
expenses and attorney fees and any settlement costs or final judgment entered
against HARRIS or its End Users as a result of such infringement. HARRIS agrees
that SKYSTREAM at its sole option shall be relieved of the foregoing obligations
unless HARRIS notifies SKYSTREAM promptly in writing of such Action and gives
SKYSTREAM
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authority to proceed as contemplated herein, and, at SKYSTREAM's expense, gives
SKYSTREAM proper and reasonable information and assistance to settle and/or
defend any such Action. If the Products, or any part thereof, are, or in the
opinion of SKYSTREAM may become, the subject of any Action for infringement of
any United States patent, copyright or trade secret, or if a judicial or other
governmental authority enjoins the use or distribution of Products as a result
of an Action defended by SKYSTREAM, then SKYSTREAM may, at its option and
expense: (i) procure for HARRIS, its customers and End Users the right to
distribute or use, as appropriate, the Products; (ii) replace the Products with
other equivalent non-infringing Products; (iii) suitably modify the Products to
render such non-infringing; yet equivalent or (iv) if the foregoing alternatives
cannot be accomplished on a commercially reasonable basis as determined in
SKYSTREAM's sole discretion, require HARRIS to return such Products and refund
the aggregate payments paid therefor by HARRIS, less a reasonable sum for use
and damage. HARRIS shall indemnify and hold harmless SKYSTREAM from and against
any and all third party claims arising out of the distribution of Products after
SKYSTREAM has required HARRIS to return such Products or arising out of any
exclusions to SKYSTREAM's indemnification obligations set forth in Section 8.2.
SKYSTREAM shall not be liable for any costs or expenses incurred without its
prior written authorization.
8.2 SKYSTREAM limitations. Notwithstanding the provisions of
Section 8.1 above, SKYSTREAM assumes no liability for (i) any infringement claim
(including without limitation combination or process patents) arising out of the
combination of a Product or use with other hardware, software or other items not
provided by SKYSTREAM to the extent such infringement would not have occurred
absent such combination or use; (ii) any infringement claims arising out of the
modification of the Products, or any part thereof, unless such modification was
made by SKYSTREAM; or (iii) any infringement claims arising out of SKYSTREAM's
compliance with HARRIS' specifications or designs.
8.3 Entire Liability. THE FOREGOING PROVISIONS OF THIS SECTION 8
STATE THE ENTIRE LIABILITY AND OBLIGATION OF SKYSTREAM AND THE EXCLUSIVE REMEDY
OF HARRIS, ITS CUSTOMERS AND END USERS WITH RESPECT TO ANY ALLEGED INFRINGEMENT
OF COPYRIGHTS, TRADEMARKS, PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE
PRODUCTS.
9. YEAR 2000 COMPLIANCE
(a) SKYSTREAM warrants to HARRIS that each of the Products
including (software, firmware or documentation) furnished with the Products
purchased by HARRIS, shall be "Year 2000 Compliant", meaning that it will, at
all times before, during and after calendar year 2000, perform all functions
(including, without limitation, input, processing, calculating, comparing,
sequencing and output) related to or including dates (including the year 2000
and dates before and after the year 2000) without interruption. For purposes of
the foregoing, "without interruption" means, among other things, without
modification, loss of performance, loss of use, or work or
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expense on the part of HARRIS or the End User, without changes in inputs,
output, data or other information in relation to dates arising in the Y2K and
beyond. Furthermore, when used in combination with other information technology,
each of the Products shall accurately process date/time data.
(b) SKYSTREAM warrants to HARRIS that internal information
technology systems are Year 2000 Compliant so as to prevent interruption or
delay respecting the continuous and timely supply of products to HARRIS.
(c) SKYSTREAM shall indemnify and hold harmless, HARRIS, its
employees, agents and third parties claiming under them from any and all
actions, claims, demands, suits, losses, damages, fines and penalties (except
where prohibited by law), judgments, expenses (including reasonable attorney's
fees), and causes of action of every character, whether in tort, contract or
otherwise which results from the failure or the alleged failure of SKYSTREAM to
furnish "Year 2000 Compliant" software as stated herein. HARRIS shall notify
SKYSTREAM in writing immediately upon being given notice of any such action or
claim and HARRIS shall be afforded the opportunity of participating in any legal
defense undertaken by SKYSTREAM.
10. LIMITATIONS OF LIABILITY.
10.1 Total Liability. EXCEPT AS SET FORTH IN SECTION 8 AND EXCEPT
FOR BREACHES OF SECTION 6, SKYSTREAM'S AND HARRIS' LIABILITY FOR A BREACH OF
THIS AGREEMENT WILL BE LIMITED TO THE TOTAL VALUE OF ORDERS RECEIVED OR DUE FROM
HARRIS UNDER THIS AGREEMENT.
10.2 Exclusion Of Damages. EXCEPT AS SET FORTH IN SECTION 8 AND
EXCEPT FOR BREACHES OF SECTION 6, SKYSTREAM WILL NOT BE LIABLE TO HARRIS OR
HARRIS' CUSTOMERS OR END USERS, NOR SHALL HARRIS BE LIABLE TO SKYSTREAM, FOR ANY
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF
CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR OTHERWISE, AND
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
THESE LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE
OF ANY LIMITED REMEDY.
10.3 No Warranty. EXCEPT AS SET FORTH IN SECTIONS 4.9, 8 AND 9,
SKYSTREAM MAKES NO WARRANTY, EXPRESS OR IMPLIED, IN CONNECTION WITH THE
PRODUCTS, INCLUDING THE RESULTS AND PERFORMANCE THEREOF, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR NONINFRINGEMENT.
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11. TERMINATION.
11.1 Term. The term of this Agreement will begin on the Effective
Date and will continue until the third anniversary of the Effective Date
("Termination Date"), unless it is terminated earlier in accordance with the
provisions hereof. Thereafter, this Agreement may be renewed for any number of
additional one-year periods upon the mutual written agreement of the Parties,
although each party acknowledges that the other is under no obligation to do so.
11.2 Events of Termination. Either party will have the right to
terminate this Agreement (i) for convenience and without cause, upon ninety (90)
days written notice to the other party, (ii) if the other party breaches any
material term or condition of this Agreement and fails to cure such breach
within thirty (30) days after written notice, or (iii) upon thirty (30) days
notice, if the other party becomes the subject of a voluntary or involuntary
petition in bankruptcy or proceeding relating to insolvency, receivership,
liquidation or composition for the benefit of creditors.
11.3 Review of Exclusivity. No more than fifteen days after
December 31, 1999, both Parties agree to meet to reconsider the exclusivity
provisions of this Agreement. HARRIS shall present to SKYSTREAM a product review
including: competition, experience to date, lost orders, orders to date,
proposals, product feedback and future implementation plans. During HARRIS'
product review presentation SKYSTREAM shall provide HARRIS with feedback on
HARRIS' presentation and SKYSTREAM's view of the marketplace. If HARRIS meets
the Performance Criteria, listed in Exhibit C, this Agreement shall
automatically continue in full force and effect. Otherwise, for thirty (30) days
after the meeting, or if such meeting fails to timely occur, for thirty (30)
days following January 15, 2000, SKYSTREAM may terminate the provisions of
Sections 2.2 and 2.3 of this Agreement by written notice to HARRIS, in which
event, the remainder of this Agreement shall continue in full force and effect.
11.4 Effect of Termination.
(a) Upon termination or expiration of this Agreement, HARRIS
will (except as specified in subsection (b) below) immediately return to
SKYSTREAM or (at SKYSTREAM's request) destroy all Source Code, if any, Software
(except for Software residing on a SKYSTREAM Product) and other Confidential
Information in its possession or control, and an authorized representative of
HARRIS will certify to SKYSTREAM in writing that HARRIS has done so.
(b) Upon termination or expiration of this Agreement, HARRIS
will have the option, in its sole discretion, of:
(i) electing, at any time, to allow SKYSTREAM to offer
maintenance and support for the Products directly to End Users in accordance
with SKYSTREAM's then applicable terms and conditions for such services; or
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(ii) continuing to provide maintenance and support for
the Products to its End Users upon the terms and conditions of Section 5 and
SKYSTREAM's obligations under Section 4.11.
(c) Upon the termination or expiration of this Agreement,
SKYSTREAM shall continue to fill any Orders previously accepted by SKYSTREAM and
all outstanding Harris quotation(s) to End User(s) for a period of ninety (90)
days.
11.5 Nonexclusive Remedy. The exercise by either party of any
remedy under this Agreement will be without prejudice to its other remedies
under this Agreement or otherwise.
11.6 Survival. The rights and obligations of the Parties contained
in Section 4.12 (Spares), Sections 6, (Confidentiality), 7 (Intellectual
Property Rights), 8 (Infringement Indemnity), 10 (Limitations of Liability), 11
(Termination) and 12 (General) will survive the termination or expiration of
this Agreement.
12. GENERAL
12.1 Publicity. HARRIS and SKYSTREAM agree to use reasonable
efforts in the preparation of a press release, mutually acceptable to both
Parties, announcing the execution of this Agreement. From and after the date
hereof, neither party shall issue any press releases with respect to the subject
matter hereof without the express approval of the other party.
12.2 Assignment. The rights and liabilities of the Parties hereto
shall bind and inure to the benefit of their respective successors, executors
and administrators, as the case may be provided that no Party may assign or
delegate its obligations under this Agreement either in whole or in part,
without the prior written consent of the other Party. Notwithstanding the
foregoing, nothing herein shall preclude an Assignment by any Party to a Party's
affiliated subsidiary or parent company.
12.3 Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of California applicable to
agreements between California residents entered into and to be performed
entirely within California, without reference to conflict of law principles. Any
dispute or claim arising out of this Agreement will be resolved by binding
arbitration in the city and state of Denver, Colorado in accordance with the
complex commercial litigation rules of the American Arbitration Association. The
arbitrator shall not limit, expand or modify the terms of the Agreement nor
award damages in excess of compensatory damages, and each Party waives any claim
to such excess damages. Notwithstanding the arbitrator will have the power to
grant any form of relief, including preliminary and permanent injunctive relief,
which a judge in California with jurisdiction could fashion, and judgment on any
award may be entered in any court in California with jurisdiction. Nonetheless,
the Parties may seek temporary or permanent
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injunctive relief from any court in California with jurisdiction without
breaching this Section 12.3 or otherwise abridging the authority of the
arbitrator.
12.4 Severability. If any provision of this Agreement is found
invalid or unenforceable, that provision will be enforced to the maximum extent
permissible and the other provisions of this Agreement will remain in force.
12.5 Force Majeure. Except for payments due under this Agreement,
neither party will be responsible for any failure to perform due to causes
beyond its reasonable control (each a "Force Majeure"), including, but not
limited to, acts of God, war, riot, embargoes, acts of civil or military
authorities, denial of or delays in processing of export license applications,
fire, floods, earthquakes, accidents, strikes, or fuel crises, provided that
such party gives prompt written notice thereof to the other party. The time for
performance will be extended for a period equal to the duration of the Force
Majeure, but in no event longer than sixty days.
12.6 Notices. All notices under this Agreement will be deemed given
when delivered personally, or sent by confirmed facsimile transmission, or sent
by certified or registered U.S. mail or recognized express courier, return
receipt requested, to the address as first shown on this Agreement or as may
otherwise be specified by either party to the other in accordance with this
section.
12.7 Independent Contractors. The Parties to this Agreement are
independent contractors. There is no relationship of partnership, joint venture,
employment, franchise, or agency between the Parties. Neither party will have
the power to bind the other or incur obligations on the other's behalf without
the other's prior written consent.
12.8 Waiver. No failure of either party to exercise or enforce any
of its rights under this Agreement will act as a waiver of such rights.
12.9 Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be enforceable against the party executing such counterpart, and all of
which together shall constitute one instrument.
12.10 Entire Agreement
This Agreement and its exhibits are the complete and exclusive agreement
between the Parties with respect to the subject matter hereof, superseding and
replacing any and all prior agreements, communications, and understandings (both
written and oral) regarding such subject matter. This Agreement may only be
modified, or any rights under it waived, by a written document executed by both
Parties.
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The Parties have caused this Agreement to be executed by their duly authorized
representatives as of the Effective Date.
HARRIS CORPORATION SKYSTREAM CORPORATION
Signature: /s/ JAY C. ADRICK Signature: /s/ CLINT CHAO
--------------------------------- -----------------------
Name: Jay Adrick Name: Clint Chao
-------------------------------------- ----------------------------
Title: Vice President of Systems Integration Title: Vice President of Marketing
------------------------------------- ---------------------------
Date: 4/18/99 Date: 4-18-99
------------------------------------- ---------------------------
Facsimile: (513) 459-3890 Facsimile: (650) 390-8990
------------------------------------- ---------------------------
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EXHIBIT A - END USER SOFTWARE LICENSE
SKYSTREAM CORPORATION
END USER SOFTWARE LICENSE
SOFTWARE LICENSE AND WARRANTY
ATTENTION!
Use of the software program on the enclosed disks and/or installed on the
computer is subject to the terms of the License Agreement printed on the license
card, in the license booklet, or in the user documentation. You should not use
this software until you have read the License Agreement.
By using the software, you signify that you have read the License Agreement and
accept its terms.
LICENSE
SKYSTREAM hereby grants to the Customer a limited, non-exclusive license to use
the Software provided solely on the terms and conditions contained herein.
"Software" means each software program provided by SKYSTREAM in machine
readable, object, printed or interpreted form.
LIMITATIONS ON USE
The Software is licensed to the Customer solely for Customer's internal use on
the purchased SKYSTREAM equipment and may not be used for any other purpose or
application.
The customer is licensed to use the Software only on the designated SKYSTREAM
equipment. The Software may not be used by Customer on any other computer, on
any other SKYSTREAM or similar equipment, or at any other location, except as
agreed by SKYSTREAM in writing.
Customer will not:
- - Copy all or any part of the Software, except that Customer may make one copy
of the Software solely for backup purposes for its own exclusive use, provided
that customer shall reproduce and include on such backup copy SKYSTREAM's
proprietary rights notices.
- - Use, print, copy, modify or display the software, in whole or in part, except
as specifically authorized by this Agreement.
- - Sublicense, assign, resell, or otherwise transfer the Software to any third
party except in connection with the permanent transfer of the SKYSTREAM
equipment with which the Software was shipped or for which the Software
upgrade was purchased. In the case of such a permanent transfer, Customer must
not retain any copies of the Software, must transfer all the Software,
including any upgrades or prior versions of the Software, and the recipient
must agree to the terms of this Software license.
- - Reverse engineer, duplicate or otherwise reproduce the Software.
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EXHIBIT A (CONTINUED)
Customer acknowledges that this Agreement does not grant to Customer, and
Customer will not acquire hereby, any rights to patents, copyrights, trade
secrets, trade names, trademarks (whether registered or unregistered), or any
other proprietary rights in or to the Software, all of which are expressly
retained by SKYSTREAM.
Customer acknowledges that the laws and regulations of the United States may
restrict the export and re-export of the Software or media in any form without
appropriate United States and foreign government approval.
If Customer is a unit or agency of the United States Government or is acquiring
the Software and Documentation for any such unit or agency, the following apply:
o If the unit or agency is the Department of Defense (DOD), the Software and
its accompanying documentation are classified as "commercial computer
software" and "commercial computer software documentation," respectively,
and, pursuant to DFAR Section 227.7202, the Government is acquiring the
Software and such documentation with terms of the Agreement.
o If the unit or agency is other than DOD, the Software and its accompanying
documentation are classified as "commercial computer software" and
"commercial computer software documentation," respectively, and pursuant to
FAR Section 12.212, the Government is acquiring the Software and such
documentation in accordance with the terms of this Agreement.
WARRANTY
SKYSTREAM makes no warranty, express or implied, in connection with the
Software, including the results and performance thereof, including without
limitation any implied warranties of merchantability or fitness for a
particular purpose or non-infringement.
LIMITATION OF LIABILITY
The maximum liability of SKYSTREAM to Customer for damages relating to this
agreement for any and all causes whatsoever, and Customer's maximum remedy,
regardless of the form of action, whether in contract, tort or otherwise, shall
be limited to the total fees paid by Customer to SKYSTREAM hereunder. In no
event shall SKYSTREAM be liable for any lost data or content, lost profits, or
business interruption, or for any indirect, incidental, special,
consequential, exemplary or punitive damages arising out of or relating to the
Software provided hereunder, even if SKYSTREAM has been advised of the
possibility of such damages.
TECHNICAL SUPPORT
For technical support, contact SKYSTREAM Customer Support through the World Wide
Web (www.SKYSTREAM.com) or via e-mail ([email protected]).
25
<PAGE> 30
EXHIBIT B - PRODUCTS
PRODUCTS
PRODUCTS TO BE COVERED UNDER THIS AGREEMENT:
PRODUCT DESCRIPTION
DBN-35 ATSC Data Broadcast Injector
DBN-35J ATSC Data Broadcast Injector System with JetStream Express Data
Broadcasting Software
All Level 1, 2, and 3 upgrades as defined in the SkySupport agreement listed in
Exhibit D.
SOFTWARE RELEASES TO BE COVERED UNDER THIS AGREEMENT:
SkyStream software release 1.3 and successor versions thereof
All JetStream Express Server software modules. Note: There is a JetStream
Client software module that is to be licensed to the manufacturer of the DTV
receiver, which is not a part of this Agreement.
This agreement covers the JetStream Express Server software only. HARRIS or
HARRIS' End user are responsible for supplying a computer system on which the
licensed software will execute The specification of the computer must meet the
following minimum requirements:
Pentium 200MHz, 4GB HD, 64MB RAM, Windows NT 4.0, TCP/IP connection to the
Internet
26
<PAGE> 31
EXHIBIT C - PERFORMANCE CRITERIA
PERFORMANCE CRITERIA FOR PERIOD BETWEEN EFFECTIVE DATE AND DECEMBER 31, 1999:
HARRIS MARKET SHARE REQUIREMENT
By December 31, 1999, HARRIS must have achieved a [*]% market share of the U.S.
ATSC call letter stations that have purchased a Data Broadcast Solution. This
will be measured by a report that will be generated by both Parties that lists
the number of television stations broadcasting digitally, their status on data
broadcast, and the HARRIS wins in that set. HARRIS' market share shall be
calculated as a fraction, the numerator of which is the number of HARRIS wins
and the denominator of which is the number of U.S. ATSC call letter stations
that have adopted a Data Broadcast Solution.
HARRIS MARKETING REQUIREMENT
By December 31, 1999, Harris must have placed at least [*] ads for Products in
national trade magazines (e.g., TV Technology, Broadcast Engineering, Digital
Television), and one direct mailing campaign to key decision makers in the
Exclusive Market.
MINIMUM PURCHASE REQUIREMENT
Under no circumstances will the total purchases from Harris be for less than [*]
units from the Effective Date to December 31, 1999.
* 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.
27
<PAGE> 32
EXHIBIT D - SKYSUPPORT PLAN AND PRODUCT/SERVICE PRICING
SKYSUPPORT PLAN
SKYSUPPORT
SERVICE PLAN
FOR DIRECT CUSTOMERS
PROVIDING WORLD-CLASS CUSTOMER SERVICE AND SUPPORT FOR THE
SKYSTREAM INTEGRATOR FAMILY OF PRODUCTS
VERSION 2.2
FEBRUARY 1999
SKYSUPPORT
28
<PAGE> 33
EXHIBIT D (CONTINUED)
CUSTOMER SERVICE PLAN FOR DIRECT CUSTOMERS
SkySupport is a customer service plan that offers world-class support to
SkyStream customers domestically and internationally. SkyStream offers a program
whereby the greatest effort is placed in fast response time to any issues that
emerge, 24 hours a day, and 7 days a week. SkyStream also employs proactive
efforts to keep SkySupport customers abreast of any new product developments or
code changes.
Because of the evolutionary architecture of the SkyStream Integrator series,
customers may find it useful to gradually add hardware or software features to
the base product. Customers can also purchase feature additions or an add-on
card for additional functionality. SkyStream offers all SkySupport customers
the opportunity to upgrade their products, even after the units are installed
in the field.
The SkySupport customer service plan is available to all direct customers of
SkyStream. The plan is supported on a per-unit basis, and is renewed annually.
SkySupport customers are also eligible to purchase product upgrades or training
for additional charges. This renewable 1-year plan (after ship date) shall
include the following three categories of support:
1. ULTRA-FAST RESPONSE TIME
2. PRODUCT UPGRADES
3. SKYSTREAM'S PRODUCT TRAINING PROGRAM
The SkySupport Service Plan is initially ordered at same time that the
equipment is purchased. SkySupport service is renewed automatically, unless
otherwise noted by the customer, every 12 months at the standard service rate
(per the most recent price list).
29
<PAGE> 34
SkyStream, HARRIS CONFIDENTIAL printed on 04/17/99
EXHIBIT D (CONTINUED)
SKYSUPPORT 3-POINT CUSTOMER SERVICE PLAN
1. ULTRA-FAST RESPONSE TIME
- - GUARANTEED ADVANCED PARTS REPLACEMENT, SHIPPED OVERNIGHT ON THE NEXT BUSINESS
DAY
SKYSTREAM WILL SHIP ADVANCE REPLACEMENT PARTS THE NEXT BUSINESS DAY.
- - TELEPHONE SUPPORT, 24 HOURS PER DAY, 7 DAYS PER WEEK (24x7)
Access to SkyStream Customer Service technical support personnel with a
guaranteed response time of within 4 hours of initial call.
- - ELECTRONIC MAIL INQUIRIES AND RESPONSES
- - REMOTE DIAGNOSTIC SERVICE (RDS)
SkyStream customer service can observe and analyze the configuration and
traffic pattern at the client's site and provide feedback to resolve
problems. Customer needs to provide SkyStream support personnel with
authorization to access the SkyStream products over a remote network for
monitoring and troubleshooting purposes.
- - DOCUMENTATION
Access to product manuals, user's guides, application notes, FAQ's and
web-based troubleshooting guide on SkyStream's website via secure SkySupport
password.
30
<PAGE> 35
SkyStream, HARRIS CONFIDENTIAL printed on 04/17/99
EXHIBIT D (CONTINUED)
2. PRODUCT UPGRADES
SkyStream's products have a unique architecture that allows them to receive
hardware or software upgrades while installed in the field. Upgrades can range
from simple software patches to significant feature upgrades, all of which are
best treated under the SkySupport plan. Product Upgrades come in three
different categories, and will be clearly marked in all price lists:
LEVEL 1 UPGRADE: BUG FIXES
All software bug fixes will be documented and made accessible to all SkyStream
customers. Bug fixes are software patches that repair a known problem in the
current released code. Level 1 upgrades will be available [*], as long as
customers are using supported software releases. Typically, SkyStream will
provide support for the 2 most recent releases of its software. Customers using
unsupported versions of software will need to upgrade to the latest version to
receive code fixes, and non-SkySupport customers may need to pay [*] to upgrade.
Registered SkySupport customers will be pro-actively notified via email of any
upgrade within 30 days of production release date.
