STOCKHOLDER AGREEMENT
This STOCKHOLDER AGREEMENT (this "Agreement"), dated as of
July 28, 2000, is entered into by and between Matrix Partners, located at 2500
Sand Hill Road, Suite 113 Menlo Park, California 94025 (the "Stockholder
Party"), a stockholder of Darius Corp., a corporation organized under the laws
of Delaware (the "Company"), and Nortel Networks Corporation, a corporation
organized under the laws of Canada ("Nortel Networks").
WHEREAS, simultaneously with the execution of this Agreement,
Nortel Networks, Darius Corp., a wholly owned subsidiary of Nortel Networks
("Sub"), and the Company, are entering into an Agreement and Plan of Merger,
dated as of the date hereof (as the same may be amended or supplemented, the
"Merger Agreement"), providing, among other things, for the merger of Sub with
and into the Company (the "Merger"); and
WHEREAS, as of the date hereof, the Stockholder Party is the
Beneficial Owner (as defined below) of the shares of common stock, par value
$0.001 per share, of the Company ("Common Stock") set forth in Schedule I hereto
(the "Owned Shares"); and
WHEREAS, as an inducement and a condition to its entering into
the Merger Agreement and incurring the obligations set forth therein, Nortel
Networks has required that the Stockholder Party enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements contained
herein and in the Merger Agreement, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions. Capitalized terms used but not defined
in this Agreement are used in this Agreement with the meanings given to such
terms in the Merger Agreement. In addition, for purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, any
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person
specified. For purposes of this Agreement, with respect to the Stockholder
Party, "Affiliate" shall not include the Company and the Persons that directly,
or indirectly through one or more intermediaries, are controlled by the Company.
"Beneficially Owned" or "Beneficial Ownership" with respect to
any securities means having beneficial ownership of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act, disregarding the
phrase "within 60 days" in paragraph (d)(1)(i) thereof), including pursuant to
any agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities Beneficially Owned by
all Affiliates, excluding any partner of the Stockholder Party who is not a
director of the Company, of such Person and all other Persons with whom such
Person would constitute a "Group" within the meaning of Section 13(d) of the
Exchange Act and the rules promulgated thereunder.
"Beneficial Owner" with respect to any securities means a
Person who has Beneficial Ownership of such securities.
"Shares" mean the Owned Shares and any shares of Common Stock
the Beneficial Ownership of which is acquired in any manner by the Stockholder
Party (including without limitation, pursuant to the exercise of existing stock
options or warrants) after the date hereof.
"Transfer" means, with respect to a security, the sale,
transfer, pledge, hypothecation, encumbrance, assignment or disposition of such
security or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing. As a
verb, "Transfer" shall have a correlative meaning.
2. No Disposition or Solicitation.
(a) The Stockholder Party agrees that from and after the date
hereof, except as contemplated by this Agreement, such party will not Transfer
or agree to Transfer any of the Shares other than with Nortel Networks' prior
written consent, or grant any proxy or power-of-attorney with respect to the
Shares other than pursuant to this Agreement; provided, that nothing in this
Agreement shall prohibit the Stockholder Party from (a) exercising any option to
purchase shares of Common Stock, or (b) effecting any Transfer of Shares (i) by
will or applicable laws of descent and distribution, (ii) to any member of the
immediate family of the Stockholder Party, or any trust, limited partnership or
other similar entity the Beneficial Ownership of which is held by the
Stockholder Party or such family members, or (iii) to partners of the
Stockholder Party (each a "Permitted Transferee"), so long as such Permitted
Transferee(s) agrees in writing, in form and substance reasonably satisfactory
to Nortel Networks, to be bound by the terms of this Agreement to the same
extent as the Stockholder Party is bound.
(b) The Stockholder Party agrees that from and after the date
hereof, except as contemplated by this Agreement or, solely in the Stockholder
Party's capacity as an officer or director of the Company to the extent
specifically permitted by the Merger Agreement, the Stockholder Party will not
directly or indirectly solicit, initiate, or knowingly encourage any inquiries
or proposals from, discuss or negotiate with, or provide any non-public
information to, any Person relating to, or otherwise facilitate, any Acquisition
Proposal.