LEVEL 2 UPGRADE: FEATURE IMPROVEMENTS
Level 2 upgrades include all software improvements. Software improvements are
released on an ongoing basis to improve on an existing set of functions. See the
SkyStream price list to determine which features fall into this category. These
upgrades will be provided to SkySupport customers for [*] as long as customers
are using supported software releases.
LEVEL 3 UPGRADE: FEATURE ADDITIONS AND HARDWARE UPGRADES
Feature additions and hardware add-on card upgrades will be sold via SkyStream's
upgrade price list. Feature additions include software code upgrades that add
significant functionality to the existing product specification. See the
SkyStream price list to determine which features fall into this category. Only
authorized SkySupport personnel will administer Level 3 upgrades. Registered
SkySupport customers will be pro-actively notified via email of any upgrade
within 30 days of production release date.
SkyStream's Integrator family uses a flexible architecture that allows customers
to purchase a base system for immediate requirements, with an interest to
upgrade its functionality to a new platform in the future. For example, if a
customer purchases a DBN-35 ATSC IP Data Injector, and later wishes to upgrade
the product to support CAS Injection, he can do so by paying only an upgrade fee
as opposed to buying a new system (see upgrade price list for upgrade prices).
Customers interested 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.
31
<PAGE> 36
SkyStream, HARRIS CONFIDENTIAL printed 04/17/99
upgrading their unit must provide SkyStream with 90 days advance notice. Only
SkySupport customers will have access to any Level 3 upgrades.
NOTE: Level 3 Upgrades are only available on same-family products (i.e. DBN 2X
is a family of products, where X can be 4, 5, 6, or other future product).
3. SKYSTREAM'S PRODUCT TRAINING PROGRAM
SkyStream offers all customers basic system operations training to the SkyStream
Integrator product family. This session will accompany any new product
installation when an authorized SkyStream field support engineer performs the
installation. For more detailed product training, SkyStream offers an additional
system maintenance training session for customer engineering or operations
personnel who require more technical knowledge and hands-on skills to work
directly with the SkyStream equipment.
There are two training modules available.
MODULE 1: SKYSTREAM SYSTEM OPERATIONS TRAINING
SkyStream provides comprehensive on-site training on the new system at the time
of system installation. Customer operations and production staff receive
training on
o System Overview/Setup
o System Operations
o Routine maintenance of the system
MODULE 2: SKYSTREAM SYSTEM MAINTENANCE TRAINING
SkyStream offers advanced training to customers that support and maintain their
SkyStream system. This training provides customers with the technical knowledge
and hands-on skills needed to use, configure, support and troubleshoot the
SkyStream system. This training is delivered at SkyStream's Corporate Training
Facility in Mt. View, CA.
32
<PAGE> 37
SkyStream, HARRIS CONFIDENTIAL printed on 04/17/99
EXHIBIT D (CONTINUED)
ADDITIONAL TERMS:
1. SkySupport must be purchased at time of order placement, and must cover
the full amount of the order (i.e. if customer buys 2 DNB-xx units, he
must also buy 2 units of SkySupport).
2. SkySupport must also be purchased for any upgrades when they are ordered,
and will be added to the basic SkySupport agreement when it is to be
renewed.
3. SkyStream will register all units by serial number. Customer service
calls must be verified by actual serial number of affected unit.
4. All existing SkySupport customers' terms will be honored until expiration
of the current annual service plan. Renewals will be assessed at the rate
established in this document.
5. All returns will be handled by RMA process. SkyStream will issue an RMA
number that must accompany any product repair or return unit.
STANDARD WARRANTY
SkyStream highly recommends that all customers obtain full customer service
with the SkySupport plan. Should customers opt not to select SkySupport,
SkyStream offers a standard warranty to all direct customers. This 14-month,
non-renewable warranty (after ship date) shall include the following:
Replacement by standard delivery, FOB Mountain View, CA USA.
Product or parts repair and/or diagnosis within 30 days after receipt of
defective unit. Customer pays for shipment to SkyStream, and SkyStream pays for
shipment back to customer.
Customers are eligible to receive Level 1 and Level 2 upgrades during the
Warranty Period. Level 3 Upgrades are only available to SkySupport customers.
33
<PAGE> 38
EXHIBIT D (continued)
PRODUCT AND SKYSUPPORT PRICING
PRICE LIST 1: TRANSFER PRICES FROM SKYSTREAM TO HARRIS
<TABLE>
<CAPTION>
Support Fees - Year Number
-----------------------------------------------------------
Description Order Price 1 2 3 4 5+ Notes
Number --------------------------------------------------
[*] [*] [*] [*] [*]
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DBN-35 with standard warranty S141001 $[*] $[*] $[*] $[*] $[*] $[*]
Preferred Option: DBN-36 with SkySupport
Coverage S141001+ $[*] $[*] $[*] $[*] $[*] $[*]
S901001 pick one
DBN-35J with standard warranty S151001 $[*] $[*] $[*] $[*] $[*] $[*]
Preferred Option: DBN-36J with S151001+
SkySupport Coverage S901001 $[*] $[*] $[*] $[*] $[*] $[*]
Network system config. application $[*] $[*] $[*] $[*] $[*]
Remote access application $[*] $[*] $[*] $[*] $[*] standard
System monitor/alarm application $[*] $[*] $[*] $[*] $[*] DBN-
ATSC Addressable Sections packetization 35/35J
software default [*] . $[*] $[*] $[*] $[*] $[*] features
Dual Power Supplies $[*] $[*] $[*] $[*] $[*]
SMPTE-310 Transport Stream Input/
Output card $[*] $[*] $[*] $[*] $[*]
One 10/100 Ethernet card $[*] $[*] $[*] $[*] $[*]
Extra 10/100 Ethernet card S301402 $[*] $[*] $[*] $[*] $[*] $[*]
Watchdog/Alarm "Relay" card S304001 $[*] $[*] $[*] $[*] $[*] $[*]
Rack-Mount Assembly Kit (Rails) S804001 $[*] $[*] $[*] $[*] $[*] $[*]
RS-232 "Com" data input card (4 ports/
card) (max: 4 cards) S301004 $[*] $[*] $[*] $[*] $[*] $[*]
RS-422 "Sync" data input card
(2 ports/card) (max: 1 card) S301102 $[*] $[*] $[*] $[*] $[*] $[*] Level 3
ATM (fiber) data input card (max: 1 card) S301201 $[*] $[*] $[*] $[*] $[*] $[*] features
Standard data ports: 8 TCP. 8 UDP. 16 File default [*] $[*] $[*] $[*] $[*] $[*] (HW and
Any changes to standard data port (TCP, SW)
UDP, File) configuration pick one
16 TCP S502102
32 TCP S502103 $[*] $[*] $[*] $[*] $[*] $[*]
16 UDP S502201
32 UDP S502202
SkySupport Coverage Standard Warranty
12 months, renewable every year 12 months, non-renewable
telephone support, 7x24 telephone support, 5x8
access to Level 1 Features (Bug Fixes) access to Level 1 Features (Bug Fixes)
access to Level 2 Features (Feature
Improvements) access to Level 2 Features (Feature Improvements)
access to Level 3 Features (Feature Upgrades) No access to Level 3 Features (Feature Upgrades)
Next day replacement parts No replacement parts, 30-day RMA only
</TABLE>
* 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.
34
<PAGE> 39
EXHIBIT E - SPARE PARTS
DBN-35 ATSC Data Broadcast Injector
DBN-35J ATSC Data Broadcast Injector System with JetStream Express Data
Broadcast Software
35
<PAGE> 40
EXHIBIT F -- NON-EXCLUSIVE PRODUCTS
36
<PAGE> 1
EXHIBIT 10.17
SKYSTREAM CORPORATION
NONEXCLUSIVE INTERNATIONAL
VALUE ADDED RESELLER ("VAR") AGREEMENT
This Agreement, dated December 1, 1999, is made between SkyStream Corporation
("SKYSTREAM"), a California corporation doing business at 555 Clyde Avenue,
Suite B, Mountain View, California 94043 and International Datacasting
Corporation, a corporation organized under the laws of Canada ("Reseller"),
doing business at 2680 Queensview Drive, Ottawa, Ontario, Canada, K2B 8H6.
RECITALS
A. SKYSTREAM sells those certain digital broadcast networking products known
as the Integrator product family, as defined in Exhibit C ("Products" as
further defined below).
B. Reseller wishes to have certain non-exclusive rights to market and
distribute such Products worldwide in combination with Reseller's products.
THEREFORE, SKYSTREAM and Reseller agree as follows:
1. DEFINITIONS.
1.1 Dollars. "Dollars" means United States Dollars.
1.2 End User. "End User" means a customer of Reseller, who is authorized
by an end user software license agreement to use the Software on the
purchased Products for the End User's internal business purposes.
1.3 Effective Date. "Effective Date" means the date first written above.
1.4 Intellectual Property Rights. "Intellectual Property Rights" means
patent rights (including but not limited to rights in patent
applications or disclosures and rights of priority), copyright
(including but not limited to rights in audiovisual works and moral
rights), trade secret rights, and any other intellectual property
rights recognized by the law of each applicable jurisdiction.
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<PAGE> 2
1.5 Marks. "Marks" means SKYSTREAM's trademarks, trade names, service
marks, and/or service names.
1.6 Reseller Products. "Reseller Products" means the computer software
and/or hardware and related documentation that are distributed by
Reseller in combination with the Products.
1.7 Products. "Products" means SKYSTREAM Integrators, as listed in
Exhibit C, including accompanying Software and any additions and
enhancements provided for use with the units.
1.8 Software. "Software" means SKYSTREAM Integrator software as listed in
Exhibit C.
1.9 Source Code. "Source Code" means software in human-readable form,
including programmers' comments, data files and structures, header
and includes files, macros, object libraries, programming tools not
commercially available, technical specifications, flowcharts and
logic diagrams, schematics, annotations and documentation reasonably
required or necessary to enable an independent third party programmer
with reasonable programming skills to create, operate, maintain,
modify and improve the software without the help of any other person.
2. DISTRIBUTION OF PRODUCTS
2.1 Reseller Appointment. SKYSTREAM hereby appoints Reseller as a
nonexclusive reseller of the Products to End-Users for End User's
internal use in conjunction with Reseller Products.
2.2 Added Value. In the exercise of Reseller's rights under this
Agreement, Reseller will sell the Products to the End User usually in
combination with Reseller Products.
2.3 Relabeling. Subject to prior approval SKYSTREAM, Reseller may relabel
the Products with Reseller's name and logo.
2.4 Documentation. Subject to the terms of this Agreement, SKYSTREAM
grants Reseller a nonexclusive license during the term of this
Agreement to use, modify, create derivative works of and distribute
SKYSTREAM's documentation for the Products to the End User. SKYSTREAM
will make available SKYSTREAM's End User documentation to Reseller, as
it is updated and modified from time to time, without additional
charge. Reseller will provide copies of such modifications to
SKYSTREAM upon SKYSTREAM's request.
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<PAGE> 3
2.5 Marketing Collateral. SKYSTREAM agrees to sell, subject to availability,
copies of its marketing literature to Reseller on an at-cost basis.
SKYSTREAM reserves all rights associated with such marketing literature.
Reseller agrees to obtain prior written approval of SKYSTREAM's Vice
President of Marketing for all marketing literature it shall prepare that
pertain to the Products.
2.6 Grant of License. Subject to the terms of this Agreement, SKYSTREAM
grants Reseller a limited license to use the Software in connection with
the demonstration of the products and in connection with the configuration
and support of the Products for End Users. All such use shall be subject
to the terms of the End User Software License attached hereto as Exhibit
A.
2.7 No Sale of Services. Reseller will not use the Products in any manner to
provide service bureau, time sharing, or other computer services to third
parties.
2.8 No Reverse Engineering. Reseller will not disassemble, decompile, or
reverse engineer the Products.
2.9 Limited Rights. Reseller's rights in the Products will be limited to
those expressly granted in this Agreement.
2.10 Terms and Conditions of Sale. Except as modified herein, all sales to
Reseller are subject to SKYSTREAM's Terms and Conditions of Sale, a copy
of which is attached hereto as Exhibit B, and which is made a part of
this Agreement as if set forth herein.
2.11 Pricing to Reseller. The price paid by Reseller to SKYSTREAM shall be
established at the time of acceptance of Reseller's purchase order. [*].
SKYSTREAM reserves the right to adjust the prices paid by Reseller at
SKYSTREAM's discretion with 60 days notice. Nothing in this Agreement will
be construed to restrict Reseller's ability to set prices to its
customers.
3. SOFTWARE
3.1 Limited Distribution. Reseller is permitted to market and distribute
SKYSTREAM Software only in connection with the sale of the Products to
the End User.
3.2 End User Software License.
(a) Reseller agrees:
(i) to include the following language in all sales quotations and
offers to sell the Products:
* 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
"The [name of Product] is sold subject to the terms on an End
User Software License. The use of the [name of Product] is
contingent upon the acceptance by the purchaser of the terms
of the End User Software License."
(ii) to provide a copy of the End User Software License, in the
form attached hereto as Exhibit A, to any potential purchaser
who shall request a copy prior to sale;
(iii) to package and to install the Products in such a manner that
Reseller's customer is provided with a meaningful opportunity
to review and agree to the End User Software License before
installing or using any of the Products; and
(iv) to agree to accept for return and refund any unused Products
in the event that Reseller's customer does not agree to accept
any of the terms of the End User Software License or of the
terms of any other software license required to use the
Products.
In consideration of SkyStream's not requiring a written End-User Software
License signed by Reseller's customer as a precondition to the sale or
transfer of the Products, Reseller agrees to indemnify SkyStream for any
and all damages that may arise as a result of (i) Reseller's breach of
Section 3.2(a).
3.3 License Only. Notwithstanding the use herein of the word "sell" and
variants thereof, all Software is licensed to the Reseller and the End
User and is not sold. SKYSTREAM, or the licensors through which SKYSTREAM
obtained the rights to distribute Software, retain title to the Software,
whether the Software is separate or combined with any other products,
including Reseller Products, and Reseller shall transfer Software only to
the extent that such transfer is incidental to the resale or lease of the
Products. The End User is licensed by SKYSTREAM directly to use the
Software solely in conjunction with the use of the Products and further
subject to the terms of the End User Software License.
3.4 Proprietary Software. The Software is proprietary to SKYSTREAM and/or its
suppliers and is copyrighted. Without SKYSTREAM's prior written approval,
Reseller shall not separate the Software from the Products as shipped by
SKYSTREAM, nor shall Reseller disassemble, de-compile, reverse-engineer,
copy, modify, or otherwise change any of the Software or its form.
Reseller shall protect the Software from any disclosure or use in
violation of this Agreement. Reseller shall not be entitled to receive
Source Code.
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<PAGE> 5
3.5 Software Revisions. In the event SKYSTREAM, at its sole discretion,
provides Reseller with revised copies of the Software, Reseller shall,
according to SKYSTREAM's instructions, replace copies of the Software from
the Products with the revised Software. Reseller shall dispose of the
replaced Software in accordance with SKYSTREAM's instructions. SKYSTREAM
shall have the right to inspect Reseller's inventory of Software and
replaced Software at any time on reasonable notice.
4. MAINTENANCE, SUPPORT, AND TRAINING.
4.1 By Reseller. Reseller will be responsible for providing the following
support to the End User: installing the Products as needed; training the
End User; and providing all direct first level technical support to the End
User, including problem analysis and using its reasonable efforts to
provide solutions and error correction for the products consistent with
Reseller's standard service and support policies and procedures.
Reseller agrees to provide a substantially similar level of support to that
SkyStream provides to its direct customers, which must include, at a
minimum, 24x7 telephone support, and at least 2 hours of on-site training
to the End User. A copy of SkyStream's direct SkySupport service agreement
is attached in Exhibit E. Reseller agrees to use best efforts to ensure
that training of Reseller's personnel occurs within the first 90 days of
the execution of this Agreement. Reseller agrees to maintain a minimum of 2
fully trained service personnel at all times, which personnel must attend
training, to be paid for by Reseller, at least once every 12 months.
4.2 By SKYSTREAM. SKYSTREAM will not be responsible for providing support to
the End User. SKYSTREAM will provide Reseller with:
(i) commercially reasonable efforts to correct any non-conformity with
the Software Feature Specification Document for the applicable
version of the Software:
(ii) technical training, to consist of one training class given over one
and one-half (1 1/2) eight-hour days and which may be attended by up
to three Reseller personnel onsite at SKYSTREAM's Mountain View,
California office, provided that Reseller pays the travel and living
expenses of such personnel designated to receive the training, or at
Reseller's headquarters, provided that Reseller pays the travel and
living expenses of SKYSTREAM's training personnel; training class for
additional personnel will be quoted by SKYSTREAM separately;
(iii) upon continued payment of an annual Maintenance Fee (the "Maintenance
Fee") in the amount currently set forth on Exhibit D, as SKYSTREAM
may change from time to time, payable in full with each sale to
Reseller and
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<PAGE> 6
thereafter on the nearest of February 15, May 15, August 15 and
November 15 following the one year anniversary of the date of
each sale to Reseller, SKYSTREAM agrees to provide reasonable
access to SKYSTREAM's technical personnel for inquiries from
Reseller relating to the Products during standard SKYSTREAM
business hours, generally Monday through Friday from nine a.m. to
five p.m. Pacific Standard Time, and access to SKYSTREAM's
technical call center 24 hours a day, 7 days a week, where
SKYSTREAM agrees to respond to any Reseller inquiry within four
business hours of initial call placement. In the case of upgrades
to a previously purchased Product, the Maintenance Fee shall be
payable on the upgrade at the time of sale to Reseller and
thereafter at the time the Maintenance Fee is payable on the
Product for which the upgrade was purchased. Payment of this
recurring Maintenance Fee does not entitle Reseller or End User
to, and shall not be construed as either full or partial payment
for, software upgrades with new functionality as defined by
SKYSTREAM;
(iv) upon fourteen days notice, technical consulting services at a
location to be designated by Reseller, at SKYSTREAM's current
hourly rate for such services as may be adjusted by SKYSTREAM
from time to time, provided that Reseller shall also reimburse
SKYSTREAM for all associated travel and living expenses in
connection with such services. SKYSTREAM's current technical
consulting hourly rate is included on SKYSTREAM's price list for
sales to Resellers, a copy of which is attached hereto as Exhibit
D.
4.3 Repairs Support. SKYSTREAM shall provide repair or replacement support
for all equipment provided, at SKYSTREAM's then-current prices,
pursuant to this Agreement for a period of at least five (5) years
from delivery of a purchased unit, provided, however, that such
replacement support may consist of equipment with comparable
functionality as determined at SKYSTREAM's sole discretion.
4.4 Quality Control System. Upon reasonable notice, SkyStream agrees to
provide Reseller reasonable access to the manufacturing areas of
SkyStream's facility for purposes of observing SkyStream's quality
control procedures.
5. CONFIDENTIALITY.
5.1 Obligations. Each party agrees that it will not disclose to any third
party or use any Products or other Confidential Information disclosed
to it by the other party, except to carry out its rights and
obligations under this Agreement, and that it will take all reasonable
measures to maintain the confidentiality of all Confidential
Information in its possession or control, which will in no event be
less than the measures it uses to maintain the confidentiality of its
own information of similar importance. Confidential Information
includes all information designated by a party as
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<PAGE> 7
confidential or proprietary within a reasonable time of its disclosure
or which a reasonable person would expect to treat as confidential.
5.2 Exceptions. "Confidential Information" will not include information
that:
(i) is in or enters the public domain without breach of this
Agreement;
(ii) is lawfully obtained by the receiving party without breach of a
nondisclosure obligation;
(iii) is independently developed or already in the possession of the
receiving party as shown by the receiving party's
contemporaneous records; or,
(iv) is required by law to be disclosed, provided that the receiving
party gives prompt written notice of such requirement prior to
disclosure.
5.3 Injunctive Relief. Each party acknowledges that the improper
disclosure of the other's confidential information could cause
substantial harm to the other party that could not be remedied by the
payment of damages alone. Accordingly, either party will be entitled
to preliminary and permanent injunctive relief and other equitable
relief for any breach of this Agreement or misuse of Confidential
Information by SKYSTREAM, Reseller or the End User, as applicable.
6. INTELLECTUAL PROPERTY RIGHTS.
6.1 Notices. Reseller will not delete or in any manner alter the
Intellectual Property Rights notices of SKYSTREAM and its suppliers,
if any, appearing on the Products as delivered to Reseller.
6.2 Reseller's Duties. Reseller will take customary measures in the
marketing and distribution of the Products to protect SKYSTREAM's
Intellectual Property Rights in the Products, no less than the extent
to which Reseller protects its Intellectual Property Rights in
Reseller's Products, and will, to the extent lawful, report promptly
to SKYSTREAM any confirmed infringement of such rights of which
Reseller becomes aware.
6.3 Trademarks. Subject to the terms and conditions of this Agreement,
SKYSTREAM grants Reseller a nonexclusive license for the term of this
Agreement to use the Marks in Reseller's marketing of the Products,
provided that such use is in accordance with SKYSTREAM's trademark
usage guidelines then in effect. Such use must reference the Marks as
being owned by SKYSTREAM. Nothing in this Agreement grants Reseller
ownership or any rights in or to use the Marks, except in accordance
with this license, and Reseller's use of the Marks will inure to the
benefit of SKYSTREAM. The rights granted to Reseller in this license
will terminate upon any
-7-
<PAGE> 8
termination or expiration of this Agreement. upon such termination or
expiration, Reseller will no longer make any use of any Marks.
SKYSTREAM will have the exclusive right to own, use, hold, apply for
registration for, and register the Marks during the term of, and
after the expiration or termination of, this Agreement; Reseller will
neither take nor authorize any activity inconsistent with such
exclusive right.
7. INFRINGEMENT INDEMNITY
7.1 Reseller Warranty.
(a) Reseller warrants that it owns all the rights to the
Confidential Information provided to SKYSTREAM, and that such
items are free of any restrictions, settlements, judgments, or
adverse claims. Reseller warrants that it has the full power and
authority to supply and to disclose such information to
SKYSTREAM.
(b) Reseller warrants that it has not improperly or unlawfully
acquired the information and processes submitted to SKYSTREAM.
7.2 Reseller Indemnification. Reseller agrees to indemnify SKYSTREAM
against, and to hold SKYSTREAM harmless of and from, any loss, cost,
damage, liability, suit, judgment, or expense, including legal fees
(collectively, "Harm") arising out of any breach of the warranties
set forth in Section 7.1.
7.3 SKYSTREAM Indemnification and Defense. Subject to the limitations
hereinafter set forth, Reseller agrees that SKYSTREAM has the right
to defend, or at its option to settle, and SKYSTREAM agrees, at its
own expense, to defend or at its option to settle, any claim, suit or
proceeding (collectively, "Action") brought against Reseller alleging
that the use or distribution of the Products infringes or
misappropriates any copyright or trade secret. SKYSTREAM shall have
sole control of any such Action or settlement negotiations, and
SKYSTREAM agrees to pay, subject to the limitations set forth in
Sections 7 and 8, any settlement costs or final judgment entered
against Reseller as a result of such infringement. Reseller agrees
that SKYSTREAM at its sole option shall be relieved of the foregoing
obligations unless Reseller notifies SKYSTREAM promptly in writing of
such Action and gives SKYSTREAM authority to proceed as contemplated
herein, and, at SKYSTREAM's expense, gives SKYSTREAM proper and full
information and assistance to settle and/or defend any such Action. If
the Products, or any part thereof, are, or in the opinion of
SKYSTREAM may become, the subject of any Action for infringement of
any intellectual property right, or if a judicial or other
governmental authority enjoins the use or distribution of Products as
a result of an Action defended by SKYSTREAM, then SKYSTREAM may, at
its option and expense; (i) procure for Reseller the right to
distribute or use, as appropriate, the Products; (ii) replace the
Products with other suitable Products; (iii) suitably modify the
Products; or (iv) if the foregoing
-8-
<PAGE> 9
alternatives cannot be accomplished on a commercially reasonable
basis as determined in SKYSTREAM's sole discretion, require Reseller
to return such Products and refund the aggregate payments paid
therefor by Reseller, less a reasonable sum for use and damage.
Reseller shall indemnify and hold harmless SKYSTREAM from and against
any and all third party claims arising out of the distribution of
Products after SKYSTREAM has required Reseller to return such
Products or arising out of any exclusions to SKYSTREAM's
indemnification obligations set forth in Section 7.4. SKYSTREAM shall
not be liable for any costs or expenses incurred without its prior
written authorization.
7.4 SKYSTREAM limitations.
(a) Notwithstanding the provisions of Section 7.3 above, SKYSTREAM
assumes no liability for (i) any infringement claims (including
without limitation combination or process patents) arising out of
the combination of a Product or use with any other hardware,
software or other items not provided by SKYSTREAM to the extent
such infringement would not have occurred absent such combination
or use; (ii) the modification of the Products, or any part
thereof, unless such modification was made by SKYSTREAM; or (iii)
any infringement claims arising out of SKYSTREAM's compliance
with Reseller's specifications or designs.
(b) SKYSTREAM's obligation to indemnify Reseller does not extend to
any Action arising from a claim of infringement by the
manufacture, use or sale of Products that conform to any
technical standard adopted by an international organization such
as the International Organization for Standardization, the
International Electrotechnical Commission, and the CCITT/ITU,
including, without limitation, the MPEG, JPEG and H.261
standards.
7.5 Entire Liability. THE FOREGOING PROVISIONS OF THIS SECTION 7 STATE
THE ENTIRE LIABILITY AND OBLIGATION OF SKYSTREAM AND THE EXCLUSIVE
REMEDY OF RESELLER AND ITS CUSTOMERS WITH RESPECT TO ANY ALLEGED
INFRINGEMENT OF COPYRIGHTS, TRADEMARKS, PATENTS OR OTHER INTELLECTUAL
PROPERTY RIGHTS BY THE PRODUCTS.
8. LIMITATIONS OF LIABILITY.
8.1 Total Liability. Except as set forth in Section 7 each party's
liability for a breach of this Agreement under this Agreement will be
limited to the Payments received or due from Reseller under this
Agreement.
8.2 Exclusion of Damages. Except as set forth in Section 7 neither party
will be liable to the other for any special, incidental, or
consequential damages, whether based on
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<PAGE> 10
breach of contract, tort (including negligence), product liability, or
otherwise, and whether or not such party has been advised of the
possibility of such damage.
8.3 No Warranty. Except as set forth in Section 7 and except as set forth
in Section 13 of the Terms and Conditions of Sale, attached as Exhibit
B, SkyStream makes no warranty, express or implied, in connection with
the Products, including the results and performance thereof, including
without limitation any implied warranties of merchantability or
fitness for a particular purpose or noninfringement.
9. TERMINATION.
9.1 Term. The term of this Agreement will begin on the Effective Date and
will continue for a period designated in Exhibit D, unless it is
terminated earlier in accordance with the provisions hereof. This
Agreement may be renewed for additional periods upon the mutual
written agreement of the parties, although each party acknowledges
that the other is under no obligation to do so.
9.2 Events of Termination. Either party will have the right to terminate
this Agreement (i) for convenience and without cause, upon thirty (30)
days written notice to the other party, or (ii) if the other party
breaches any material term or condition of this Agreement and fails to
cure such breach within thirty (30) days after written notice.
9.3 Effect of Termination.
(a) Upon termination or expiration of this Agreement, Reseller will
(except as specified in subsection (b) below) immediately return
to SKYSTREAM or (at SKYSTREAM's request) destroy all Source Code,
Software (except for Software residing on a SKYSTREAM Product)
and other Confidential Information in its possession or control,
and an officer of Reseller will certify to SKYSTREAM in writing
that Reseller has done so.
(b) Upon termination or expiration of this Agreement, SKYSTREAM will
have the option, in its sole discretion, of:
(i) electing, at any time, to offer maintenance and support for
the Products directly to End Users in accordance with
SKYSTREAM's then applicable terms and conditions for such
services; or
(ii) permitting Reseller to continue to provide maintenance and
support for the Products to its End Users upon the terms and
conditions of Section 4.
-10-
<PAGE> 11
9.4 Nonexclusive Remedy. The exercise by either party of any remedy under
this Agreement will be without prejudice to its other remedies under
this Agreement or otherwise.
9.5 Survival. The rights and obligations of the parties contained in
Sections 5, (Confidentiality), 6 (Intellectual Property Rights), 7
(Infringement Indemnity), 8 (Limitations of Liability), 9
(Termination) and 10 (General) will survive the termination or
expiration of this Agreement.
10. GENERAL
10.1 Publicity. Reseller agrees to use best efforts in the preparation of
a press release announcing the execution of this Agreement, [*]
10.2 Binding Effect. This Agreement will bind and inure to the benefit of
each party's permitted successors and assigns.
10.3 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California applicable to
agreements between California residents entered into and to be
performed entirely within California, without reference to conflict
of law principles. Any dispute or claim arising out of this
Agreement will be resolved by binding arbitration in the county of
Santa Clara in accordance with the complex commercial litigation rules
of the American Arbitration Association. The arbitrator will have the
power to grant any form of relief, including preliminary and
permanent injunctive relief, which a judge in California with
jurisdiction could fashion, and judgment on any award may be entered
in any court in California with jurisdiction. Nonetheless, the
parties may seek temporary or permanent injunctive relief from any
court in California with jurisdiction without breaching this Section
10.3 or otherwise abridging the authority of the arbitrator.
10.4 Severability. If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent
permissible and the other provisions of this Agreement will remain in
force.
10.5 Force Majeure. Except for payments due under this Agreement, neither
party will be responsible for any failure to perform due to causes
beyond its reasonable control (each a "Force Majeure"), including,
but not limited to, acts of God, war, riot, embargoes, acts of civil
or military authorities, denial of or delays in processing of export
license applications, fire, floods, earthquakes, accidents, strikes,
or fuel crises, provided that such party gives prompt written notice
thereof to the other party. The
* 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.
-11-
<PAGE> 12
time for performance will be extended for a period equal to the duration
of the Force Majeure, but in no event longer than sixty days.
10.6 Notices. All notices under this Agreement will be deemed given when
delivered personally, sent by confirmed facsimile transmission, or sent by
certified or registered U.S. mail or recognized express courier, return
receipt requested, to the address as first shown on this Agreement or as
may otherwise be specified by either party to the other in accordance with
this section.
10.7 Independent Contractors. The parties to this Agreement are independent
contractors. There is no relationship of partnership, joint venture,
employment, franchise or agency between the parties. Neither party will
have the power to bind the other or incur obligations on the other's
behalf without the other's prior written consent.
10.8 Waiver. No failure of either party to exercise or enforce any of its
rights under this Agreement will act as a waiver of such rights.
10.9 Entire Agreement. This Agreement and its exhibits (A, B and C) are the
complete and exclusive agreement between the parties with respect to the
subject matter hereof, superseding and replacing any and all prior
agreements, communications, and understandings (both written and oral)
regarding such subject matter. This Agreement may only be modified, or any
rights under it waived, by a written document executed by both parties.
[Remainder of page Intentionally Left Blank]
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<PAGE> 13
The parties have caused this Agreement to be executed by their duly authorized
representatives as of the Effective Date.
RESELLER SKYSTREAM CORPORATION
Signature: /s/ PHIL BOLGE Signature: /s/ JAMES D. OLSON
--------------------------------- -----------------------
Name: Phil Bolge Name: James D. Olson
-------------------------------------- ----------------------------
Title: CFO Title: President & CEO
------------------------------------- ---------------------------
Date: Jan 11/2000 Date: 12/22/99
------------------------------------- ---------------------------
Facsimile: Facsimile:
------------------------------------- ---------------------------
[Signature Page to Nonexclusive VAR Agreement]
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<PAGE> 14
EXHIBIT A
SkyStream CORPORATION
END USER SOFTWARE LICENSE
SOFTWARE LICENSE AND WARRANTY
ATTENTION!
Use of the software program on the enclosed disks and/or installed on the
computer is subject to the terms of the License Agreement printed on the license
card, in the license booklet, or in the user documentation. You should not use
this software until you have read the License Agreement.
By using the software, you signify that you have read the License Agreement and
accept its terms.
LICENSE
SkyStream hereby grants to the Customer a limited, non-exclusive to use the
Software provided solely on the terms and conditions contained herein.
"Software" means each software program provided by SkyStream in machine
readable, object, printed or interpreted form.
LIMITATIONS ON USE
The Software is licensed to the Customer solely for Customer's internal use on
the purchased SkyStream equipment and may not be used for any other purpose or
application.
The customer is licensed to use the Software only on the designated SkyStream
equipment. The Software may not be used by Customer on any other computer, on
any other SkyStream or similar equipment, or at any other location, except as
agreed by SkyStream in writing.
Customer will not:
- - Copy all or any part of the Software, except that Customer may make one copy
of the Software solely for backup purposes for its own exclusive use, provided
that customer shall reproduce and include on such backup copy SkyStream's
proprietary rights notices.
- - Use, print, copy, modify or display the software, in whole or in part, except
as specifically authorized by this Agreement.
- - Sublicense, assign, resell, or otherwise transfer the Software to any third
party. Any attempted such sublicense, sale, assignment or transfer shall be
void and shall be deemed a material breach of this agreement.
- - Reverse engineer, duplicate or otherwise reproduce the Software.
<PAGE> 15
Customer acknowledge that this Agreement does not grant to Customer, and
Customer will not acquire hereby, any rights to patents, copyrights, trade
secrets, trade names, trademarks (whether registered or unregistered), or any
other proprietary rights in or to the Software, all of which are expressly
retained by SkyStream.
Customer acknowledges that the laws and regulations of the United States may
restrict the export and re-export of the Software or media in any form without
appropriate United States and foreign government approval.
If Customer is a unit or agency of the United States Government or is acquiring
the Software and Documentation for any such unit or agency, the following apply:
o If the unit or agency is the Department of Defense (DOD), the Software and
its accompanying documentation are classified as "commercial computer
software" and "commercial computer software documentation," respectively,
and, pursuant to DFAR Section 227.7202, the Government is acquiring the
Software and such documentation with terms of this Agreement.
o If the unit or agency is other than DOD, the Software and its accompanying
documentation are classified as "commercial computer software" and
"commercial computer software documentation," respectively, and, pursuant
to FAR Section 12.212, the Government is acquiring the Software and such
documentation in accordance with terms of this Agreement.
WARRANTY
SkyStream makes no warranty, express or implied, in connection with the
Software, including the results and performance thereof, including without
limitation any implied warranties of merchantability or fitness for a
particular purpose or non-infringement.
LIMITATION OF LIABILITY
The maximum liability of SkyStream to Customer for damages relating to this
agreement for any and all causes whatsoever, and Customer's maximum remedy,
regardless of the form of action, whether in contract, tort or otherwise, shall
be limited to the total fees paid by Customer to SkyStream hereunder. In no
event shall SkyStream be liable for any lost data or content, lost profits, or
business interruption or for any indirect, incidental, special, consequential,
exemplary or punitive damages arising out of or relating to the Software
provided hereunder, even if SkyStream has been advised of the possibility of
such damages.
TECHNICAL SUPPORT
For technical support, contact SkyStream Customer Support through the World Wide
Web (www.skystream.com) or via e-mail ([email protected]).
2
<PAGE> 16
EXHIBIT B
SKYSTREAM CORPORATION
TERMS AND CONDITIONS OF SALE
1. Applicability of Terms and Conditions of Sale
THE FOLLOWING TERMS AND CONDITIONS OF SALE ("AGREEMENT") APPLY TO ALL
QUOTATIONS FOR PRODUCTS ("PRODUCTS") ISSUED BY SKYSTREAM CORPORATION
("SKYSTREAM") TO BUYER, SKYSTREAM'S ACCEPTANCE OF ANY BUYER PURCHASE
ORDER IS EXPRESSLY CONDITIONED ON BUYER'S ASSENT TO THIS AGREEMENT. NO
TERMS OR CONDITIONS SET FORTH IN BUYER'S PURCHASE ORDER, TO WHICH NOTICE
OF OBJECTION IS HEREBY GIVEN, OR IN ANY FUTURE CORRESPONDENCE BETWEEN
BUYER AND SKYSTREAM SHALL ALTER OR SUPPLEMENT THIS AGREEMENT UNLESS BOTH
PARTIES HAVE AGREED IN WRITING TO MODIFY THIS AGREEMENT. Neither
SKYSTREAM's commencement of performance nor delivery shall be deemed or
construed as acceptance of Buyer's additional or different terms and
conditions.
2. Price
2.1 Unless otherwise stated in writing by SKYSTREAM, all prices quoted
are in U.S. Dollars and expire 30 days after the date of a
quotation.
2.2 Unless otherwise stated in writing by SKYSTREAM, all prices quoted
shall be exclusive of transportation, insurance, federal, state,
local, use, sales, property (ad valorem) and similar taxes or duties
now in force or hereafter enacted. Buyer agrees to pay all taxes,
fees or charge of any nature whatsoever imposed by any governmental
authority on, or measured by, the transaction between Buyer and
SKYSTREAM, in addition to the prices quoted or invoiced. In the
event that SKYSTREAM is required to collect the foregoing, such
amounts will appear as separate items on SKYSTREAM's invoice. Buyer
agrees to provide SKYSTREAM with a valid resale certificate for the
Products purchased for resale.
2.3 Notwithstanding anything to the contrary herein, in the event a
quotation is issued pursuant to a current written purchase agreement
between SKYSTREAM and Buyer, the quotation shall remain valid for
the period specified or until the expiration date of the ordering
period of any such purchase agreement, whichever occurs first.
3
<PAGE> 17
3. Payment Terms
3.1 All invoices are payable thirty (30) days from date of invoice. No
discounts are authorized. Interest on late payments shall accrue at
the rate of one and one half percent (1.5%) per month or the highest
legal rate, whichever is lower. SKYSTREAM may at any time require
that shipments be made on a C.O.D. or cash-with-order basis.
3.2 Until the purchase price and all other charges payable to SKYSTREAM
hereunder have been received in full, SKYSTREAM hereby retains, and
Buyer hereby grants to SKYSTREAM, a security interest in the
Products delivered to Buyer and any proceeds therefrom. Buyer agrees
to promptly execute all documents reasonably requested by SKYSTREAM
to perfect and protect such security interest. In the event Buyer
fails promptly to execute such documents, Buyer hereby appoints
SKYSTREAM its attorney-in-fact for the sole purpose of executing such
documents, which appointment shall be a power coupled with an
interest and shall be irrevocable.
3.3 Should Buyer become delinquent in the payment of any sum due
hereunder, SKYSTREAM shall not be obligated to continue performance
hereunder, including without limitation shipment of any previously
accepted orders.
3.4 Buyer warrants to SKYSTREAM that it is financially solvent on the
date on which it places an order and expects to be solvent on the
date of receipt of shipment. SKYSTREAM reserves the right to change
the credit terms provided herein, when in SKYSTREAM's opinion the
financial condition or previous payment record of Buyer so warrants.
4. Delivery Dates
4.1 All shipments are subject to SKYSTREAM's availability schedule.
SKYSTREAM will use commercially reasonable efforts to meet any
delivery date(s) requested in Buyer's order; provided however, that
SKYSTREAM will not be liable under any circumstances for its failure
to meet such delivery date(s). Any delivery dates provided by
SKYSTREAM to Buyer are best estimates only.
4.2 SKYSTREAM shall have the right to make partial shipments and payment
therefore shall be made in the manner described in Section 3.1 above.
4.3 SKYSTREAM shall have the right to make shipments at any time before
or after the requested delivery date and payment therefore shall be
made in the manner described in Section 3.1 above.
4
<PAGE> 18
5. Packing
All Products shall be packed, if appropriate, for shipment and storage in
accordance with standard commercial practices. All packing will conform to
requirements of carrier's tariffs. When special or export packaging is
requested or, in the opinion of SKYSTREAM, required under the
circumstances, the cost of such special import packaging, if not set forth
on the invoice, will be separately invoiced.
6. Shipment & Acceptance
6.1 F.O.B. Point. All prices are F.O.B. (as defined in the Uniform
Commercial Code as implemented by the state of California, U.S.A.)
SKYSTREAM's Mountain View location unless otherwise agreed to in
writing. Buyer will pay all transportation and insurance charges after
delivery to the F.O.B. point. Unless otherwise indicated by SKYSTREAM,
Buyer is obligated to obtain insurance covering damage to the goods
being shipped.
6.2 Method of Shipment. Subject to this Section 6.2, SKYSTREAM will ship
in accordance with Buyer's shipping instructions. In the absence of
specific instructions or if Buyer's instructions are deemed
unsuitable, SKYSTREAM reserves the right to ship by the most
appropriate method.
6.3 Title and Risk of Loss. Title to the Products and risk of loss and
damage shall pass to Buyer upon delivery to the F.O.B. point.
6.4 Acceptance. Products shall be deemed to have been accepted by Buyer
unless Buyer provides written notice to SKYSTREAM to the contrary
within thirty (30) days from the date of delivery to the F.O.B. point.
Such written notice shall request a Return Material Authorization
("RMA") number and the terms and conditions that apply to warranty
returns under Section 13.2 shall apply to returns under this Section
6.4.
7. Changes and Cancellations
7.1 Subject to the additional charges set forth below and to Section 7.2,
standard Product orders may be canceled per the following schedule:
<TABLE>
<CAPTION>
DAYS PRIOR TO SCHEDULED PERCENTAGE OF ORDER
SHIPMENT DATE TO F.O.B. POINT WHICH MAY BE CANCELED
<S> <C>
0-30 days 0%
31-60 days 25%
61-90 days 50%
91+ days 100%
</TABLE>
5
<PAGE> 19
In the event that Buyer cancels any order more than thirty (30) days but
fewer than ninety (90) days prior to the scheduled delivery date (to the
F.O.B. point) for such order, Buyer shall promptly pay to SKYSTREAM a
restocking/cancellation fee equal to fifteen percent (15%) of the purchase
price for the Products subject to such order.
7.2 Standard Product orders may be rescheduled per the following schedule:
<TABLE>
<CAPTION>
- ----------------------------- ----------------------------------
DAYS PRIOR TO SCHEDULED PERCENTAGE OF ORDER WHICH MAY BE
SHIPMENT DATE TO F.O.B. POINT RESCHEDULED
<S> <C>
0-30 days may not be rescheduled
31-60 days 25% may be rescheduled up to four weeks out
61-90 days 50% may be rescheduled up to four weeks out
91+ days 100% may be rescheduled
</TABLE>
Orders may only be rescheduled once. Rescheduled orders may not be later
canceled.
7.3 Non-standard Products (customer special and certain designated
Products) may have different cancellation and reschedule terms, and
require advance payment.
7.4 If Buyer terminates individual orders in whole or in part because of
SKYSTREAM's failure to timely deliver, Buyer's sole remedy shall be
entitlement to cancel the undelivered quantity of any individual
order.
7.5 No cancellation of any purchase order for default shall be effective
unless SKYSTREAM has failed to correct such alleged default within
thirty (30) days after receipt by SKYSTREAM of a written notice by
Buyer of such default.
8. Software
"Software" shall mean each software program provided by SKYSTREAM in
machine-readable, object, printed, or interpreted form. SKYSTREAM shall
retain all right, title and ownership of any Software provided to Buyer or
its end users. SKYSTREAM sells its products to Buyer only to the extent
that such products consist of non-software items on the terms specified
herein. Use of the terms "sell," "purchase," "purchase price" and similar
terms are to be interpreted in accordance with this Section. Use of
Software is governed by the provisions of the Software License, a copy of
which Buyer has received and executed.
6
<PAGE> 20
9. Confidential Information
9.1 It is understood that during the term of this Agreement, parties may
receive Confidential Information belonging to the other party. If any
Confidential Disclosure Agreements have been executed, such Agreements
are incorporated herein by reference.
9.2 Confidential Information shall include information submitted in
writing, and covers, but is not limited to, Software, designs,
performance data, system bugs, and test programs.
9.3 The parties shall protect the disclosed Confidential Information, by
using the same degree of care, but not less than a reasonable degree
of care, to prevent the unauthorized use, dissemination or publication
of the Confidential Information, as the recipient party uses to
protect its own Confidential Information of a like nature. Both
SKYSTREAM and Buyer shall restrict the dissemination of such
Confidential Information only to those personnel of each who require
access thereto, in order to perform this Agreement.
9.4 The obligation to protect the Confidential Information shall survive
for three (3) years following the expiration or termination of this
Agreement.
9.5 The obligation to protect the Confidential Information shall not
extend to information which:
(a) Was already lawfully known or acquired by the receiving party
prior to the receipt from the disclosing party;
(b) Is or becomes generally known to the public through no wrongful
act of the receiving party;
(c) Is received from a third party without similar restriction and
without breach of these or similar conditions; or
(d) Is independently developed by the receiving party by personnel
without access to the Confidential Information.
10. Intellectual Property Warranty and Indemnity
10.1 Buyer warrants that it owns all the rights to the information and
processes including specifications, designs, instructions and
Confidential Information provided to SKYSTREAM, and that such items
are free of any restrictions, settlements, judgments, or adverse
claims. Buyer warrants that it has the full power and authority to
supply and to disclose such information to SKYSTREAM.
7
<PAGE> 21
10.2 Buyer warrants that it has not improperly or unlawfully acquired the
information and processes submitted to SKYSTREAM.
10.3 Buyer agrees to indemnify SKYSTREAM against, and to hold SKYSTREAM
harmless of and from, any loss, cost, damage, liability, suit,
judgment, or expense, including legal fees (collectively, "Harm")
arising out of any breach of the warranties set forth in Section 10.1
or Section 10.2.