(c) The Stockholder Party agrees that, except for
communications made in the course of such party's duties as an officer or
director of the Company or unless required by applicable law, neither the
Stockholder Party nor any of such party's Affiliates shall make any press
release or public announcement with respect to Nortel Networks or this Agreement
and the Merger Agreement and the transactions contemplated hereby and thereby,
without the prior written consent of Nortel Networks.
3. Stockholder Vote. The Stockholder Party agrees that (i) at
such time as the Company conducts a meeting of or otherwise seeks a vote or
consent of its stockholders for the purpose of adopting the Merger Agreement
(such meeting or any adjournment thereof, or such consent process, the "Company
Meeting"), the Stockholder Party will vote, or provide a consent with respect
to, all issued and outstanding shares of Common Stock over which the Stockholder
Party has voting power ("Voting Shares") in favor of the adoption of the Merger
Agreement, provided that the Stockholder Party shall not be required to vote
for, or provide a consent with respect to, any action that would reduce the
number of Nortel Networks Common Shares to be received by the Stockholder Party
in respect of such party's Common Stock in the Merger, and (ii) the Stockholder
Party will (at any meeting of stockholders) vote the Voting Shares against, and
will not consent to, any Acquisition Proposal or any action that would delay,
prevent or frustrate the transactions contemplated by the Merger Agreement.
Without limiting the foregoing, it is understood that the
obligations under clause (i) above shall remain applicable in respect of each
meeting of stockholders of the Company duly called for the purpose of adopting
the Merger Agreement regardless of the position of the Company Board as to the
Merger at the time of such meeting, and that the obligations under clause (ii)
above shall continue until the termination of this Agreement in accordance with
Section 9.
4. Reasonable Efforts to Cooperate. The Stockholder Party will
provide any information reasonably requested by the Company, Nortel Networks or
Sub for any regulatory application or filing made or approval sought for the
transactions contemplated by the Merger Agreement (including filings with the
SEC).
5. Irrevocable Proxy. (a) In furtherance of the agreements
contained in Section 3 of this Agreement, the Stockholder Party hereby
irrevocably grants to, and appoints, Nortel Networks and any designees of Nortel
Networks, and each of them individually, the Stockholder Party's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of the Stockholder Party, to vote all Voting Shares, or grant a
consent or approval in respect of the Voting Shares, or execute and deliver a
proxy to vote the Voting Shares, (x) subject to the proviso set forth in clause
(i) of the first paragraph of Section 3, in favor of the adoption of the Merger
Agreement and approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement and (y) against any Acquisition Proposal or
any other matter referred to in clause (ii) of the first sentence of Section 3
hereof.
(b) The Stockholder Party represents and warrants to Nortel
Networks that any proxies heretofore given in respect of the Voting Shares are
not irrevocable, and hereby revokes any such proxies.
(c) The Stockholder Party hereby affirms that the irrevocable
proxy set forth in this Section 5 is given in connection with, and in
consideration of, the execution of the Merger Agreement by Nortel Networks and
Sub, and that such irrevocable proxy is given to secure the performance of the
duties of such Stockholder Party under this Agreement. The Stockholder Party
hereby further affirms that the irrevocable proxy is coupled with an interest
and may under no circumstances be revoked. The Stockholder Party hereby ratifies
and confirms all that such irrevocable proxy may lawfully do or cause to be done
by virtue hereof. Such irrevocable proxy is executed and intended to be
irrevocable in accordance with the provisions of Section 218 of the DGCL. The
proxy granted in this Section 5 shall remain valid until terminated pursuant to
Section 9 hereof.
6. Covenant of Stockholder Party. The Stockholder Party agrees
to take all reasonable action to (i) permit (x) the Shares to be acquired in the
Merger and (y) the voting of the Voting Shares in accordance with the terms of
this Agreement and (ii) prevent creditors in respect of any pledge of the Shares
from exercising their rights under such pledge.
7. Representations, Warranties and Covenants of Stockholder
Party. The Stockholder Party hereby represents and warrants to, and agrees with,
Nortel Networks as follows:
(a) The Stockholder Party has all necessary power and
authority and legal capacity to execute and deliver this Agreement and perform
his obligations hereunder.
(b) This Agreement has been duly and validly executed and
delivered by the Stockholder Party and constitutes the valid and binding
agreement of the Stockholder Party, enforceable against the Stockholder Party in
accordance with its terms except to the extent limited by (i) applicable
bankruptcy, insolvency or similar laws affecting creditors' rights or (ii)
general equity principles, whether considered at law or in equity.