10.4 Subject to the limitations hereinafter set forth, Buyer agrees that
SKYSTREAM has the right to defend, or at its option to settle, and
SKYSTREAM agrees, at its own expense, to defend or at its option to
settle, any claim, suit or proceeding (collectively, "Action") brought
against Buyer alleging that the use or distribution of the Products in
the United States infringes or misappropriates any copyright or trade
secret. Notwithstanding the above, SKYSTREAM's obligations with
respect to any claims to the object code within Products are subject
to the Software License. SKYSTREAM shall have sole control of any such
Action or settlement negotiations, and SKYSTREAM agrees to pay,
subject to the limitations set forth in Section 14, any final judgment
entered against Buyer as a result of such infringement in any such
Action defended by SKYSTREAM. Buyer agrees that SKYSTREAM at its sole
option shall be relieved of the foregoing obligations unless Buyer
notifies SKYSTREAM promptly in writing of such Action and gives
SKYSTREAM authority to proceed as contemplated herein, and, at
SKYSTREAM's expense, gives SKYSTREAM proper and full information and
assistance to settle and/or defend any such Action. If the Products,
or any part thereof, are, or in the opinion of SKYSTREAM may become,
the subject of any Action for infringement of any intellectual
property right, or if a judicial or other governmental authority
enjoins the use or distribution of Products as a result of an Action
defended by SKYSTREAM, then SKYSTREAM may, at its option and expense:
(i) procure for Buyer the right to distribute or use, as appropriate,
the Products; (ii) replace the Products with other suitable Products;
(iii) suitably modify the Products; of (iv) if the foregoing
alternatives cannot be accomplished on a commercially reasonable basis
as determined in SKYSTREAM's sole discretion, require Buyer to return
such Products and refund the aggregate payments paid therefor by
Buyer, less a reasonable sum for use and damage. Buyer shall
indemnify and hold harmless SKYSTREAM from and against any and all
third party claims arising out of the distribution of Products after
SKYSTREAM has required Buyer to return such Products or arising out of
any exclusions to SKYSTREAM's indemnification obligations set forth in
Section 10.5. SKYSTREAM shall not be liable for any costs or expenses
incurred without its prior written authorization.
8
<PAGE> 22
10.5 Notwithstanding the provisions of Section 10.4 above, SKYSTREAM
assumes no liability for (i) any infringement claims (including
without limitation combination or process patents) arising out of the
combination of a Product or use with other hardware, software or other
items not provided by SKYSTREAM to the extent such infringement would
not have occurred absent such combination or use; (ii) the
modification of the Product, or any part thereof, unless such
modification was made by SKYSTREAM; or (iii) any infringement claims
arising out of SKYSTREAM's compliance with Buyer's specifications or
designs.
10.6 SKYSTREAM's obligation to indemnify Buyer does not extend to any
Action arising from a claim of infringement by the manufacture, use or
sale of Products that conform to any technical standard adopted by an
international organization such as the International Organization for
Standardization, the International Electrotechnical Commission, and
the CCITT/ITU, including, without limitation, the MPEG, JPEG and H.261
standards.
10.7 THE FOREGOING PROVISIONS OF THIS SECTION 10 STATE THE ENTIRE LIABILITY
AND OBLIGATION OF SKYSTREAM AND THE EXCLUSIVE REMEDY OF BUYER AND ITS
CUSTOMERS WITH RESPECT TO ANY ALLEGED INFRINGEMENT OF COPYRIGHTS,
TRADEMARKS, PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS BY THE
PRODUCTS.
10.8 SKYSTREAM shall have the right but, except as provided by Section
10.4, not the obligation, to exclusively settle any claim, suit or
proceeding brought against Buyer so far as it is based on an
allegation that any Product or service furnished hereunder infringes a
patent, copyright or other intellectual property right of any country.
Buyer shall provide SKYSTREAM with prompt notice of any such claim,
suit or proceeding.
11. Intellectual Property Rights
11.1 Buyer hereby grants SKYSTREAM a license under any patent required to
enable SKYSTREAM to perform its obligations pursuant to this
Agreement. This license shall extend for the duration of this
Agreement.
11.2 No provision in this Agreement shall be interpreted as a grant by
SKYSTREAM to Buyer of a license to use SKYSTREAM's service-marks or
trade marks.
11.3 The Products are offered for sale and are sold by SKYSTREAM subject in
every case to the condition that such sale does not convey any license
expressly or by implication, to manufacture, reverse engineer,
duplicate or otherwise copy or reproduce any of the Products or any
part thereof.
9
<PAGE> 23
12. Termination by SKYSTREAM
12.1 In the event of any proceedings, voluntary or involuntary, in
bankruptcy or insolvency by or against Buyer, or in the event of the
appointment, with or without Buyer's consent, of an assignee for the
benefit of creditors, or of a receiver, SKYSTREAM may elect to
immediately cancel any purchase order previously accepted by
SKYSTREAM.
12.2 In the event Buyer has materially breached this Agreement, including
but not limited to failure to comply with credit terms, and has not
cured such breach within 30 days after receiving notice thereof by
SKYSTREAM, SKYSTREAM may immediately cancel any purchase order
previously accepted by SKYSTREAM.
13. Limited Warranty
13.1 The Products are warranted against defects in material and workmanship
for a period of ninety (90) days from the date of shipment to the
F.O.B. point provided that the foregoing warranty shall not apply to
defects that reasonably could have been discovered by Buyer during the
30 day period following delivery to the F.O.B. point. This limited
warranty does not cover the results of accident, abuse, neglect,
improper testing, vandalism, acts of God, use contrary to
specifications or instructions, or repair or modification by anyone
other than SKYSTREAM or SKYSTREAM's authorized agents. SKYSTREAM SHALL
HAVE NO OBLIGATION UNDER THIS WARRANTY, AND MAKES NO REPRESENTATION AS
TO PRODUCTS WHICH HAVE BEEN MODIFIED BY BUYER OR ITS CUSTOMERS. The
foregoing warranty extends only to Buyers who are SKYSTREAM customers,
and not Buyer's customers or other users of Buyers' Products. The
foregoing warranty does not apply to any used or modified Products, or
software within the Products, which is subject to the Software
License.
13.2 If the Product does not conform to the foregoing warranties, Buyer
may, at its own risk and expense, return the allegedly defective
Product directly to SKYSTREAM during the Warranty Period. In order to
do so, Buyer must first notify SKYSTREAM in writing of the alleged
defect and request a return material authorization ("RMA") number.
Within five (5) days of its receipt of the RMA number, Buyer shall
ship to SKYSTREAM the allegedly defective Product, freight prepaid, to
SKYSTREAM, and shall include a notation of the RMA number. Any
Products returned to SKYSTREAM without an authorized RMA number may be
returned to Buyer, freight collect. Upon receipt of the Product,
SKYSTREAM, at its option, will repair or replace the Product and ship
the repaired or replaced Product to Buyer at
10
<PAGE> 24
SKYSTREAM's expense and risk, or refund the purchase price. If
SKYSTREAM determines that any returned Product conformed to the
warranties, SKYSTREAM will return the Product to Buyer at Buyer's
expense and risk, along with a written statement setting forth the
basis for SKYSTREAM's conclusion that the returned Product was not
defective, and Buyer agrees to pay SKYSTREAM's reasonable costs of
handling and testing.
13.3 THE REMEDIES PROVIDED HEREIN ARE BUYERS' SOLE AND EXCLUSIVE REMEDIES
FOR BREACH OF WARRANTY BY SKYSTREAM. SKYSTREAM SPECIFICALLY DISCLAIMS
ALL OTHER EXPRESS, IMPLIED OR STATUTORY WARRANTIES, INCLUDING ANY
IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE,
MERCHANTABILITY OR NONINFRINGEMENT. NO PERSON IS AUTHORIZED TO MAKE
ANY OTHER WARRANTY OR REPRESENTATION CONCERNING THE PERFORMANCE OF THE
PRODUCTS OTHER THAN AS PROVIDED IN THIS SECTION.
14. Limitation of Liability
NEITHER SKYSTREAM NOR ITS SUPPLIERS SHALL BE LIABLE TO BUYER FOR ANY
DAMAGES WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT UNDER ANY
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY
(i) FOR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES OF ANY
SORT EVEN IF SKYSTREAM OR ITS SUPPLIERS HAVE BEEN INFORMED OF THE
POSSIBILITY OF SUCH DAMAGES; (ii) FOR COST OF PROCUREMENT OF SUBSTITUTE
GOODS, TECHNOLOGY OR SERVICES; OR (iii) FOR LOSS OR CORRUPTION OF DATA OR
INTERRUPTION OF USE. SKYSTREAM SHALL NOT BE LIABLE FOR ANY AMOUNTS IN
EXCESS OF THE TOTAL AMOUNT ACTUALLY PAID TO SKYSTREAM HEREUNDER FOR THE
PARTICULAR PRODUCTS THAT ARE SUBJECT TO A CLAIM. THESE LIMITATIONS SHALL
APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY. THE LIMITATION OF LIABILITY SET FORTH IN THIS SECTION SHALL NOT
APPLY TO LIABILITY FOR DEATH OR PERSONAL INJURY TO THE EXTENT APPLICABLE
LAW PROHIBITS SUCH LIMITATION.
15. Import/Export
Buyer agrees that it will not in any form export, re-export, resell, ship
or divert directly or indirectly any Product or technical data or Software
furnished hereunder to any country for which the United States Government
or any government agency
11
<PAGE> 25
requires an export license or other governmental approval without first
obtaining such license or approval.
16. Restricted Use
SKYSTREAM's Products may produce a reduction and loss of data and therefore
are not sold for use in medical equipment, avionics, nuclear applications,
or other high risk applications where malfunctions or loss of data could
result directly in personal injury to human beings. Buyer agrees to not to
use, to contractually bind its customers not to use, and to forbid all
third parties from using the Products in such applications, and Buyer
agrees to indemnify SKYSTREAM and to hold SKYSTREAM harmless from and
against any liability arising out of Buyer's failure to contractually bind
its customers in the manner previously described.
17. Term This Agreement will govern in perpetuity all of Buyer's purchases of
Products.
18. Publicity
Buyer consents to the use of Buyer's name and purchase order data for use
by SKYSTREAM at SKYSTREAM's discretion for the purpose of preparing press
releases and promotional materials. Buyer agrees to use best efforts in
assisting in the preparation of any such press releases or promotional
materials.
19. Miscellaneous
19.1 Any notice required to be given hereunder shall be given in writing at
the address of each party set forth in an attached quotation or
purchase agreement, or to such other address as either party may
substitute by written notice to the other.
19.2 Any attempt by Buyer to assign or transfer any of the rights, duties,
or obligations herein shall render such attempted assignment or
transfer null and void.
19.3 SKYSTREAM's failure to exercise any of its rights hereunder shall not
constitute or be deemed a waiver or forfeiture of such rights.
19.4 No U.S. Government Procurement Regulations shall be binding on either
party unless specifically agreed to in writing prior to incorporation
herein.
19.5 Stenographic, typographical and clerical errors are subject to
correction.
19.6 Governing Law and Jurisdiction. This Agreement will be governed by and
construed in accordance with the laws of the State of California
applicable to agreements entered into, and to be performed entirely,
within California
12
<PAGE> 26
between California residents, without reference to conflict of law
principles. Any dispute or claim arising out of this Agreement will
be resolved by binding arbitration in the city and county of Santa
Clara in accordance with the complex commercial litigation rules of
the American Arbitration Association. The arbitrator will have the
power to grant any form of relief, including preliminary and
permanent injunctive relief, which a judge in California with
jurisdiction could fashion, and judgment on any award may be entered
in any court in California with jurisdiction. Nonetheless, the
parties may seek temporary or permanent injunctive relief from any
court in California with jurisdiction without breaching this Section
19.6 or otherwise abridging the authority of the arbitrator.
19.7 In the event any proceeding or lawsuit is brought by either party to
enforce its rights hereunder, the prevailing party shall be entitled
to recover its costs, including expert witness fees and reasonable
attorneys' fees.
19.8 All disputes between the parties of any kind arising out of or
related to this Agreement shall be brought within one (1) year after
the accrual of the dispute.
19.9 THE TERMS AND CONDITIONS SET FORTH HEREIN REPRESENT THE ENTIRE
AGREEMENT BETWEEN SKYSTREAM AND BUYER WITH RESPECT TO THE SUBJECT
MATTER AND BUYER AGREES THAT ALL PRIOR QUOTATIONS, INVOICES,
NEGOTIATIONS, UNDERSTANDINGS, REPRESENTATIONS AND/OR AGREEMENTS OF
THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF, EXCLUDING THE
SOFTWARE LICENSE, WHETHER ORAL OR WRITTEN, ARE MERGED HEREIN AND
SUPERSEDED IN THEIR ENTIRETY. BUYER ACKNOWLEDGES THAT IT HAS NOT
ENTERED INTO THIS AGREEMENT IN RELIANCE ON ANY WARRANTY OR
REPRESENTATION BY ANY PERSON OR ENTITY EXCEPT FOR THE WARRANTIES AND
REPRESENTATIONS SPECIFICALLY SET FORTH HEREIN. No change or
modification of any of the terms or conditions herein shall be valid
or binding on either party unless in writing and signed by an
authorized representative of each party.
19.10 Neither party shall be liable to the other for its failure to perform
any of its obligations hereunder during any period in which such
performance is delayed by circumstances beyond its reasonable control
including, but not limited to, fire, flood, earthquake, war, embargo,
strike, riot, inability to secure materials and transportation
facilities, or the intervention of any governmental authority.
13
<PAGE> 27
EXHIBIT C
PRODUCTS TO BE COVERED UNDER THIS AGREEMENT:
PRODUCT DESCRIPTION
DBN-24
DBN-25
DBN-26
JetStream Server
JetStream Client
SOFTWARE RELEASES TO BE COVERED UNDER THIS AGREEMENT:
V1.3
V3.0
V3.1
V3.2
EXHIBIT D
PRODUCT PRICING MATRIX
PRODUCTS AND UPGRADE PRICING WITH INITIAL INTEGRATOR PURCHASE
[Insert price list]
UPGRADE PRICING AFTER INITIAL INTEGRATOR HAS BEEN PURCHASED
[Insert upgrade price list]
14
<PAGE> 28
ANNUAL MAINTENANCE FEES
[*]% of the invoiced price to the Reseller on a per unit, per year basis.
SkySupport service is renewed automatically every 21 months, unless otherwise
noted by the Reseller.
HOURLY CONSULTING RATE FOR CHARGEABLE SERVICES
$[*] per hour, not including travel or lodging expenses
RESELLER'S TERM
Term. The term of this Agreement will begin on the Effective Date and will
continue for a period of one year unless it is terminated earlier in accordance
with the provisions hereof. This Agreement may be renewed for additional periods
upon the mutual written agreement of the parties, although each party
acknowledges that the other is under no obligation to do so.
* 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.
15
<PAGE> 29
[SKYSTREAM LOGO]
EXHIBIT E
SKYSUPPORT(TM)
SERVICE PLAN
--------------
For DIRECT Customers
Providing World-Class Customer
Service and Support for the
SkyStream Integrator Family of
Products
This document overrides any and all previous documents in circulation. SkyStream
reserves the right to change information contained in this document without
notice to any non-SkySupport customers
<PAGE> 30
Version 2.2
February 1999
<PAGE> 31
SKYSUPPORT
CUSTOMER SERVICE PLAN FOR DIRECT CUSTOMERS
SkySupport is a customer service plan that offers world-class support to
SkyStream customers domestically and internationally. SkyStream offers a program
whereby the greatest effort is placed in fast response time to any issues that
emerge, 24 hours a day, and 7 days a week. SkyStream also employs proactive
efforts to keep SkySupport customers abreast of any new product developments or
code changes.
Because of the evolutionary architecture of the SkyStream Integrator series,
customers may find it useful to gradually add hardware or software features to
the base product, such as upgrading a data encapsulator (DBN-24) to a data
injection (DBN-25) or DUB-Simulcrypt conditional access product (DBN-26).
Customers can also purchase feature additions or an add-on card for additional
functionality. SkyStream offers all SkySupport customers the opportunity to
upgrade their products, even after the units are installed in the field.
The SkySupport customer service plan is available to all direct customers of
SkyStream. The plan is supported on a per-unit basis, and is renewed annually.
SkySupport customers are also eligible to purchase product upgrades or training
for additional charges. This renewable 1-year plan (after ship date) shall
include the following three categories of support:
1. ULTRA-FAST RESPONSE TIME
2. PRODUCT UPGRADES
3. SKYSTREAM'S PRODUCT TRAINING PROGRAM
The SkySupport Service Plan is initially ordered at same time that the equipment
is purchased. SkySupport service is renewed automatically, unless otherwise
noted by the customer, every 12 months at the standard service rate (per the
most recent price list).
<PAGE> 32
SKYSUPPORT 3-POINT CUSTOMER SERVICE PLAN
1. ULTRA-FAST RESPONSE TIME
- - GUARANTEED ADVANCED PARTS REPLACEMENT, SHIPPED OVERNIGHT ON THE NEXT BUSINESS
DAY
SkyStream will ship advance replacement parts the next business day.
- - TELEPHONE SUPPORT, 24 HOURS PER DAY, 7 DAYS PER WEEK (24x7)
Access to SkyStream Customer Service technical support personnel with a
guaranteed response time of within 4 hours of initial call.
- - ELECTRONIC MAIL INQUIRIES AND RESPONSES
- - REMOTE DIAGNOSTIC SERVICE (RDS)
SkyStream customer service can observe and analyze the configuration and
traffic pattern at the client's site and provide feedback to resolve
problems. Customer needs to provide SkyStream support personnel with
authorization to access the SkyStream products over a remote network for
monitoring and troubleshooting purposes.
- - DOCUMENTATION
Access to product manuals, user's guides, application notes, FAQ's and
web-based troubleshooting guide on SkyStream's website via secure SkySupport
password.
<PAGE> 33
2. PRODUCT UPGRADES
SkyStream's products have a unique architecture that allows them to receive
hardware or software upgrades while installed in the field. Upgrades can range
from simple software patches to significant feature upgrades, all of which are
best treated under the SkySupport plan. Product Upgrades come in three
different categories, and will be clearly marked in all price lists:
LEVEL 1 UPGRADE: BUG FIXES
All software bug fixes will be documented and made accessible to all SkyStream
customers. Bug fixes are software patches that repair a known problem in the
current released code. Level 1 upgrades will be available at [*], as long as
customers are using supported software releases. Typically, SkyStream will
provide support for the 2 most recent releases of its software. Customers using
unsupported versions of software will need to upgrade to the latest version to
receive code fixes, and non-SkySupport customers may need to pay [*] to upgrade.
Registered SkySupport customers will be pro-actively notified via email of any
upgrade within 30 days of production release date.
LEVEL 2 UPGRADE: FEATURE IMPROVEMENTS
Level 2 upgrades include all software improvements. Software improvements are
released on an ongoing basis to improve on an existing set of functions. See the
SkyStream price list to determine which features fall into this category. These
upgrades will be provided to SkySupport customers for [*] as long as customers
are using supported software releases.
LEVEL 3 UPGRADE: FEATURE ADDITIONS AND HARDWARE UPGRADES
Feature additions and hardware add-on card upgrades will be sold via SkyStream's
upgrade price list. Feature additions include software code upgrades that add
significant functionality to the existing product specification. See the
SkyStream price list to determine which features fall into this category. Only
authorized SkySupport personnel will administer Level 3 upgrades. Registered
SkySupport customers will be pro-actively notified via email of any upgrade
within 30 days of production release date.
SkyStream's Integrator family uses a flexible architecture that allows customers
to purchase a base system for immediate requirements, with an interest to
upgrade its functionality to a new platform in the future. For example, if a
customer purchases a DBN-35 ATSC IP Data Injector, and later wishes to upgrade
the product to support CAS Injection, he can do so by paying only an upgrade fee
as opposed to buying a new system (see upgrade price list for upgrade prices).
Customers interested in upgrading their unit must provide SkyStream with 90 days
advance notice. ONLY SKYSUPPORT CUSTOMERS WILL HAVE ACCESS TO ANY LEVEL 3
UPGRADES.
NOTE: Level 3 Upgrades are only available on same-family products (i.e. DBN 2X
is a family of products, where 4, 5, 6, or other future product).
* 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> 34
<TABLE>
<CAPTION>
Product Upgrades SkySupport Customers
-------------------------------------------------------------
<S> <C>
LEVEL 1: BUG FIXES
Software Patches [ * ]
Hardware Fixes [ * ]
LEVEL 2: FEATURE
IMPROVEMENTS
Software - feature improvements [ * ]
LEVEL 3: FEATURE
ADDITIONS/HARDWARE
UPGRADES
Software - new feature additions Available for additional
charge-see price list
Hardware - new feature additions Available for additional
charge - see price list
DBN-24 to DBN-25 Available for additional
charge - see price list
DBN-25 to DBN-26 Available for additional
charge - see price list
</TABLE>
* 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> 35
3. SKYSTREAM'S PRODUCT TRAINING PROGRAM
SkyStream offers all customers basic system operations training to the SkyStream
Integrator product family. This session will accompany any new product
installation when an authorized SkyStream field support engineer performs the
installation. For more detailed product training, SkyStream offers an additional
system maintenance training session for customer engineering or operations
personnel who require more technical knowledge and hands-on skills to work
directly with the SkyStream equipment.
There are two training modules available:
MODULE 1: SKYSTREAM SYSTEM OPERATIONS TRAINING
SkyStream provides comprehensive on-site training on the new system at the time
of system installation. Customer operations and production staff receive
training on
- - System Overview/Setup
- - System Operations
- - Routine maintenance of the system
MODULE 2: SKYSTREAM SYSTEM MAINTENANCE TRAINING
SkyStream offers advanced training to customers that support and maintain their
SkyStream system. This training provides customers with the technical knowledge
and hands-on skills needed to use, configure, support and troubleshoot the
SkyStream system. This training is delivered at SkyStream's Corporate Training
Facility in Mt. View, CA.
<PAGE> 36
SKYSUPPORT PRICING - FEBRUARY 1999
<TABLE>
<CAPTION>
SERVICE ORDER NUMBER COST
- ------- ------------ ----
<S> <C> <C>
1-year SkySupport S901001 [ * ] price per unit
On-Site Installation S901004 [ * ] (N.A.), [ * ] per day (Int'l)
LEVEL 1 PRODUCT UPGRADES
- ------------------------
Bug fixes [ * ] [ * ]
LEVEL 2 PRODUCT UPGRADES
- ------------------------
Hardware Add-on cards refer to upgrade price list refer to upgrade price list
Software feature additions refer to upgrade price list refer to upgrade price list
LEVEL 3 PRODUCT UPGRADES
- ------------------------
DBN-24 to DBN-25 S101002 refer to upgrade price list
DBN-25 to DBN-26 S111003 refer to upgrade price list
DBN-24 to DBN-26 S101003 refer to upgrade price list
Other Feature Additions refer to upgrade price list refer to upgrade price list
SKYSTREAM PRODUCT TRAINING
- --------------------------
System Operations Training [ * ] [ * ] (SkySupport only)
System Maintenance Training S901101 [ * ] per person
</TABLE>
ADDITIONAL TERMS:
1. SkySupport must be purchased at time of order placement, and must cover the
full amount of the order (i.e. if customer buys 2 DBN-xx units, he must also
buy 2 units of SkySupport).
2. SkySupport must also be purchased for any upgrades when they are ordered, and
will be added to the basic SkySupport agreement when it is to be renewed.
3. SkyStream will register all units by serial number. Customer service calls
must be verified by actual serial number of affected unit.
4. All existing SkySupport customers' terms will be honored until expiration of
the current annual service plan. Renewals will be assessed at the new rate,
listed above.
5. All returns will be handled by RMA process. SkyStream will issue an RMA
number that must accompany any product repair or return unit.
* 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 10.18
LOAN AND SECURITY AGREEMENT
Agreement No. 19101 Dated as of August 31, 1998
by and between
LIGHTHOUSE CAPITAL PARTNERS II, L.P.,
as lender
and
SKYSTREAM CORPORATION
a California corporation
555 Clyde Avenue, Suite B,
Mountain View, California 94043,
as borrower
TOTAL COMMITMENT: $2,000,000
Repayment Period: 24 months
Principal Repayment Factor: 4.167%
Stock Purchase Agreement:
Number of shares: 75,410
Class of stock: Common
Price per share: $0.225
The terms and information set forth on this cover page are a part of the
attached Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and between Lighthouse Capital Partners II,
L.P. ("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of the Loan Agreement agreed to between Lender and Borrower are as
follows:
<PAGE> 2
THIS LOAN AND SECURITY AGREEMENT is entered into as of August 31, 1998, by
and between LIGHTHOUSE CAPITAL PARTNERS II, L.P. ("Lender"), as lender and
SKYSTREAM CORPORATION, a California corporation ("Borrower").
RECITALS
Borrower wishes to borrow money from time to time from Lender and Lender
desires to lend money to Borrower. This Agreement sets forth the terms on which
Lender will lend to Borrower and Borrower will repay the loan to Lender.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following definitions:
"Affiliate" means any Person that owns or controls directly
or indirectly five percent or more of the stock of another entity, any Person
that controls or is controlled by or is under common control with such Persons
or any Affiliate of such Persons or each of such Person's officers, directors,
joint venturers or partners.
"Basic Rate" means a per annum variable rate of interest
(based on a year of 360 days and actual days elapsed) equal to the Prime Rate
as quoted in the western edition of the Wall Street Journal on the date of
determination plus 450 basis points, which rate shall vary concurrently with
any change in the Prime Rate.
"Borrower's Books" means all of Borrower's books and
records including: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and
all computer programs, or tape files, and the equipment, containing such
information.
"Business Day" means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized
or required to close.
"Code" means the Uniform Commercial Code as adopted and in
effect in the State of California, as amended from time to time.
"Collateral" means the Property described on EXHIBIT A
attached hereto.
"Commitment" means $2,000,000.
"Commitment Termination Date" means December 31, 1998.
"Contingent Obligation" means, as applied to any Person,
any direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend, letter of credit or other
obligation of another, including any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable. The amount of any Contingent Obligation shall be equal to the amount of
the obligation so guaranteed or otherwise supported.
"Default" means any event which with the passing of time or
the giving of notice or both would become an Event of Default hereunder.
1
<PAGE> 3
"Default Rate" means the per annum rate of interest equal to the Basic
Rate plus 3%, but such rate shall in no event be more than the highest rate
permitted by applicable law to be charged on commercial loans.
"Event of Default" has the meaning given to such term in SECTION 8.
"Facility Fee" has the meaning given to such term in SECTION 2.5(a).
"Funding Date" means any date on which a Loan is made to or on account of
Borrower under this Agreement.
"Government Authority" means (a) any federal, state, county, municipal or
foreign government, or political subdivision thereof, (b) any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality or public body, (c) any court or administrative tribunal or (d)
with respect to any Person, any arbitration tribunal or other non-governmental
authority to whose jurisdiction that Person has consented.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of Property or services, including reimbursement and
other obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all capital lease obligations, and (d) all Contingent Obligations.
"Interim Payment" has the meaning given to such term in SECTION 2.4(b).
"Landlord Consent" means a consent in the form of EXHIBIT C or such other
form as Lender may agree to accept.
"Lender's Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; and Lender's reasonable attorneys' fees and expenses incurred in
amending, modifying, enforcing or defending the Loan Documents, including in
the exercise of any rights or remedies afforded hereunder or under applicable
law, whether or not suit is brought.
"Lien" means any pledge, bailment, lease, mortgage, hypothecation,
conditional sales and title retention agreement, charge, claim, encumbrance or
other lien in favor of any Person.
"Liquidation Event" means any of the following: (i) a merger of Borrower
with another entity; or (ii) the sale of all or substantially all of Borrower's
assets; or (iii) a transaction in which the shareholders immediately prior to
such transaction own less than 50% of the equity securities of Borrower
immediately after such transaction; or (iv) the initial public offering of any
of Borrower's equity securities.
"Loan" means each advance of credit by Lender to Borrower under this
Agreement.
"Loan Agreement Supplement" means a supplement to this Agreement in
substantially the form of EXHIBIT D.
"Loan Commencement Date" means October 1, 1999.
"Loan Documents" means, collectively, this Agreement, the Stock Purchase
Agreement, the Landlord Consent(s) and all other documents, instruments and
agreements entered into between Borrower and Lender in connection with this
Agreement, all as amended or extended from time to time.
"Maturity Date" means, with respect to each Loan, the last day of the
Repayment Period for such Loan, or if earlier, the date of acceleration of such
Loan by Lender following an Event of Default.
2
<PAGE> 4
"Minimum Funding Amount" means $500,000.
"Obligations" means all debt, principal, interest, fees, charges,
expenses and attorneys' fees and costs and other amounts, obligations,
covenants, and duties owing by Borrower to Lender of any kind and description
(whether pursuant to or evidenced by the Loan Documents, or by any other
agreement between Lender and Borrower, and whether or not for the payment of
money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including the principal and interest
due with respect to the Loans, and including any debt, liability, or obligation
owing from Borrower to others that Lender may have obtained by assignment or
otherwise, and further including all interest not paid when due and all
Lender's Expenses that Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"Payment Date" has the meaning given to that term in SECTION 2.4(a).
"Permitted Indebtedness" means the following:
(a) any loans made from time to time by Lender;
(b) Indebtedness secured by the Permitted Lien in clause (d) of
the definition of Permitted Liens;
(c) Indebtedness, provided said Indebtedness is junior in
priority to the loans made by Lender under this Agreement and further provided
said other lender(s) shall have entered into a subordination agreement with
Lender reasonably acceptable to Lender;
(d) Indebtedness up to $750,000 in favor of Silicon Valley Bank
or another lender reasonably acceptable to Lender, provided Silicon Valley Bank
or the other lender has executed an intercreditor agreement reasonably
acceptable to Lender;
(e) Other senior Indebtedness not to exceed $1,000,000; and
(f) Other Indebtedness secured solely by Borrower's accounts
receivable.
"Permitted Liens" means the following:
(a) The Lien created by this Agreement;
(b) Any Liens existing as of the date hereof and disclosed in
SCHEDULE I;
(c) Liens securing indebtedness permitted pursuant to clause
(d) of the definition of Permitted Indebtedness provided Silicon Valley Bank
or the other lender has entered into an intercreditor agreement with Lender
reasonably acceptable to Lender;
(d) Liens and security interests (a) upon or in any equipment
acquired or held by Borrower to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment and in an amount not greater than the purchase price thereof or
(b) existing on such equipment at the time of its acquisition, provided that
the Lien and security interest is confined solely to the property so acquired
and improvements thereon, and the proceeds of such equipment;
(e) Liens securing indebtedness permitted pursuant to clause
(c) of the definition of Permitted Indebtedness provided the liens are junior
to that of Lender and the other lenders have entered into a subordination
agreement with Lender reasonably acceptable to Lender;
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(f) Liens securing indebtedness permitted pursuant to clause
(e) of the definition of Permitted Indebtedness provided that the other
lender(s) have entered into an intercreditor agreement with Lender reasonably
acceptable to Lender;
(g) Liens securing indebtedness permitted pursuant to clause
(f) of the definition of Permitted Indebtedness provided the Lien is limited
solely to Borrower's accounts receivable in favor of a commercial bank or other
financial institution upon commercially reasonable terms (reasonably
satisfactory to Lender) including, without limitation, an advance rate that
does not exceed eighty percent (80%) of eligible accounts (using a definition
that is consistent with prudent lending practices). Lender will execute a
subordination agreement reasonably acceptable to Lender subordinating solely
Lender's security interest in Borrower's accounts receivable;
(h) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no superior priority over
Lender's Lien in the Collateral;
(i) Liens to secure payment of worker's compensation,
employment insurance, old age pensions or other social security obligations of
Borrower in the ordinary course of business of Borrower;
(j) Liens on equipment leased by Borrower pursuant to an
operating lease in the ordinary course of business (including proceeds thereof
and accessions thereto) incurred solely for the purpose of financing the lease
of such equipment;
(k) Leases or subleases and licenses or sublicenses granted in
the ordinary course of Borrower's business and any interest or title of a
lessor or licensor under any lease or license;
(l) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under SECTION 8.5;
(m) Easements, reservations, rights-of-ways, restrictions,
minor defects or irregularities in title and other similar charges or
encumbrances affecting real property that could not reasonably be expected to
have a material adverse effect;
(n) Liens in favor of customs and revenue authorities arising
as a matter of law to secure payments of customs duties in connection with the
importation of goods;
(o) Liens that are not prior to the Lien of Lender which
constitute rights of set-off of a customary nature or banker's Liens with
respect to amount on deposit, whether arising by operation of law or by
contract, in connection with arrangements entered into with banks in the
ordinary course of business;
(p) Liens of materialmen, mechanics, warehousemen, carriers, or
other similar Liens arising in the ordinary course of business or by operation
of law or regulation and securing obligations not yet due; and
(q) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (b) and (d) above, provided that any extension, renewal or replacement
Lien shall be limited to the Property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase.
"Person" means and includes any individual, any partnership, any
corporation, any business trust, any joint stock company, any limited liability
company, any unincorporated association or any other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
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"Prepayment Fee" means an amount equal to one and one-half
percent (1.5%) of the principal amount prepaid prior to December 31, 2000 and
one percent (1.0%) of the principal amount prepaid on or after December 31,
2000 but prior to September 30, 2001.
"Principal Repayment Factor" means an amount equal to 4.167%.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, whether tangible or intangible.
"Repayment Period" means the period beginning on the first
Payment Date and continuing for the number of calendar months set forth
following such term on the cover page of this Agreement.
"Responsible Officer" means each of the Chief Executive Officer
and the Vice President of Finance and Administration of Borrower.
"Scheduled Payments" has the meaning given to such term in
SECTION 2.4(a).
"Stock Purchase Agreement" means the stock purchase agreement in
favor of Lender to purchase securities of Borrower substantially in the form of
EXHIBIT B.
"Subsidiary" means any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Term" means the period from and after the date hereof until the
payment in full of all amounts and liabilities payable under this Agreement and
the other Loan Documents, including principal and interest on the Loans.
1.2 OTHER PAYMENT PROVISIONS. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other Loan
Documents to any document, instrument or agreement shall include (a) all
exhibits, schedules, annexes and other attachments thereto, (b) all documents,
instruments or agreement issued or executed in replacement thereof, and (c)
such document, instrument or agreement, or replacement or predecessor thereto,
as amended, modified and supplemented from time to time and in effect at any
given time. The words "hereof, "herein" and "hereunder" and words of similar
import when used in this Agreement or any other Loan Document shall refer to
this Agreement or such other Loan Document, as the case may be, as a whole and
not to any particular provision of this Agreement or such other Loan Document,
as the case may be. The words "include" and "including" and words or similar
import when used in this Agreement or any other Loan Document shall not be
construed to be limiting or exclusive. Unless otherwise indicated in this
Agreement or any other Loan Document, all accounting terms used in this
Agreement or any other Loan Document shall be construed, and all accounting and
financial computations hereunder or thereunder shall be computed, in accordance
with generally accepted accounting principles as in effect in the United States
of America from time to time.
2. LOAN AND TERMS OF PAYMENT
2.1 COMMITMENTS. Subject to the terms and conditions of this
Agreement and relying upon the representations and warranties herein set forth
as and when made or deemed to be made, Lender agrees to lend to Borrower, from
time to time prior to the Commitment Termination Date, the Loans; provided that
the aggregate principal amount of the Loans shall not exceed the Commitment at
such time. If prepaid, the principal of the Loans may not be re-borrowed.
2.2 USE OF PROCEEDS; THE LOAN.
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(a) USE OR PROCEEDS. The proceeds of the Loan shall be used
solely for general corporate requirements and working capital purposes.
(b) THE LOANS. The Loans shall be repayable in consecutive
monthly installments in accordance with the terms of SECTION 2.4. Lender may,
and is hereby authorized by Borrower to, endorse in its books and records
appropriate notations regarding Lender's interest in the Loans; provided,
however, that the failure to make, or an error in making, any such notation
shall not limit or otherwise affect the Obligations of Borrower hereunder.
2.3 PROCEDURE FOR MAKING LOAN.
(a) NOTICE. Whenever Borrower desires that Lender make a Loan,
Borrower shall so notify Lender in writing (or by telephone with prompt
confirmation in writing) at least five Business Days in advance of the desired
Funding Date, which notice shall be irrevocable. Lender's obligation to make
Loans shall be expressly subject to the satisfaction of the conditions set
forth in SECTIONS 3.1 and 3.2. Lender shall have the right, exercisable at any
time, to request that Borrower furnish Lender with such additional information
with respect to the Loans as Lender shall reasonably request.
(b) LOAN INTEREST RATE. Borrower shall pay interest on the unpaid
principal amount of each Loan from the Funding Date until such Loan has been
paid in full, at a per annum rate of interest equal to the Basic Rate. All
computations of interest on each Loan shall be based on a year of 360 days for
actual days elapsed. Notwithstanding any other provision hereof, the amount of
interest payable hereunder shall not in any event exceed the maximum amount
permitted by the law applicable to interest charged on commercial loans.
(c) DISBURSEMENT. Subject to the satisfaction of the conditions
set forth in SECTIONS 3.1 and 3.2 with respect to the initial Loan and the
satisfaction of the conditions set forth in SECTION 3.2 with respect to each
subsequent Loan, Lender shall disburse the Loans.
(d) TERMINATION OF COMMITMENT TO LEND. Notwithstanding anything
in the Loan Documents, Lender's obligation to lend the undisbursed portion of
the Commitment to Borrower hereunder shall terminate on the earlier of (i) at
the Lender's sole election, the occurrence and continuance of any Default or
Event of Default hereunder, and (ii) the Commitment Termination Date.
Notwithstanding the foregoing, Lender's obligation to lend the undisbursed
portion of the Commitment to Borrower shall terminate if, in Lender's sole
judgment, there has been a material adverse change in the general affairs,
management, results of operations, condition (financial or otherwise) or
prospects of Borrower, whether or not arising from transactions in the ordinary
course of business, or there has been any material adverse deviation by
Borrower from the business plan of Borrower presented to and not disapproved by
Lender, since the date of this Agreement.
2.4 AMORTIZATION OF PRINCIPAL AND INTEREST; INTERIM PAYMENT.
(a) PRINCIPAL AND INTEREST PAYMENTS ON PAYMENT DATES. Borrower
shall make payments of principal in advance, when due, and accrued interest
monthly in arrears for the aggregate amount of the Loans hereunder
(collectively, "Scheduled Payments"), commencing on the Loan Commencement Date
with respect to such Loans and continuing thereafter during the Repayment
Period on the first Business Day of each month (each a "Payment Date"), in an
amount equal to the sum of (a) the Principal Repayment Factor multiplied by the
aggregate amount of the Loans as of the Loan Commencement Date, and (b) accrued
interest on the outstanding principal amount of the Loans calculated at the
Basic Rate. In any event, all unpaid principal and accrued interest shall be
due and payable in full on the last Payment Date with respect to such Loan.
(b) INTERIM PAYMENT. In addition to the Scheduled Payments,
Borrower shall pay to Lender, monthly in arrears, an amount (the "Interim
Payment") equal to accrued interest on the original principal amount of the
Loans calculated at the Basic Rate from the Funding Date until the first
Payment Date with respect to each Loan.
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(c) FINAL PAYMENT. Unless a Loan is prepaid in full, on the
Maturity Date with respect to such Loan, Borrower shall pay the unpaid
principal and accrued interest and all other amounts due on such date with
respect to such Loan.
2.5 FEES. Borrower shall pay to Lender the following:
(a) FACILITY FEE. A Facility Fee equal to Twenty Thousand
Dollars ($20,000), which fee shall be due and payable upon execution of this
Agreement and shall be fully earned and non-refundable;
(b) COMMITMENT FEE. Borrower has paid to Lender a commitment
fee ("Commitment Fee") equal to Fifteen Thousand Dollars ($15,000). Such fee
shall be applied first as payment of amounts due under SECTION 3.1(h), then to
any other amounts due hereunder as and when such amounts become due;
(c) LATE FEE. A late charge on any Scheduled Payments or other
sums due hereunder which are a payment default as determined under SECTION 8.1,
in an amount equal to 2% of the past due amount, payable on demand.
2.6 PREPAYMENTS.
(a) MANDATORY PREPAYMENT UPON AN ACCELERATION. If the Loans are
accelerated following the occurrence of an Event of Default or otherwise, then
Borrower shall immediately pay to Lender (i) all unpaid Interim Payments and/or
Scheduled Payments with respect to the Loans due prior to the date of
prepayment, (ii) the outstanding principal amount of the Loans, (iii) the
Prepayment Fee, and (iv) all other sums, if any, that shall have become due and
payable hereunder with respect to the Loans.
(b) MANDATORY PREPAYMENT UPON A LIQUIDATION EVENT. If a
Liquidation Event shall occur, then Borrower shall within sixty (60) days of
such Liquidation Event pay to Lender (i) all unpaid Interim Payment and/or
Scheduled Payments with respect to the Loans due prior to the date of
prepayment, (ii) the outstanding principal amount of the Loans and any unpaid
accrued interest, and (iii) all other sums, if any, that shall have become due
and payable hereunder with respect to the Loans.
(c) VOLUNTARY PREPAYMENT. Borrower may voluntarily prepay a
Loan, provided that each of the following conditions is satisfied: Borrower
pays to Lender (i) all unpaid Interim Payments and/or Scheduled Payments with
respect to such Loan due prior to the date of prepayment, (ii) the outstanding
principal amount of the Loans and any unpaid accrued interest, (iii) the
Prepayment Fee, and (iv) all other sums, if any, that shall have become due and
payable hereunder with respect to such Loan.
(d) NO OTHER PREPAYMENT. Borrower may not prepay any Loan
except upon the occurrence of an event described in SECTIONS 2.6(a), (b) or (c)
above in which event the prepayment shall be made as described in such section.
2.7 OTHER PAYMENT TERMS.
(a) PLACE AND MANNER. Borrower shall make all payments due to
Lender by payments to Lender at the address specified in SECTION 11, in lawful
money of the United States and in same day or immediately available funds.
(b) DATE. Whenever any payment due hereunder shall fall due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
(c) DEFAULT RATE. If either (i) any amounts required to be paid
by Borrower under this Agreement or the other Loan Documents (including
principal, interest, and any fees or other amounts) remain
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unpaid after such amounts are due, provided however that Borrower will not be
charged a late fee in addition to the Default Rate on such amounts, or (ii) an
Event of Default has occurred and is continuing, Borrower shall pay interest on
the aggregate, outstanding balance hereunder from the date due or from the date
of the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured, as applicable, at a per annum
rate equal to the Default Rate. All computations of such interest shall be based
on a year of 360 days for actual days elapsed.
2.8 MINIMUM FUNDING AMOUNT. Except with the prior consent of Lender,
in Lender's sole discretion, the amount of the requested Loan shall not be less
than the Minimum Funding Amount.
2.9 CREDITING PAYMENTS. The receipt by Lender of any wire transfer of
funds, check, or other item of payment shall be immediately applied
conditionally to reduce Obligations, but shall not be considered a payment on
account unless such wire transfer is of immediately available federal funds and
is made to the appropriate deposit account of Lender or unless and until such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any wire transfer or
payment received by Lender after 1:00 p.m. California time shall be deemed to
have been received by Lender as of the opening of business on the immediately
following Business Day.
2.10 TERM. This Agreement shall become effective upon acceptance by
Lender and shall continue in full force and effect for a term ending on the
Maturity Date for the last Loan made hereunder. Notwithstanding the foregoing,
Lender shall have the right to terminate this Agreement immediately and without
notice upon the occurrence of an Event of Default.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL LOAN. The obligation of Lender to
make the initial Loan is subject to the condition precedent that Lender shall
have received, in form and substance satisfactory to Lender, all of the
following:
(a) This Agreement duly executed by Borrower.
(b) The Negative Pledge Agreement duly executed by Borrower, in
the form of EXHIBIT E.
(c) The Stock Purchase Agreement to be issued to Lender duly
executed by Borrower.
(d) Use its best efforts to obtain a Landlord Consent from the
owner of the building in which Collateral is to be located, substantially in the
form of EXHIBIT C.
(e) A certificate of the secretary or assistant secretary of
Borrower with copies of the following documents attached: (i) the articles of
incorporation and bylaws of Borrower certified by Borrower as being in full
force and effect on the Funding Date, (ii) incumbency and representative
signatures, and (iii) resolutions authorizing the execution and delivery of
this Agreement and each of the other Loan Documents.
(f) A good standing certificate from Borrower's state of
incorporation and the state in which Borrower's principal place of business
is located, together with certificates of the applicable governmental
authorities stating that Borrower is in compliance with the franchise tax laws
of each such state, each dated as of a recent date.
(g) Evidence of the insurance coverage required by SECTION 6.8
of this Agreement.
(h) Payment of any unreimbursed Lender's Expenses for which
Borrower has received invoices at least two business days in advance, limited
to $5,000.
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(i) All necessary consents of shareholders and
other third parties with respect to the execution, delivery and performance of
this Agreement, the Stock Purchase Agreement and the other Loan Documents.
(j) Such other documents, and completion of such
other matters, as Lender may deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL LOANS. The obligation of
Lender to make each Loan, including the initial Loan, is further subject to the
following conditions:
(a) A certificate from a Responsible Officer to the
effect that no Default or Event of Default has occurred and is continuing.
(b) Borrower and Lender shall have executed a Loan
Agreement Supplement with respect to the proposed Loan.
(c) Lender shall have received such documents,
instruments and agreements, including UCC financing statements or amendments to
UCC financing statements, as Lender shall reasonably request to evidence the
perfection and priority of the security interests granted to Lender pursuant to
Section 4.