(c) Subject to applicable community property laws, the
Stockholder Party is the sole Beneficial Owner of the Owned Shares. The
Stockholder Party has good and marketable title (which may include holding in
nominee or "street" name) to all of the Owned Shares, free and clear of all
liens, claims, options, proxies, voting agreements and security interests (other
than as created by this Agreement and restrictions on Transfer under applicable
securities laws). The Owned Shares constitute all of the capital stock of the
Company Beneficially Owned by the Stockholder Party and neither the Stockholder
Party nor any of such party's Affiliates, excluding any partner of the
Stockholder Party who is not a director of the Company, is the Beneficial Owner
of, or has any right to acquire (whether currently, upon lapse of time,
following the satisfaction of any conditions, upon the occurrence of any event
or any combination of the foregoing) any Common Stock or any securities
convertible into or exchangeable or exercisable for Common Stock.
(d) Neither the execution and delivery of this Agreement by
the Stockholder Party nor the consummation of the transactions contemplated
hereby will (i) conflict with, result in any violation of, require any consent
under or constitute a default (whether with notice or lapse of time or both) by
the Stockholder Party under any mortgage, bond, indenture, agreement, instrument
or obligation to which the Stockholder Party is a party or by which the
Stockholder Party or any of the Shares is bound; (ii) violate any judgment,
order, injunction, decree or award of any court, administrative agency or
governmental body that is binding on the Stockholder Party; or (iii) constitute
a violation by the Stockholder Party of any law or regulation of any
jurisdiction, in each case except for violations, conflicts or defaults that
would not have a material adverse effect on the ability of the Stockholder Party
to perform the party's obligations under this Agreement.
8. Representations and Warranties of Nortel Networks. Nortel
Networks represents and warrants to the Stockholder Party that Nortel Networks
has full corporate power and authority to execute and deliver this Agreement and
to perform its obligations hereunder. The execution, delivery and performance of
this Agreement by Nortel Networks will not constitute a violation of, conflict
with or result in a default under, (i) any contract, understanding or
arrangement to which Nortel Networks is a party or by which it is bound or
require the consent of any other Person or any party pursuant thereto, (ii) any
judgment, decree or order applicable to Nortel Networks, or (iii) any law, rule
or regulation of any governmental body, in each case except for violations,
conflicts or defaults that would not have a material adverse effect on the
ability of Nortel Networks to perform its obligations under this Agreement; and
this Agreement constitutes a legal, valid and binding agreement on the part of
Nortel Networks, enforceable against Nortel Networks in accordance with its
terms, except as such enforceability may be limited by principles applicable to
creditors' rights generally or governing the availability of equitable relief.
The execution and delivery by Nortel Networks of this Agreement and the
consummation by Nortel Networks of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Nortel Networks
and no other corporate proceedings on the part of Nortel Networks are necessary
to authorize this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Nortel Networks.
9. Termination. This Agreement (including the proxy referred
to herein) shall terminate upon the earliest to occur of (a) the Effective Time,
(b) the termination of the Merger Agreement (unless Nortel Networks is or may be
entitled to receive a Termination Fee under the Merger Agreement following such
termination), and (c) 30 days following the termination of the Merger Agreement
in the event that Nortel Networks is or may be entitled to receive a Termination
Fee under the Merger Agreement following such termination; provided that, during
such 30 day period, the Stockholder Party shall be permitted to make sales of
Shares in broker transactions effected through the Nasdaq Stock Market. No such
termination shall relieve any party from liability for any breach of this
Agreement prior to termination.
10. Miscellaneous.
(a) This Agreement represents the entire understanding of the
parties hereto with reference to the subject matter hereof and supersedes any
and all other oral or written agreements and understandings among the parties
heretofore made.
(b) The Stockholder Party agrees that this Agreement and the
respective rights and obligations of such Stockholder Party hereunder shall
attach to all Common Stock, and all securities convertible into such shares,
that become Beneficially Owned by the Stockholder Party.
(c) Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
(d) This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties and their respective
successors, personal or legal representatives, executors, administrators, heirs,
distributees, devisees, legatees and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party (whether by operation of law or otherwise) without the
prior written consent of the other party; provided, that Nortel Networks may
assign any or all rights under this Agreement to Sub or any other Subsidiary of
Nortel Networks. Nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement.