(d) Borrower shall have delivered to Lender an
intercreditor agreement, release, or estoppel letter, as appropriate, from any
Person having an existing Lien superior to the Lien of Lender on any item of
Collateral.
(e) Such other documents, and completion of such
other matters, as Lender may deem necessary or appropriate.
3.3 COVENANT TO DELIVER. Borrower agrees (not as a
condition but as a covenant) to deliver to Lender each item required to be
delivered to Lender as a condition to the Loan, if such Loan is advanced.
Borrower expressly agrees that the extension of such Loan prior to the receipt
by Lender of any such item shall not constitute a waiver by Lender of
Borrower's obligation to deliver such item.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants to Lender a
valid, continuing security interest in all presently existing and hereafter
acquired or arising Collateral, subject only to the Permitted Liens, in order
to secure prompt, full and complete payment of any and all Obligations and in
order to secure prompt, full and complete performance by Borrower of each of
its covenants and duties under each of the Loan Documents.
4.2 DURATION OF SECURITY INTEREST. Lender's security
interest in the Collateral shall continue until the payment in full and the
satisfaction of all Obligations, whereupon such security interest shall
terminate. Lender shall, at Borrower's sole cost and expense, execute such
further documents and take such further actions as may be necessary to effect
the release contemplated by this SECTION 4.2, including duly executing and
delivering termination statements for filing in all relevant jurisdictions
under the Code.
4.3 POSSESSION OF COLLATERAL. So long as no Event of
Default has occurred and is continuing, Borrower shall remain in full
possession, enjoyment and control of the Collateral (except only as may be
otherwise required by Lender for perfection of its security interest therein)
and shall be entitled to manage, operate and use the same and each part thereof
with the rights and franchises appertaining thereto; provided, however, that
the possession, enjoyment, control and use of the Collateral shall at all times
be subject to the observance and performance of the terms of this Agreement.
4.4 MARKINGS ON THE COLLATERAL. At Lender's request at any
time during the Term of the Loan (including any extension thereof), Borrower
shall place in a conspicuous location on each item of equipment that
constitutes Collateral, a plaque or other marking to be supplied by Lender
which reads substantially as follows:
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Lighthouse Capital Partners II, L.P. has a security interest in this
item of equipment.
Such plaque or other marking shall not be removed (or if removed or damaged
such plaque or other marking shall be replaced) until the security interest in
favor of Lender in such item of Collateral is terminated pursuant to this
Agreement.
4.5 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower
shall from time to time execute and deliver to Lender, all financing statements
and other documents such Lender may reasonably request, in form satisfactory to
Lender, to perfect and continue Lender's perfected security interests in the
Collateral, subject only to Permitted Liens, and in order to consummate fully
all of the transactions contemplated under the Loan Documents.
4.6 RIGHT TO INSPECT. Lender (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's
Books and to make copies thereof and to check, test, and appraise the
Collateral in order to verify Borrower's financial condition or the amount,
condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents, warrants and covenants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower is a
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
Property requires that it be so qualified or in which the Collateral is
located, except for such states as to which any failure so to qualify would not
reasonably be expected to have a material adverse effect on Borrower's ability
to perform its obligations under this Agreement (a "Material Adverse Effect").
5.2 AUTHORITY. Borrower has all necessary power and authority to
execute, deliver, and perform in accordance with the terms thereof, the Loan
Documents to which it is a party. Borrower has all requisite power and
authority to own and operate its properties and to carry on its businesses as
now conducted.
5.3 SUBSIDIARIES. Borrower has no Subsidiaries, except those
listed in Schedule 2 hereto.
5.4 CONFLICT WITH OTHER INSTRUMENTS, ETC. Neither the execution
and delivery of any Loan Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of (a) any of the terms, conditions or provisions of the articles of
incorporation and the by-laws, or other organizational documents of Borrower or
(b) any law or any regulation, order, writ, injunction or decree of any court
or governmental instrumentality or (c) any material agreement or instrument to
which Borrower is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject, or constitute a default
thereunder or result in the creation or imposition of any Lien, other than
Permitted Liens, except to the extent such conflict or breach could not
reasonably be expected to have a Material Adverse Effect.
5.5 AUTHORIZATION; ENFORCEABILITY. The execution and delivery of
this Agreement, the granting of the security interest in the Collateral, the
incurring of the Loans, the execution and delivery of the other Loan Documents
to which Borrower is a party and the consummation of the transactions herein
and therein contemplated have each been duly authorized by all necessary action
on the part of Borrower. The Loan Documents have been duly executed and
delivered and constitute legal, valid and binding obligations of Borrower,
enforceable in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other
similar laws of general application relating to or affecting the enforcement of
creditors' rights or by general principles of equity.
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5.6 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title
to the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for the lien held by the Lender and except for other
Permitted Liens. Except as disclosed in SCHEDULE I, Borrower has not acquired
any part of the Collateral from an assignor outside the ordinary course of such
assignor's business.
5.7 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE, PRINCIPAL PLACE OF
BUSINESS AND COLLATERAL. Borrower has not done business under any name other
than that specified on the signature page hereof. The chief executive office,
principal place of business, and the place where Borrower maintains its records
concerning the Collateral are presently located at the address set forth on the
cover page. The Collateral is presently located at the addresses set forth on
the cover page.
5.8 LITIGATION. There are no actions or proceedings pending by or
against Borrower before any court or administrative agency in which an adverse
decision could reasonably be expected to have a material adverse effect on
Borrower or the aggregate value of the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings. Borrower
will promptly notify Lender in writing if any action, proceeding or
governmental investigation involving Borrower is commenced that may result
in damages or costs to Borrower of Fifty Thousand Dollars ($50,000) or more.
5.9 FINANCIAL STATEMENTS. All financial statements relating to
Borrower or any Affiliate that have been or may hereafter be delivered by
Borrower to Lender present fairly in all material respects Borrower's financial
condition as of the date thereof and Borrower's results of operations for the
period then ended.
5.10 SOLVENCY. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.11 TAXES. Borrower has filed or caused to be filed all tax returns
required to be filed, and has paid, or has made adequate provision for the
payment of, all taxes that are due and payable.
5.12 CONSENTS AND APPROVALS. No approval, authorization or consent
of any trustee or holder of any indebtedness or obligation of Borrower or of
any other Person under any such material agreement, contract, lease or license
or similar document or instrument to which Borrower is a party or by which
Borrower is bound, is required to be obtained by Borrower in order to make or
consummate the transactions contemplated under the Loan Documents. All consents
and approvals of, filings and registrations with, and other actions in respect
of, all Governmental Authorities required to be obtained by Borrower in order
to make or consummate the transactions contemplated under the Loan Documents
have been, or prior to the time when required will have been, obtained, given,
filed or taken and are or will be in full force and effect.
5.13 TRADEMARKS, PATENTS, COPYRIGHTS, FRANCHISES AND LICENSES.
Borrower possesses and owns all necessary trademarks, trade names, copyrights,
patents, patent rights, franchises and licenses which are material to the
conduct of its business as now operated.
5.14 MATERIAL CONTRACTS. Borrower has disclosed to Lender in writing
all currently effective material contracts and agreements (whether written or
oral) to which Borrower is a party. There are no material defaults under any
such contract or agreement by Borrower that could reasonably be expected to
have a Material Adverse Effect. Borrower has delivered to Lender true and
correct copies of all such contracts or agreements (or, with respect to oral
contracts or agreements, written descriptions of the material terms thereof).
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any Loan Document, certificate or written statement
furnished to Lender contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
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Borrower covenants and agrees that, until the full and complete payment of
the Obligations and the termination of the Commitments, Borrower shall do all
of the following:
6.1 GOOD STANDING. Borrower shall maintain its corporate existence and
its good standing in its jurisdiction of incorporation and maintain
qualification in such jurisdiction in which the failure to so qualify could
reasonably be expected to have a material adverse effect on the financial
condition, operations or business of Borrower. Borrower shall maintain in force
all licenses, approvals and agreements, the loss of which could reasonably be
expected to have a material adverse effect on its financial condition,
operations or business.
6.2 GOVERNMENT COMPLIANCE. Borrower shall comply with all statutes, laws,
ordinances and government rules and regulations to which it is subject,
noncompliance with which could reasonably be expected to materially adversely
affect the financial condition, operations or business of Borrower.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver
to Lender: (a) as soon as available, but in any event within thirty (30) days
after the end of each month, a company prepared balance sheet, income statement
and cash flow statement covering Borrower's operations during such period,
certified by a Responsible Officer; (b) as soon as available, but in any event
within one hundred twenty (120) days after the end of Borrower's fiscal year,
audited financial statements of Borrower prepared in accordance with generally
accepted accounting principles, consistently applied, together with an
unqualified opinion on such financial statements of a nationally recognized or
other independent public accounting firm reasonably acceptable to Lender; (c)
promptly upon becoming available, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders; (d)
immediately upon receipt of notice thereof, a report of any material legal
actions pending or threatened against Borrower; and (e) such other financial
information as Lender may reasonably request from time to time.
6.4 CERTIFICATES OF COMPLIANCE. Each time financial statements are
furnished pursuant to SECTION 6.3 above, there shall be delivered to Lender a
certificate signed by a Responsible Officer (each an "Officer's Certificate")
with respect to such financial reports to the effect that: (i) no Event of
Default or Default has occurred and is continuing hereunder since the date of
this Agreement or, if later, since the date of the prior Officer's Certificate
or, if such an event or condition has occurred and is continuing, the nature
and extent thereof and the action Borrower proposes to take with respect
thereto, and (ii) Borrower is in compliance with the provisions of SECTIONS 6
and 7.
6.5 NOTICE OF DEFAULTS. As soon as possible, and in any event within five
(5) days after the discovery of a Default or an Event of Default provide Lender
with an Officer's Certificate of Borrower setting forth the facts relating to
or giving rise to such Default or Event of Default and the action which
Borrower proposes to take with respect thereto.
6.6 TAXES. Borrower shall make due and timely payment or deposit of all
federal, state, and local taxes, assessments, or contributions required of it
by law or imposed upon any properties belonging to it, and will execute and
deliver to Lender, on demand, appropriate certificates attesting to the payment
or deposit thereof; and Borrower will make timely payment or deposit of all tax
payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, and will, upon request, furnish Lender with proof
satisfactory to Lender indicating that Borrower has made such payments or
deposits; provided that Borrower need not make any payment if the amount or
validity of such payment is contested in good faith by appropriate proceedings
and is adequately reserved against Borrower.
6.7 USE; MAINTENANCE.
(a) Borrower, at its expense, shall make all necessary site
preparations and cause the Collateral to be operated in accordance with any
applicable manufacturer's manuals or instructions. So long as no Default or
Event of Default has occurred and is continuing, Borrower shall have the right
to quietly possess and use the Collateral as provided herein without
interference by Lender.
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(b) Borrower, at its expense, shall maintain the Collateral in
good condition, reasonable wear and tear excepted, and will comply in all
material respects with all laws, rules and regulations to which the use and
operation of the Collateral may be or become subject. Such obligation shall
extend to repair and replacement of any partial loss or damage to the
Collateral, regardless of the cause. If maintenance is mandated by
manufacturer, Borrower shall obtain and keep in effect, at all times during the
Term maintenance service contracts with suppliers approved by Lender, such
approval not to be unreasonably withheld. All parts furnished in connection
with such maintenance or repair shall immediately become part of the
Collateral. All such maintenance, repair and replacement services shall be
immediately paid for and discharged by Borrower with the result that no Lien
will attach to the Collateral.
6.8 INSURANCE.
(a) Borrower shall obtain and maintain for the Term, at its own
expense, (a) "all risk" insurance against loss or damage to the Collateral, and
(b) commercial general liability insurance (including contractual liability,
products liability and completed operations coverage's), reasonably
satisfactory to Lender and such other insurance against such other risks of
loss and with such terms, as shall in each case be reasonably satisfactory to
or reasonably required by Lender (as to carriers, amounts, deductibles and
otherwise). The amount of the "all risk" insurance shall be the greater of (i)
the replacement value of the Collateral (as new) or (ii) the outstanding
principal amount of the Loans and all other then outstanding amounts payable
under the Loan Documents. Such amounts shall be determined to Lender's
reasonable satisfaction as of each anniversary date of this Agreement and the
appropriate amount of coverage shall be put in effect on the next succeeding
renewal or inception date of such insurance.
(b) The amount of such commercial general public liability
insurance (other than products liability coverage and completed operations
insurance) shall be at least $1,000,000 per occurrence. The amount of such
products liability and completed operations insurance shall be at least
$1,000,000 per occurrence. The deductible with respect to the "all-risk" and
product liability insurance shall not exceed $25,000; otherwise there shall be
no deductible with respect to any insurance required to be maintained hereunder
without the prior written approval of Lender. Such "all risk" insurance shall:
(a) name Lender as loss payee as it interests may appear with respect to the
Collateral, (b) provide each insurer's waiver of its right of subrogation
against Lender and Borrower, and (c) provide that such insurance (i) shall not
be invalidated by any action of, or breach of warranty by, Borrower of a
provision of any of its insurance policies, and (ii) shall waive set-off,
counterclaim or offset against Lender. Each liability policy shall (A) name
Lender as an additional insured and (B) provide that such insurance shall have
cross-liability and severability of interest endorsements (which shall not
increase the aggregate policy limits of Borrower's insurance). All insurance
policies (C) shall provide that Borrower's insurance shall be primary without a
right of contribution of Lender's insurance, if any, or any obligation on the
part of Lender to pay premiums of Borrower, and (D) shall contain a clause
requiring the insurer to give Lender at least thirty (30) days prior written
notice of its cancellation (other than cancellation for non-payment for which
ten (10) days notice shall be sufficient). Borrower shall, on or prior to the
date of and prior to each policy renewal, furnish to Lender certificates of
insurance or other evidence satisfactory to Lender that such insurance coverage
is in effect.
6.9 LOSS; DAMAGE; DESTRUCTION AND SEIZURE.
(a) Borrower shall bear the risk of the Collateral being lost,
stolen, destroyed, damaged beyond repair, rendered permanently unfit for use,
or seized by a governmental authority for any reason whatsoever at any time
until the expiration or termination of the Term.
(b) So long as no Event of Default has occurred and is
continuing, any proceeds of insurance maintained pursuant to Section 6.8
received by Lender or Borrower with respect to an item of Collateral, the
repair of which is practicable, shall, at the election of Borrower, be applied
either to the repair or replacement of such Collateral or, upon Lender's
receipt of evidence of the repair or replacement of the Collateral reasonably
satisfactory to Lender, to the reimbursement of Borrower for the cost of such
repair or replacement. All replacement parts and equipment acquired by Borrower
in replacement of Collateral pursuant to this Section 6.9(b) shall immediately
become part of the Collateral upon acquisition by Borrower. Borrower shall take
such actions
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and provide such documentation as may be reasonably requested by Lender to
protect and preserve its security interest and otherwise to avoid any
impairment of Lender's rights under the Loan Documents in connection with such
repair or replacement.
6.10 FURTHER ASSURANCES. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Lender to effect the purposes of this
Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that until the full and complete
payment of the Obligations and termination of the Commitments, Borrower will
not do any of the following:
7.1 CHIEF EXECUTIVE OFFICER; LOCATION OF COLLATERAL. During the
continuance of this Agreement, change the chief executive officer or principal
place of business or remove or cause to be removed, except in the ordinary
course of Borrower's business, the Collateral or the records concerning the
Collateral from the premises listed on the coverage page without thirty (30
days prior written notice to Lender.
7.2 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS. Enter into
any transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, license or other disposition of, moving, relocation,
or transfer, whether by sale or otherwise, of Borrower's assets, other than (i)
sales of inventory in the ordinary and usual course of Borrower's business as
presently conducted and (ii) sales or other dispositions in the ordinary course
of business of assets, other than Collateral, that have become worn out or
obsolete or that are promptly being replaced. Notwithstanding anything
contained in this SECTION 7.2, Borrower may do any of the following: (i) grant
non-exclusive licenses and similar arrangements for use of the intellectual
property of the Borrower in the ordinary course of business, (ii) declare and
make any dividend payment or other distribution payable on its equity
securities, (iii) convert any of its convertible securities existing as of the
date hereof into other securities pursuant to the terms of such convertible
securities or otherwise in exchange therefor, (iv) repurchase stock from former
contractors or employees of Borrower in accordance with the terms of
repurchase, vesting or similar agreements between Borrower and such employees,
(v) repurchase equity securities with the proceeds from the issuance of equity
securities, and (vi) make investments in the ordinary course of business.
7.3 RESTRUCTURE. Change Borrower's name without thirty (30) days
prior written notice to Lender; make any material change in Borrower's
financial structure or business operations; cause, permit, or suspend operation
of Borrower's business.
7.4 LIENS. Create, incur assume or suffer to exist any Lien or any
other encumbrance of any kind with respect to any of its Property, whether now
owned or hereafter acquired, except for Permitted Liens.
7.5 INDEBTEDNESS. Create, incur, assume or suffer to exist any
Indebtedness other than Permitted Indebtedness.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay when due and payable or
when declared due and payable in accordance with the Loan Documents, any
portion of the Obligations, and such failure continues for a period of five (5)
business days after written notice from Lender.
8.2 CERTAIN COVENANT DEFAULTS. If Borrower fails to perform any
obligation under SECTIONS 6.8, 6.9, or 6.10, or violates any of the covenants
contained in SECTION 7 of this Agreement.
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8.3 OTHER COVENANT DEFAULTS. If Borrower fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant or agreement contained in this Agreement, in any of the other Loan
Documents, or in any other present or future agreement between Borrower and
Lender and as to any default under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure such default within
fifteen (15) business days after the occurrence of such default.
8.4 MATERIAL ADVERSE CHANGE. If there occurs an event that
could reasonably be expected to (a) have a material adverse effect on the
ability of the Borrower to perform its obligations under this Agreement or (b)
materially impair the value or priority of Lender's security interests in the
Collateral.
8.5 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon,
or comes into the possession of any trustee, receiver or Person acting in a
similar capacity and such attachment, seizure, writ or distress warrant or levy
has not been removed, discharged or rescinded within thirty (30) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if
a judgment or other claim becomes a lien or encumbrance upon any material
portion of Borrower's assets, or if a notice of lien, levy, or assessment is
filed of record with respect to any of Borrower's assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, country, municipal, or governmental agency, and the same is not paid
within thirty (30) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith
contesting by Borrower.
8.6 Other agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in a principal amount of at least One Hundred
Thousand Dollars ($100,000).
8.7 JUDGMENTS. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred
Thousand Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days.
8.8 REDEMPTION OR REPURCHASE. Borrower shall, after the date of
this Agreement, redeem or repurchase (a) any shares of any class or series of
its preferred stock or (b) more than Fifty Thousand Dollars ($50,000) in the
aggregate of common stock, in each case whether pursuant to a mandatory
redemption or otherwise.
8.9 MISREPRESENTATIONS. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty, representation,
statement, or report made to Lender by Borrower or any officer or director of
Borrower.
8.10 BREACH OF STOCK PURCHASE AGREEMENT. If Borrower shall breach
the terms of the Stock Purchase Agreement.
8.11 ENFORCEABILITY. If any Loan Document shall in any material
respect cease to be, or Borrower shall assert that any Loan Document is not, a
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms.
8.12 INVOLUNTARY BANKRUPTCY OR INSOLVENCY. If a proceeding shall
have been instituted in a court having jurisdiction in the premises seeking a
decree or order for relief in respect of Borrower in an involuntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee (or similar official) of Borrower or for any substantial part of its
property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
forty-five (45) consecutive days or such court shall enter a decree or order
granting the relief sought in such proceeding.
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8.13 VOLUNTARY BANKRUPTCY OR INSOLVENCY. If Borrower shall
commence a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, shall consent to the entry of an order
for relief in an involuntary case under any such law, or shall consent to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian (or other similar official) of Borrower or for any
substantial part of its property, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action in furtherance of any of the foregoing.
9. LENDER'S RIGHT AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and continuance of
any Default or Event of Default, Lender shall have no further obligation to
advance money or extend credit to or for the benefit of Borrower. In addition,
upon the occurrence and during the continuance of an Event of Default, Lender
shall have the rights, options, duties and remedies of a secured party as
permitted by law and, in addition to and without limitation of the foregoing,
Lender may, at its election, without notice of election and without demand, do
any one or more of the following, all of which are authorized by Borrower.
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, including the
outstanding principal amount of each Loan, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Sections
8.12 or 8.13 all Obligations shall become immediately due and payable without
any action by Lender);
(b) Without notice to or demand upon Borrower, make such
payments and do such acts as Lender consider necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Lender so requires, and to make the Collateral available to
Lender as Lender may designate. Borrower authorizes Lender to enter the
premises where the Collateral is located, to take and maintain possession of
the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Lender's determination appears to be
prior or superior to its security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises,
Borrower hereby grants Lender a license to enter into possession of such
premises and to occupy the same, without charge, for up to one hundred twenty
(120) days in order to exercise any of Lender's rights or remedies provided
herein, at law, in equity, or otherwise;
(c) Without notice to Borrower, set off and apply to the
Obligations any and all indebtedness at any time owing to or for the credit or
the account of Borrower;
(d) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Lender is hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks and advertising matter, or any
Property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Lender's exercise of its rights under this Section 9.1,
Borrower's rights under all licenses and all franchise agreements shall inure
to Lender's benefit:
(e) Sell the Collateral at either a public or private
sale, or both, by way of one or more contracts or transactions for cash or on
terms, in such manner and at such places (including Borrower's premises) as
Lender determines are commercially reasonable;
(f) Lender may credit bid and purchase at any public sale;
and
(g) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 WAIVER BY BORROWER. Upon the occurrence of an Event of
Default, to the extent permitted by law, Borrower covenants that it will not at
any time insist upon or plead, or in any manner whatever
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claim or take any benefit or advantage of, any stay or extension law now or at
any time hereafter in force, nor claim, take nor insist upon any benefit or
advantage of or from any law now or hereafter in force providing for the
valuation or appraisement of the Collateral or any part thereof prior to any
sale or sales thereof to be made pursuant to any provision herein contained, or
to the decree, judgment or order of any court of competent jurisdiction; nor,
after such sale or sales, claim or exercise any right under any statute now or
hereafter made or enacted by any state or otherwise to redeem the Property so
sold or any part thereof, and, to the full extent legally permitted, except as
to rights expressly provided herein, hereby expressly waives for itself and on
behalf of each and every Person, except decree or judgment creditors of
Borrower acquiring any interest in or title to the Collateral or any part
thereof subsequent to the date of this Agreement, all benefit and advantage of
any such law or laws, and covenants that it will not invoke or utilize any such
law or laws or otherwise hinder, delay or impede the execution of any power
herein granted and delegated to Lender, but will suffer and permit the execution
of every such power as though no such power, law or laws had been made or
enacted.
9.3 EFFECT OF SALE. Any sale, whether under any power of sale
hereby given or by virtue of judicial proceedings, shall operate to divest all
right, title, interest, claim and demand whatsoever, either at law or in
equity, of Borrower in and to the Property sold, and shall be a perpetual bar,
both at law and in equity, against Borrower, its successors and assigns, and
against any and all Persons claiming the Property sold or any part thereof
under, by or through Borrower, its successors or assigns.
9.4 POWER OF ATTORNEY IN RESPECT OF THE COLLATERAL. Borrower
does hereby irrevocably appoint Lender (which appointment is coupled with an
interest) on the occurrence and continuance of a Default or an Event of
Default, the true and lawful attorney in fact of Borrower with full power of
substitution, for it and in its name: (a) to ask, demand, collect, receive,
receipt for, sue for, compound and give acquittance for any and all rents,
issues, profits, avails, distributions, income, payment draws and other sums in
which a security interest is granted under Section 4 with full power to settle,
adjust or compromise any claim thereunder as fully as if Lender were a Borrower
itself, (b) to receive payment of and to endorse the name of Borrower to any
items of Collateral (including checks, drafts and other orders for the payment
of money) that come into Lender's possession or under Lender's control, (c) to
make all demands, consents and waivers, or take any other action with respect
to, the Collateral, (d) in Lender's discretion to file any claim or take any
other action or proceedings, either in its own name or in the name of Borrower
or otherwise, which Lender may reasonably deem necessary or appropriate to
protect and preserve the right, title and interest of Lender in and to the
Collateral, or (e) to otherwise act with respect thereto as though Lender were
the outright owner of the Collateral.
9.5 LENDER'S EXPENSES. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Lender may do any or all of
the following: (a) make payment of the same or any part thereof; (b) set up
such reserves in Borrower's loan account as Lender deem necessary to protect
Lender from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in SECTION 6.8 of this Agreement, and
take any action with respect to such policies as Lender deem prudent. Any
amounts paid or deposited by Lender shall constitute Lender's Expenses, shall
be immediately due and payable, and shall bear interest at the then applicable
rate hereinabove provided, and shall be secured by the Collateral. Any payments
made by Lender shall not constitute an agreement by Lender to make similar
payments in the future or a waiver by Lender of any Event of Default under this
Agreement.
9.6 REMEDIES CUMULATIVE. Lender's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Lender shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Lender of one
right or remedy shall be deemed an election, and no waiver by Lender of any
Event of Default on Borrower's part shall be deemed a continuing waiver. No
delay by Lender shall constitute a waiver, election, or acquiescence by it.
9.7 APPLICATION OF COLLATERAL PROCEEDS. The proceeds and/or
avails of the Collateral, or any part thereof, and the proceeds and the avails
of any remedy hereunder (as well as any other amounts of any kind held by
Lender at the time of or received by Lender after, the occurrence of an Event
of Default hereunder) shall be paid to and applied as follows:
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(a) First, to the payment of reasonable out-of-pocket costs and
expenses, including all amounts expended to preserve the value of the
Collateral, of foreclosure or suit, if any, and of such sale and the exercise
of any other rights or remedies, and of all proper fees, expenses, liability
and advances, including reasonable legal expenses and attorneys' fees, incurred
or made hereunder by Lender;
(b) Second, to the payment to Lender of the amount then owing
or unpaid on the Loans for Scheduled Payments, the unpaid principal amount of
the Loans, and all other Obligations with respect to all Loans, and in case
such proceeds shall be insufficient to pay the whole amount so due, owing or
unpaid upon the Loans, then to the unpaid interest thereon, then to the unpaid
principal amount of the Loans, and then to the payment of other amounts then
payable to Lender under any of the Loan Documents; and
(c) Third, to the payment of the surplus, if any, to Borrower,
its successors and assigns, or to whomsoever may be lawfully entitled to
receive the same.
9.8 REINSTATEMENT OF RIGHTS. If Lender shall have proceeded to
enforce any right under this Agreement or any other Loan Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Lender shall be restored to its former position and
rights hereunder with respect to the Property subject to the security interest
created under this Agreement.
10. WAIVERS; INDEMNIFICATION
10.1 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Lender on which Borrower may in any way be
liable.
10.2 LENDER'S LIABILITY FOR COLLATERAL. So long as Lender complies
with its obligations, if any, under Section 9207 of the Code, Lender shall not
in any way or manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (c) any diminution in the value thereof; or (d) any
act or default of any carrier, warehouseman, bailee, forwarding agency, or
other Person whomsoever. All risk of loss, damage or destruction of the
Collateral shall be borne by Borrower.
10.3 INDEMNIFICATION. Whether or not the transactions contemplated
hereby shall be consummated:
(a) GENERAL INDEMNITY. Borrower shall pay, indemnify, and hold
Lender and each of its officers, directors, employees, counsel, partners,
agents and attorneys-in-fact (each, an "Indemnified Person") harmless from and
against any and all reasonable liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including Lender's Expenses and reasonable attorney's fees and the allocated
cost of in-house counsel) of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and other Loan Documents, or the transactions contemplated hereby and
thereby, and with respect to any investigation, litigation or proceeding
(including any case, action or proceeding before any court or other Governmental
Authority relating to bankruptcy, reorganization, insolvency, liquidation,
dissolution or relief of debtors or any appellate proceeding) related to this
Agreement or the Loans or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of such Indemnified
Person.
(b) SURVIVAL; DEFENSE. The obligations in this SECTION 10.3
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using
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legal counsel satisfactory to such Indemnified Person in such Person's sole
reasonable discretion, at the sole cost and expense of Borrower. All amounts
owing under this SECTION 10.3 shall be paid within thirty (30) days after
written demand.
11. NOTICES
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements
and other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested, or by prepaid facsimile to Borrower
or to Lender, as the case may be, at their respective addresses set forth below:
If to Borrower: Skystream Corporation
555 Clyde Avenue, Suite B
Mountain View, California 94043
FAX: (650) 390-8990
If to Lender: Lighthouse Capital Partners II, LP
100 Drake's Landing Road, Suite 260
Greenbrae, California 94904-3121
Attention: Contract Administrator
FAX: (415) 925-3387
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of
the parties; provided, however, that neither this Agreement nor any rights
hereunder may be assigned by Borrower without Lender's prior written consent,
which consent may be granted or withheld in Lender's sole discretion. Lender
shall have the right with the consent of Borrower (which consent shall not be
unreasonably withheld) to sell, transfer, negotiate, or grant participations in
all or any part of, or any interest in such Lender's rights and benefits
hereunder, provided that consent of Borrower shall not be required in the case
of sales, transfers or negotiations, or grant of participations, to affiliates
of Lender that do not compete, directly or indirectly, with Borrower.
12.2 TIME OF ESSENCE. Time is of the essence for the performance
of all obligations set forth in this Agreement.
12.3 SEVERABILITY OF PROVISIONS. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.4 ENTIRE AGREEMENT; CONSTRUCTION; AMENDMENTS AND WAIVERS.
(a) This Agreement and each of the other Loan Documents
dated as of the date hereof, taken together, constitute and contain the entire
agreement between Borrower and Lender and supersede any and all prior
agreements, negotiations, correspondence, understandings and communications
between the parties, whether written or oral, respecting the subject matter
hereof.
(b) This Agreement is the result of negotiations between
and has been reviewed by each of Borrower and Lender executing this Agreement
as of the date hereof and their respective counsel; accordingly, this Agreement
shall be deemed to be the product of the parties hereto, and no ambiguity shall
be construed in favor of
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<PAGE> 21
or against Borrower or Lender. Borrower and Lender agree that they intend the
literal words of this Agreement and the other Loan Documents and that no parol
evidence shall be necessary or appropriate to establish Borrower's or Lender's
actual intentions.
(c) Any and all amendments, modifications, discharges or
waivers of, or consents to any departures from any provision of this Agreement
or of any of the other Loan Documents shall not be effective without the
written consent of Lender and Borrower. Any waiver or consent with respect to
any provision of the Loan Documents shall be effective only in the specific
instance and for the specific purpose for which it was given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances. Any amendment,
modification, waiver or consent effected in accordance with this SECTION 12.4
shall be binding upon Lender and on Borrower.
12.5 RELIANCE BY LENDER. All covenants, agreements, representations
and warranties made herein by Borrower shall, notwithstanding any investigation
by Lender, be deemed to be material to and to have been relied upon by Lender.
12.6 NO SET-OFFS BY BORROWER. All sums payable by Borrower pursuant
to this Agreement or any of the other Loan Documents shall be payable without
notice or demand and shall be payable in United States Dollars without set-off
or reduction of any manner whatsoever.
12.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.8 SURVIVAL. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Lender
with respect to the expenses, damages, losses, costs and liabilities described
in SECTION 10.3 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Lender have run.
13. RELATIONSHIP OF PARTIES. Borrower and Lender acknowledge, understand
and agree that the relationship by virtue of this Agreement between the
Borrower, on the one hand, and Lender, on the other, is, and at all time shall
remain solely that of a borrower and lender. Lender shall not under any
circumstances be construed to be a partner or joint venturer of Borrower or any
of its Affiliates; nor shall the Lender under any circumstances be deemed to be
in a relationship of confidence or trust or a fiduciary relationship with
Borrower or any of its Affiliates, or to owe any fiduciary duty to Borrower or
any of its Affiliates. Lender does not undertake or assume any responsibility
or duty to Borrower or any of its Affiliates to select, review, inspect,
supervise, pass judgment upon or otherwise inform the Borrower or any of its
Affiliates of any matter in connection with its or their Property, any
Collateral held by Lender or the operations of Borrower or any of its
Affiliates. Borrower and each of its Affiliates shall rely entirely on their
own judgment with respect to such matters, and any review, inspection,
supervision, exercise of judgment or supply of information undertaken or
assumed by Lender in connection with such matters is solely for the protection
of Lender and neither Borrower nor any Affiliate is entitled to rely thereon.
THIS SECTION INTENTIONALLY LEFT BLANK.
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<PAGE> 22
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE
OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF
BORROWER AND LENDER HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA.
BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS
OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BORROWER: LENDER:
SKYSTREAM CORPORATION LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: /s/ JAMES D. OLSON By: LIGHTHOUSE MANAGEMENT
--------------------------- PARTNERS II, L.P., its general partner
Name: James D. Olson By: LIGHTHOUSE CAPITAL PARTNERS, INC.,
------------------------ as general partner
Title: Chief Executive Officer By: /s/ RICHARD D. STUBBLEFIELD
------------------------ --------------------------------
Name: Richard D. Stubblefield
------------------------------
Title: Managing Director
-----------------------------
Exhibit A - Collateral
Exhibit B - Form of Common Stock Purchase Agreement
Exhibit C - Landlord Consent
Exhibit D - Form of Loan Agreement Supplement
Exhibit E - Negative Pledge Agreement
Schedule 1 - Existing Liens
Schedule 2 - Subsidiaries
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<PAGE> 23
EXHIBIT A
DEBTOR/BORROWER: SKYSTREAM CORPORATION
SECURED PARTY/LENDER: LIGHTHOUSE CAPITAL PARTNERS II, L.P.
COLLATERAL
The Collateral shall consist of all right, title and interest of Debtor
in, to and under all of the following wherever located and whether now owned or
hereafter owned or acquired (collectively, the "Collateral"):
1. All Accounts of Debtor;
2. All Chattel Paper of Debtor;
3. All Contracts of Debtor;
4. All Documents of Debtor;
5. All Equipment of Debtor;
6. All Fixtures of Debtor;
7. All General Intangibles of Debtor; not including Intellectual
Property;
8. All Proceeds of Intellectual Property;
9. All Instruments of Debtor;
10. All Inventory of Debtor;
11. All Investment Property of Debtor;
12. All property of Debtor held by Secured Party or any other party
for whom Secured Party is acting as agent hereunder, including, without
limitation, all property of every description now or hereafter in the
possession or custody of or in transit to Secured Party or such other party for
any purpose, including, without limitation, safekeeping, collection or pledge,
for the account of Debtor, or as to which Debtor may have any right or power;
13. All other goods and personal property of Debtor whether tangible
or intangible and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by Debtor and wherever located; and
14. To the extent not otherwise included, all Proceeds of each of
the foregoing and all accessions to, substitutions and replacements for, and
rents, profits and products of each of the foregoing.
--------------------- ---------------------
Debtor Initial Secured Party Initial
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DEFINED TERMS. Unless otherwise defined herein, the following terms shall
have the following meanings (such meanings being equally applicable to both the
singular and plural forms of the terms defined):
"ACCOUNTS" means any "account," as such term is defined in Section 9106 of
the UCC, now owned or hereafter acquired by Debtor and, in any event, shall
include, without limitation, all accounts receivable, book debts and other
forms of obligations (other than forms of obligations evidenced by Chattel
Paper, Documents or Instruments) now owned or hereafter received or acquired by
or belonging or owing to Debtor (including, without limitation, under any
trade name, style or division thereof) whether arising out of goods sold or
services rendered by Debtor or from any other transaction, whether or not the
same involves the sale of goods or services by Debtor (including, without
limitation, any such obligation which may be characterized as an account or
contract right under the UCC) and all of Debtor's rights in, to and under all
purchase orders or receipts now owned or hereafter acquired by it for goods or
services, and all of Debtor's rights to any goods represented by any of the
foregoing (including, without limitation, unpaid seller's rights of rescission,
replevin, reclamation and stoppage in transit and rights to returned, reclaimed
or repossessed goods), and all monies due or to become due to Debtor under all
purchase orders and contracts for the sale of goods or the performance of
services or both by Debtor (whether or not yet earned by performance on the
part of Debtor or in connection with any other transaction), now in existence
or hereafter occurring, including, without limitation, the right to receive the
proceeds of said purchase orders and contracts, and all collateral security and
guarantees of any kind given by any Person with respect to any of the foregoing.
"CHATTEL PAPER" means any "chattel paper," as such term is defined in
SECTION 9105(1)(b) of the UCC, now owned or hereafter acquired by Debtor.
"CONTRACTS" means all contracts, undertakings, franchise agreements or
other agreements (other than rights evidenced by Chattel Paper, Documents or
Instruments) in or under which Debtor may now or hereafter have any right,
title or interest, including, without limitation, with respect to an Account,
any agreement relating to the terms of payment or the terms of performance
thereof.
"COPYRIGHT LICENSE" means all of the following now owned or hereafter
acquired by Debtor: any agreement granting any right in or to any Copyright or
Copyright registration (whether Debtor is the licensee or the licensor
thereunder) including, without limitation, licenses pursuant to which Debtor
has obtained the exclusive right to use a copyright owned by a third party.
"COPYRIGHTS" means all of the following in which Debtor now holds or
hereafter acquires any interest: (i) all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof
or of any other country; (ii) registrations, applications and recordings in the
United States Copyright Office or in any similar office or agency of the United
States, any state thereof or any other country or political subdivision
thereof; (iii) any continuations, renewals or extensions thereof; (iv) any
registrations to be issued in any pending applications; (v) prior versions of
works covered by copyright and all works based upon, derived from, or
incorporating such works; (vi) income, royalties, damages, claims, and payments
now and hereafter due and payable with respect to copyrights including, without
limitation, damages and payments for past, present or future infringement;
(vii) rights to sue for past, present and future infringements of copyright;
and (viii) any other rights corresponding to any of the foregoing rights
throughout the world.
"DOCUMENTS" means any "documents," as such term is defined in Section
9105(1)(f) of the UCC, now owned or hereafter acquired by Debtor.
"EQUIPMENT" means any "equipment," as such term is defined in Section
9109(2) of the UCC, now or hereafter owned or acquired by Debtor and, in any
event, shall include, without limitation, all machinery, equipment,
furnishings, vehicle, computers and other electronic data-processing and any
other office equipment of any nature whatsoever, any and all additions,
substitutions and replacements of any of the foregoing, wherever located,
together with all attachments, components, parts, equipment and accessories
installed thereon or affixed thereto.
- ----------------------- -----------------------
Debtor Initial Security Party Initial
2
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"FIXTURES" means "fixtures," such term is defined in Section 9313(1)(a) of
the UCC, now or hereafter owned or acquired by Debtor and, in any event, shall
include, without limitation, regardless of where located, all of the fixtures,
systems, machinery, apparatus, equipment and fittings of every kind and nature
whatsoever and all appurtenances and additions thereto and substitutions or
replacements thereof, now or hereafter attached or affixed to or constituting a
part of, or located in or upon, real property wherever located, including,
without limitation, all heating, electrical, mechanical, lighting, lifting,
plumbing, ventilating, air-conditioning and air cooling, refrigerating, food
preparation, incinerating and power, loading and unloading, signs, escalators,
elevators, boilers, communication, switchboards, sprinkler and other fire
prevention and extinguishing fixtures, systems, machinery, apparatus and
equipment, and all engines, motors, dynamos, machinery, pipes, pumps, tanks,
conduits and ducts constituting a part of any of the foregoing, together with
all right, title and interest of Debtor in and to all extensions, improvements,
betterments, renewals, substitutes, and replacements of, and all additions and
appurtenances to any of the foregoing property, and all conversions of the
security constituted thereby, immediately upon any acquisition or release
thereof or any such conversion, as the case may be.
"GENERAL INTANGIBLES" means any "general intangibles," as such term is
defined in SECTION 9106 of the UCC, now owned or hereafter acquired by Debtor
and, in any event, shall include, without limitation, all right, title and
interest which Debtor may now or hereafter have in or under any Contract, all
customer lists, interests in partnerships, joint ventures and other business
associations, permits, trade secrets, proprietary or confidential information,
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, recipes, experience, processes, models,
drawings, materials and records, goodwill, claims in or under insurance
policies, including unearned premiums, uncertificated securities, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification.
"INSTRUMENTS" means any "instrument," as such term is defined in SECTION
9105(1)(i) of the UCC now owned or hereafter acquired by Debtor, including,
without limitation, all notes, certificated securities, and other evidences of
indebtedness, other than instruments that constitute, or are a part of a group
of writings that constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" means all Copyrights, Patents, Trademarks, trade
secrets, customer lists, proprietary or confidential information, inventions
(whether or not patented or patentable), technical information, procedures,
designs, knowledge, know-how, software, data bases, data, skill, expertise,
recipes, experience, processes, models, drawings, materials and records, and
all Licenses related to the foregoing in which Debtor is the licensee.
"INVENTORY" means any "inventory," as such term is defined in Section
9109(4) of the UCC, wherever located, now or hereafter owned or acquired by,
Debtor and, in any event, shall include, without limitation, all inventory,
merchandise, goods and other personal property which are held by or on behalf
of Debtor for sale or lease or are furnished or are to be furnished under a
contract of service or which constitute raw materials, work in process or
materials used or consumed or to be used or consumed in Debtor's business, or
the processing, packaging, promotion, delivery or shipping of the same, and all
furnished goods whether or not such inventory is listed on any schedules,
assignments or reports furnished to Secured Party from time to time and whether
or not the same is in transit or in the constructive, actual or exclusive
occupancy or possession of Debtor or is held by Debtor or by others for
Debtor's account, including, without limitation, all goods covered by purchase
orders and contracts with suppliers and all goods billed and held by suppliers
and all inventory which may be located on premises of Debtor or of any
carriers, forwarding agents, truckers, warehousemen, vendors, selling agents or
other persons.
"INVESTMENT PROPERTY" means any "investment property," as such term is
defined in Section 9115(1)(f) of the UCC, now owned or hereafter acquired by
Debtor, including, without limitation, a security, whether certificated or
uncertificated, a security entitlement, a securities account, a commodity
contract or a commodity account.
____________________ ____________________
Debtor Initial Secured Party Initial
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"LICENSE" means any Copyright License, Patent License, Trademark License
or other license of rights or interests now held or hereafter acquired by
Debtor.
"PATENT LICENSE" means any of the following now owned or hereafter
acquired by Debtor; any written agreement granting any right with respect to
any invention on which a Patent is in existence.
"PATENTS" means all of the following in which Debtor now holds or
hereafter acquires any interest: (a) letters patent of the United States or any
other county, all registrations and recordings thereof, and all applications
for letters patent of the United States or any other county, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political subdivision
thereof; (b) all reissues, continuations, continuations-in-part or extensions
thereof; (c) all petty patents, divisionals, and patents of addition; and (d)
all patents to issue in any such applications.
"PROCEEDS" means "proceeds," as such term is defined in SECTION 9-306(1)
of the UCC and, in any event, shall include, without limitation, (a) any and
all Accounts, Chattel Paper, Instruments, cash or other proceeds payable to
Debtor from time to time in respect of the Collateral, (b) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to Debtor from time
to time with respect to any of the Collateral, (c) any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral above by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority), and (d) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral or any Contract.
"TRADEMARK LICENSE" means any written agreement granting any right in and
to any Trademark or Trademark registration (whether Debtor is the licensee or
the licensor thereunder).
"TRADEMARKS" means any of the following now owned or hereafter acquired by
Debtor: (a) any and all trademarks, trade names, corporate names, company
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature, now
existing or hereafter adopted or acquired, all registrations and recordings
thereof, and any applications in connection therewith, including, without
limitation, registrations, recordings and applications in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof or any other country or any political subdivision
thereof (the "Marks"), (b) any reissues, extensions or renewals thereof, (c)
the goodwill of the business symbolized by or associated with Marks, (d)
income, royalties, damages and payments now and hereafter due and/or payable
with respect to Marks, including, without limitation, damages, claims and
recoveries for past, present or future infringement, misappropriation, or
dilution, and (e) rights to sue for past, present and future infringements of
Marks.
"UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Secured Party's security interest in any collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "UCC" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions
hereof relating to such attachment, perfection of priority and for purposes of
definitions related to such provisions.
-------------- ---------------------
Debtor Initial Secured Party Initial
4
<PAGE> 27
EXHIBIT B
SKYSTREAM CORPORATION
COMMON STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of this 31st day of August, 1998, by and between
SKYSTREAM CORPORATION, a California corporation (the "Corporation"), and
LIGHTHOUSE CAPITAL PARTNERS II, L.P. (the "Purchaser").
All capitalized terms in this Agreement shall have the meaning assigned to
them in this Agreement or in the attached Appendix.
1. ACQUISITION OF SHARES
(a) SALE AND PURCHASE. On the terms and conditions set forth in this
Agreement, the Corporation agrees to sell to the Purchaser, and Purchaser
agrees to purchase 75,410 shares of Common Stock (the "Shares") of the
Corporation. The sale and purchase shall occur at the offices of the
Corporation on the date set forth above or at such other place and time as the
parties may agree. Attached hereto as Exhibit A is a current capitalization
table for the Corporation.
(b) CONSIDERATION. The Purchaser agrees to pay $0.225 for each Share (the
"Purchase Price"). The Corporation represents and warrants that the Purchase
Price is at least 100% of the Fair Market Value of the Shares. Payment shall be
made on the transfer date in cash or cash equivalents. Upon receipt by the
Corporation of the Purchase Price with respect to the Shares, the Corporation
shall issue a duly executed certificate representing the Shares (the
"Closing"). The Corporation further covenants that the Shares will, upon
issuance, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issuance thereof.
(c) STOCKHOLDER RIGHTS. Purchaser (or any successor in interest) shall
have all the rights of a stockholder (including voting, dividend and
liquidation rights) with respect to the Shares, subject, however, to the
transfer restrictions of Section 2 below.
2. SECURITIES LAW COMPLIANCE/TRANSFER RESTRICTIONS
(a) RESTRICTED SECURITIES. The Shares have not been registered under the
1933 Act.
(b) PURCHASER REPRESENTATIONS. In connection with the issuance and
acquisition of Shares under this Agreement, Purchaser hereby represents and
warrants to the Corporation as follows:
(i) Purchaser is acquiring the Shares for investment for its
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the 1933 Act.
(ii) Purchaser understands that the Shares have not been registered
under the 1933 Act by reason of a specific exemption therefrom and that the
Shares must be held indefinitely, unless they are subsequently registered under
the 1933 Act or Purchaser determines that such registration is not required.
(iii) Purchaser will not sell, transfer or otherwise dispose of the
Shares in violation of the 1933 Act, the Securities Exchange Act of 1934, or
the rules promulgated thereunder, including Rule 144 under the 1933 Act.
Purchaser agrees that it will not dispose of the Shares unless and until it has
complied with all requirements of this Agreement applicable to the disposition
of Shares, and only if (i) the proposed disposition does not require
registration of the Shares under the 1933 Act or all appropriate action
necessary for compliance with the registration requirements of the 1933 Act or
with any exemption from registration available under the 1933 Act (including
Rule 144) has been taken and (ii) the proposed disposition will not result in
the contravention of any transfer restrictions applicable to the Shares under
the Rules of the California Corporations Commissioner.
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<PAGE> 28
(iv) Notwithstanding anything to the contrary contained herein,
Purchase may grant a security interest in its rights hereunder and the Shares
to third parties.
(c) CORPORATION REPRESENTATIONS. The Corporation hereby represents and
warrants to Purchaser as follows:
(1) The execution and delivery of this Agreement do not, and
the issuance of the Shares in accordance with the terms hereof will not, with
or without the passage of time or giving of notice, (i) violate or contravene
the Corporation's Articles of Incorporation or Bylaws, or any law, statute,
regulation, rule, judgment or order applicable to the Corporation, (ii)
violate, contravene or result in a breach or default under any contract,
agreement or instrument to which the Corporation is a party or by which the
Corporation or any of its assets are bound, (iii) result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Corporation or the suspension, revocation, impairment, forfeiture
or nonrenewal of any permit license, authorization or approval applicable to
the Corporation, its business or operations or any of its assets or properties,
or (iv) require the consent or approval of or the filing of any notice or
registration with any person or entity.
(2) The Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of California. The
Corporation has all requisite corporate power and authority to own and operate
its properties and assets, to execute and deliver this Agreement, to issue and
sell the Shares, to carry out the provisions of this Agreement, and to carry on
its business as presently conducted and as presently proposed to be conducted.
(3) The authorized capital stock of the Corporation,
immediately prior to the Closing, will consist of 20,000,000 shares of Common
Stock (par value $0.01 per share), of which (i) 4,349,367 shares are issued and
outstanding, (ii) 6,704,831 shares are reserved for the conversion of the
Preferred Stock and (iii) 2,175,633 shares are reserved for future issuance to
key employees pursuant to the Corporation's stock option plan. In addition,
4,425,000 shares of Series A Preferred Stock are authorized, of which 4,425,000
shares are issued and outstanding and 35,385 are reserved for issuance upon the
exercise of certain Warrants. All issued and outstanding shares of the
Corporation's Common Stock (i) have been duly authorized and validly issued,
(ii) are fully paid and nonassessable, and (iii) were issued in compliance with
all applicable state and federal laws concerning the issuance of securities.
(4) All corporate action on the part of the Corporation, its
officers, directors and shareholders necessary for the authorization of this
Agreement, the performance of all obligations of the Corporation hereunder and
thereunder at the Closing and the authorization, sale, issuance and delivery of
the Shares pursuant hereto has been taken or will be taken prior to the
Closing. The Agreement, when executed and delivered, will be a valid and
binding obligation of the Corporation enforceable in accordance with its terms,
except as limited by (i) applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, and (ii) general principles of equity that restrict the
availability of equitable remedies.
(5) The Corporation has good and marketable title to its
properties and assets, including the properties and assets reflected in the
most recent balance sheet included in the financial statements of the
Corporation delivered to the Purchaser, and good title to its leasehold
estates, in each case subject to no mortgage, pledge, lien, lease, encumbrance
or charge, other than (i) those resulting from taxes which have not yet become
delinquent, (ii) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Corporation, and (iii) those that have otherwise arisen in
the ordinary course of business.
(6) The Corporation owns or possesses sufficient legal rights
to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, information and other proprietary rights and processes necessary for
its business as now conducted and as proposed to be conducted, without any
known infringement of the rights of others.
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<PAGE> 29
(7) The Corporation is not in violation or default of any term of its
Articles of Incorporation or Bylaws, or of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party or
by which it is bound or of any judgment, decree, order, writ or, to its
knowledge, any law, statute, regulation, rule, judgment or order applicable to
the Corporation which would materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Corporation.
(8) There is no action, suit, proceeding or investigation pending or
to the Corporation's knowledge currently threatened against the Corporation
that questions the validity of this Agreement or the consummation of the
transactions contemplated hereby, or which might result, either individually or
in the aggregate, in any material adverse change in the assets, condition,
affairs or prospects of the Corporation, financially or otherwise, or any
change in the current equity ownership of the Corporation, nor is the
Corporation aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor know to the Corporation) involving the prior employment of any of the
Corporation's employees, their use in connection with the Corporation's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers. The Corporation is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency
or instrumentality. There is no action, suit, proceeding or investigation by
the Corporation currently pending or which the Corporation intends to initiate.
(d) RIGHTS OF THE CORPORATION. The Corporation shall not be required to (i)
transfer on its books any Shares that have been sold or transferred in
contravention of this Agreement or (ii) treat as the owner of Shares, or
otherwise to accord voting, dividend or liquidation rights to, any transferee
to whom Shares have been transferred in contravention of this Agreement.
3. NOTICES OF RECORD DATE, ETC. IN THE EVENT OF:
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, sell or otherwise acquire or dispose of any shares of
stock of any class or any other securities or property, or to receive any other
right;
(b) any reclassification of the capital stock of the Corporation, capital
reorganization of the Corporation, consolidation or merger involving the
Corporation, or sale or conveyance of all or substantially all of its assets; or
(c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Corporation;
then in each such event the Corporation will provide or cause to be
provided to the Purchaser a written notice thereof. Such notice shall be
provided at least twenty (20) business days prior to the date specified in such
notice on which any such action is to be taken.
4. RIGHTS OF PARTICIPATION. The Corporation hereby grants the Purchaser the
right of participation as set forth on Exhibit B, which is incorporated herein
by reference.
5. WAIVER OF RIGHT OF FIRST REFUSAL. The Corporation hereby waives any
"first-refusal rights" of the Corporation with respect to the Shares,
including, without limitation, the right of first refusal provided for in
Article 8.6 of the bylaws of the Corporation.
6. GENERAL PROVISIONS
(a) NOTICES. Any notice required to be given under this Agreement shall be
in writing and shall be deemed effective upon personal delivery or upon deposit
in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
3
<PAGE> 30
7. MISCELLANEOUS PROVISIONS
(a) ADDITIONAL UNDERTAKINGS. Purchaser and Corporation hereby agree to
take whatever additional action and execute whatever additional documents the
other party may deem reasonably necessary or advisable in order to carry out
or effect the provisions of this Agreement.
(b) AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the entire
contract between the parties hereto with regard to the subject matter hereof.
(c) GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without resort to the
State's conflict-of-laws rules.
(d) COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
(e) SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure
to the benefit of, and be binding upon, the Corporation and its successors and
assigns and upon Purchaser and its successors and assigns, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first indicated above.
SKYSTREAM CORPORATION
By: EXHIBIT ONLY
-----------------------------------------
Name: James D. Olson
---------------------------------------
Title: Chief Executive Officer
--------------------------------------
Address: 555 Clyde Avenue
Mountain View, CA 94043
PURCHASER
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: LIGHTHOUSE MANAGEMENT
PARTNERS II, L.P., ITS GENERAL PARTNER
By: LIGHTHOUSE CAPITAL PARTNERS, INC.,
ITS GENERAL PARTNER
By:
-----------------------------------------
Name: Richard D. Stubblefield
---------------------------------------
Title: Managing Director
--------------------------------------
Address: 100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904
4
<PAGE> 31
APPENDIX
The following definitions shall be in effect under the Agreement:
A. "Agreement" shall mean this Common Stock Purchase Agreement.
B. "Board" shall mean the Corporation's Board of Directors.
C. "Common Stock" shall mean the Corporation's common stock.
D. "Corporation" shall mean SkyStream Corporation, a California
corporation.
E. "Fair Market Value" shall mean the fair market value of a Share, as
determined by the Board of Directors in good faith. Such determination shall be
conclusive and binding on all persons.
F. "1933 Act" shall mean the Securities Act of 1933, as amended.
G. "Purchaser" shall mean the person to whom the Shares are issued.
H. "Shares" shall have the meaning assigned to such term in Section
1.(a).
5
<PAGE> 32
EXHIBIT A
CAPITALIZATION TABLE
SEE ATTACHED PAGES.
1
<PAGE> 33
EXHIBIT B
RIGHT OF PARTICIPATION
SEE ATTACHED PAGES.
1
<PAGE> 34
EXHIBIT B
RIGHT OF PARTICIPATION
(a) Right of Participation. Subject to the terms and conditions contained
in this Exhibit B, the Company hereby grants to Purchaser, the right of
participation to purchase its Pro Rata Portion of any New Securities (as
defined in Section (b)) which the Company may, from time to time, propose to
sell and issue. A Holder's "Pro Rata Portion" for purposes of this Section (a)
is the ratio that (x) the sum of the number of shares of the Company's Common
Stock then held by such Purchaser and the number of shares of the Company's
Common Stock issuable upon conversion of any Preferred Stock then held by
Purchaser, bears to (y) the sum of the total number of shares of the Company's
Common Stock then outstanding and the number of shares of the Company's Common
Stock issuable upon conversion of the then outstanding Preferred Stock.
(b) Definition of New Securities. Except as set forth below, "New
Securities" shall mean any shares of capital stock of the Company, including
Common Stock and Preferred Stock, whether authorized or not, and rights, options
or warrants to purchase said shares of Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible into said
shares of Common Stock or Preferred Stock. Notwithstanding the foregoing, "New
Securities" does not include (i) Common Stock issued or issuable upon conversion
of any Preferred Stock, (ii) securities offered to the public generally pursuant
to a registration statement under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or shares or other reorganization
whereby the Company or its shareholders own not less than a majority of the
voting power of the surviving or successor corporation, (iv) shares of the
Company's Common Stock or related options or warrants convertible into or
exercisable for such Common Stock issued to employees, officers and directors
of, and consultants to, the Company, pursuant to any arrangement approved by the
Board of Directors of the Company, (v) shares of the Company's Common Stock or
related options convertible into or exercisable for such Common Stock issued to
banks, commercial lenders, lessors and other financial institutions in
connection with the borrowing of money or the leasing of equipment by the
Company approved by the Board of Directors of the Company, (vi) stock issued
pursuant to any rights or agreements, including, without limitation, convertible
securities, options and warrants, provided that the Company shall have complied
with the rights of participation established by this Exhibit B with respect to
the initial sale or grant by the Company of such rights or agreements, or (vii)
stock issued in connection with any stock split, stock dividend or
recapitalization by the Company.
(c) Notice of Right. In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Purchaser written notice of its
intention, describing the type of New Securities and the price and terms upon
which the Company proposes to issue the same. Each Purchaser shall have twenty
(20) days from the date of receipt of any such notice to agree to purchase
shares of such New Securities (up to the amount referred to in Section (a)),
for the price
<PAGE> 35
and upon the terms specified in the notice, by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(d) Exercise of Right. If any Purchaser exercises its right of
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
within ninety (90) calendar days after the Purchaser gives notice of such
exercise, which period of time shall be extended in order to comply with
applicable laws and regulations. Upon exercise of such right of participation,
the Company and the Purchaser shall be legally obligated to consummate the
purchase contemplated thereby and shall use their best efforts to secure any
approvals required in connection therewith.
(e) Lapse and Reinstatement of Right. In the event a Purchaser fails to
exercise the right of participation provided in this Exhibit B within said
twenty (20) day period, the Company shall have ninety (90) days thereafter to
sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within sixty (60) days from the
date of said agreement) to sell the New Securities not elected to be purchased
by such Purchaser at the price and upon the terms no more favorable to the
purchasers of such securities than specified in the Company's notice. In the
event the Company has not sold the New Securities or entered into an agreement
to sell the New Securities within said ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within sixty (60) days
from the date of said agreement), the Company shall not thereafter issue or
sell any New Securities without first offering such securities to the Purchasers
in the manner provided above.
(f) No Assignment. The right of Purchaser to purchase any part of the New
Securities may not be assigned or transferred.
(g) Termination of Participation Right. The rights of participation
granted under this Exhibit B shall terminate on and be of no further force or
effect upon the consummation of the Company's sale of its Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed under the Securities Act immediately subsequent to which the Company
shall be obligated to file annual and quarterly reports with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
2
<PAGE> 36
EXHIBIT C
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Lighthouse Capital Partners II, L.P.
100 Drake's Landing Road, Suite 260
Greenbrae, CA 94904-3121
Attn.: Contract Administration
________________________________________________________________________________
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in that
certain real property (the "Real Property") in the County of Santa Clara, State
of California, described as: SEE EXHIBIT 1 ATTACHED HERETO FOR FULL LEGAL
DESCRIPTION, and commonly known as 555 Clyde Avenue, Suite B, Mountain View,
California 94043 (Parcel No. _______________).
(b) SKYSTREAM CORPORATION, a California corporation ("Borrower"), has
entered into or will enter into a Loan and Security Agreement with LIGHTHOUSE
CAPITAL PARTNERS II, L.P. ("Lender") (as amended and supplemented from time to
time, the "Agreement").
(c) Lender, as a condition to entering into the Agreement, requires
that the undersigned consent to the removal by Lender of the equipment and
other assets covered by the Agreement (hereinafter the "Equipment") from the
Real Property, no matter how it is affixed thereto, and to the other matters
set forth below.
NOW, THEREFORE, for good and sufficient consideration, receipt of which is
hereby acknowledged, the undersigned consents to the placing of the Equipment
on the Real Property, and agrees with Lender as follows:
1. The undersigned waives and releases each and every right which
undersigned now has, under the laws of the State of California or by virtue of
the lease from the Real Property now in effect, to levy or distrain upon for
rent, in arrears, in advance or both, or to claim or assert title to the
Equipment that is already on said Real Property, or may hereafter be delivered
or installed thereon.
2. The Equipment shall be considered to be personal property and shall
not be considered part of the Real Property regardless of whether or by what
means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Lender, or its agent or representative,
to enter upon the Real Property for the purpose of exercising any right it may
have under the terms of the Agreement or otherwise, including, without
limitation, the right to remove the Equipment; provided, however, that if
Lender, in removing the Equipment damages any improvements of the undersigned
on the Real Property, Lender will, at its expense, cause same to be repaired,
normal wear and tear excepted. The right of Lender to enter the Real Property
shall not terminate until thirty (30) days after Lender receives written notice
from the undersigned of the termination of the Lease.
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of Lender and its
successors and assigns.
1
<PAGE> 37
IN WITNESS WHEREOF, the undersigned has executed this instrument this ___ day
of ________________, 1998
LANDLORD Notarial Acknowledgment required.
By: EXHIBIT ONLY
Name:
---------------------------
Title:
--------------------------
ATTACH LEGAL DESCRIPTION OF THE REAL PROPERTY
2
<PAGE> 38
EXHIBIT D
FORM OF LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT NO. 01
LOAN AGREEMENT SUPPLEMENT NO. 01, dated October 6, 1998 ("Supplement"), to
the Loan and Security Agreement dated as of October 6, 1998 (the "Loan
Agreement") by and between SKYSTREAM CORPORATION, a California corporation
("Borrower"), and LIGHTHOUSE CAPITAL PARTNERS II, L.P. (the "Lender").
Capitalized terms used herein but not otherwise defined herein are used
with the respective meanings given to such terms in the Loan Agreement.
The amount being advanced under this Loan Agreement Supplement No. 01 is
$________.
Borrower hereby certifies that (a) the foregoing information is true and
correct and authorizes Lender to endorse in its books and records, the Basic
Rate applicable to the Funding Date of the Loan contemplated in this Loan
Agreement Supplement and the principal amount set forth above; (b) the
representations and warranties made by Borrower in SECTION 5 of the Loan
Agreement and in the other Loan Documents are true and correct on the date
hereof and will be true and correct on the Funding Date; (c) Borrower has met
or will by the Funding Date meet all conditions set forth in SECTION 3 of the
Loan Agreement; (d) Borrower is now, and on the Funding Date will be, in
compliance with the covenants and the requirements contained in SECTIONS 6 AND
7 of the Loan Agreement; and (e) no Default or Event of Default has occurred
and is continuing under the Loan Agreement.
This Supplement is being delivered in the State of California.
This Supplement may be executed by Borrower and Lender in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, Borrower and Lender have caused this Supplement to be
duly executed and delivered as of this day and year first above written.
SKYSTREAM CORPORATION LIGHTHOUSE CAPITAL PARTNERS II, L.P.
By: EXHIBIT ONLY By: LIGHTHOUSE MANAGEMENT PARTNERS, II
L.P., its general partner
Name: James D. Olson
By: LIGHTHOUSE CAPITAL PARTNERS, INC.,
Title: Chief Executive Officer its general partner
By:
--------------------------------
Name: Thomas Conneely
Title: Vice President, Operations
1
<PAGE> 39
EXHIBIT E
NEGATIVE PLEDGE AGREEMENT
THIS NEGATIVE PLEDGE AGREEMENT is made as of August 31, 1998 by and
between SKYSTREAM CORPORATION ("Borrower") and LIGHTHOUSE CAPITAL PARTNERS II,
L.P. ("Lender").
In connection with the Loan Documents being concurrently executed between
Borrower and Lender, Borrower agrees as follows:
Except as otherwise permitted in the Loan Documents, Borrower shall
not sell, transfer, assign, mortgage, pledge, lease, grant a security interest
in, or encumber any of Borrower's intellectual property, including, without
limitation, the following:
(a) Any and all copyright rights, copyright applications,
copyright registration and like protection in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not
the same also constitutes a trade secret, now or hereafter existing, created,
acquired or held (collectively, the "Copyrights");
(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) All patents, patent applications and like protections,
including, without limitation, improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same,
including, without limitation, the patents and patent applications
(collectively, the "Patents");
(e) Any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks (collectively, the "Trademarks");
(f) Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(g) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(h) All amendments, extensions, renewals and extensions of any of
the Copyrights, Patents or Trademarks; and
(i) All proceeds and products of the foregoing, including,
without limitation, all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
It shall be an Event of Default under the Loan Documents between
Borrower and Lender if there is a breach of any term of this Negative Pledge
Agreement.
Notwithstanding anything in this Agreement, Borrower may grant
non-exclusive licenses with respect to its intellectual property in the
ordinary course of business.
1
<PAGE> 40
Capitalized items used herein without definition shall have the same
meanings as set forth in the Loan and Security Agreement of even date herewith.
SKYSTREAM CORPORATION
By: EXHIBIT ONLY
-------------------------------
Name: James D. Olson
------------------------------
Title: Chief Executive Officer
----------------------------
LIGHTHOUSE CAPITAL PARTNERS II, L.P.
BY: LIGHTHOUSE MANAGEMENT PARTNERS II, L.P.
its general partner
BY: LIGHTHOUSE CAPITAL PARTNERS, INC.
its general partner
By:
-------------------------------
Name: Richard D. Stubblefield
------------------------------
Title: Managing Director
----------------------------
2
<PAGE> 41
SCHEDULE 1
EXISTING LIENS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FILE STATE
SECURED PARTY NUMBER DATE FILED FILED DESCRIPTION
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Silicon Valley Bank 9700360589 12/31/96 CA Blanket Lien
- ------------------------------------------------------------------------------------------------
William Kirsch Lease Funding 9731060643 11/5/97 CA Equipment Schedule 01
- ------------------------------------------------------------------------------------------------
Venture Leasing Associates 9731860528 11/10/97 CA Equipment Schedule 02
- ------------------------------------------------------------------------------------------------
David Campbell 9800960544 1/5/98 CA Equipment Schedule 03
- ------------------------------------------------------------------------------------------------
William Kirsch Lease Funding 9802260250 1/21/98 CA Equipment Schedule 04
- ------------------------------------------------------------------------------------------------
Venture Leasing Associates 9806960108 3/5/98 CA Equipment Schedule 06
- ------------------------------------------------------------------------------------------------
William Kirsch Lease Funding 9816360660 6/11/98 CA Equipment Schedule 08
- ------------------------------------------------------------------------------------------------
Venture Leasing Associates 9817060759 6/17/98 CA Equipment Schedule 07
- ------------------------------------------------------------------------------------------------
Venture Leasing Associates Pending Pending CA Equipment Schedule 09
- ------------------------------------------------------------------------------------------------
William Kirsch Lease Funding Pending Pending CA Equipment Schedule 05
- ------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE> 42
SCHEDULE 2
SUBSIDIARIES
NONE
1
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF SKYSTREAM NETWORKS INC.
<TABLE>
<CAPTION>
<S> <C>
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
SkyStream Networks Limited Hong Kong
SkyDBN U.K. Limited United Kingdom
</TABLE>
[S] [C]
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of Form S-1 of our
reports dated February 18, 2000, except as to Note 12 which is as of March 7,
2000, relating to the financial statements and financial statement schedules of
Skystream Networks Inc., which appear in such Registration Statement. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
San Jose, California
March 7, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 14,443
<SECURITIES> 0
<RECEIVABLES> 3,012
<ALLOWANCES> 183
<INVENTORY> 126
<CURRENT-ASSETS> 17,844
<PP&E> 1,363
<DEPRECIATION> 1,029
<TOTAL-ASSETS> 19,399
<CURRENT-LIABILITIES> 3,848
<BONDS> 1,667
0
26,603
<COMMON> 8
<OTHER-SE> (11,997)
<TOTAL-LIABILITY-AND-EQUITY> 19,399
<SALES> 8,518
<TOTAL-REVENUES> 8,518
<CGS> 2,646
<TOTAL-COSTS> 2,646
<OTHER-EXPENSES> 12,701
<LOSS-PROVISION> 164
<INTEREST-EXPENSE> 348
<INCOME-PRETAX> (6,621)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,621)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,621)
<EPS-BASIC> (1.37)
<EPS-DILUTED> (1.37)
</TABLE>