(e) This Agreement may not be amended, changed, supplemented,
or otherwise modified or terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto; provided, that Nortel Networks
may waive compliance by the Stockholder Party with any representation, agreement
or condition otherwise required to be complied with by the Stockholder Party
under this Agreement or release the Stockholder Party from its obligations under
this Agreement, but any such waiver or release shall be effective only if in
writing executed by Nortel Networks.
(f) All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given (a) upon delivery if
personally delivered or (b) three Business Days after being mailed by registered
or certified mail (return receipt requested) or (c) one Business Day after being
delivered by overnight courier or by facsimile (with confirmation) to such party
at its address or facsimile set forth below or such other address or facsimile
as such party may specify by notice to the parties hereto.
(i) In the case of the Stockholder Party, to the address
set forth beside his, her or its name on Schedule I hereto;
and
(ii) If to Nortel Networks, to:
Nortel Networks Corporation
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Corporate Secretary
Fax: (905) 863-8386
Phone: (905) 863-0000
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor I. Lewkow, Esq.
Paul J. Shim, Esq.
Fax: (212) 225-3999
Phone: (212) 225-2000
(g) If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated.
(h) The Stockholder Party acknowledges and agrees that in the
event of any breach of this Agreement, Nortel Networks would be irreparably and
immediately harmed and could not be made whole by monetary damages. It is
accordingly agreed that (i) the Stockholder Party will waive, in any action for
specific performance, the defense of adequacy of a remedy at law, and (ii)
Nortel Networks shall be entitled, in addition to any other remedy to which it
may be entitled at law or in equity, to compel specific performance of this
Agreement and (iii) specific performance of this Agreement shall be the
exclusive remedy for any breach by the Stockholder Party of such party's
obligations under Section 2 hereof (it being understood that this clause (iii)
shall in no way limit Nortel Networks' rights and remedies against the Company
under the Merger Agreement).
(i) All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any party
shall not preclude the simultaneous or later exercise of any other such right,
power or remedy by such party. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(j) This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of New York (except that matters of
corporate law and fiduciary duties shall be governed by the laws of the State of
Delaware).
(k) The section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(l) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
(m) The spouse of the Stockholder Party, if any (the
"Spouse"), by executing the Spousal Consent attached hereto as Annex A, agrees
to be bound in all respects by the terms of this Agreement to the same extent as
the Stockholder Party. The Spouse further agrees that should he or she
predecease or become divorced from the Stockholder Party, any of the Common
Shares in which he or she may have an interest shall remain subject to all of
the restrictions and to all of the rights of the Company as contained in this
Agreement. Whenever reference is made in this agreement to "Shares", "Owned
Shares" or "Voting Shares", unless the context clearly requires otherwise, such
reference will include any community property or other interest of the Spouse,
if any, in such Shares, Owned Shares or Voting Shares.
11. Stockholder Capacity. The Stockholder Party, to the extent
such party is or becomes during the term hereof a director or officer of the
Company, does not make any agreement or understanding herein in such party's
capacity as such director or officer. The Stockholder Party signs solely in such
party's capacity as the record holder and/or beneficial owner of the Owned
Shares and Voting Shares, and nothing herein shall limit or affect any actions
taken or omitted to be taken by the Stockholder Party in such party's capacity
as an officer or director of the Company to the extent specifically permitted by
the Merger Agreement.
12. Further Assurances. From time to time, at Nortel Networks'
reasonable request and without further consideration, the Stockholder Party
shall execute and deliver such additional documents and take all such further
lawful action as may be necessary or desirable to consummate and make effective,
in the most expeditious manner practicable, the transactions contemplated by
this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
NORTEL NETWORKS CORPORATION
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
MATRIX PARTNERS
----------------------------------
Name: Andrew W. Verhalen
Title: General Partner of Matrix IV
Management Co., L.P., the General
Partner of Matrix Partners IV, L.P.
----------------------------------
Name: Andrew W. Verhalen
Title: General Partner of Matrix IV
Management Co., L.P., the General
Partner of Matrix IV Entrepreneurs
Fund, L.P.
<PAGE>
Schedule I
STOCKHOLDER PARTY
NAME SHARES VESTED AND ADDRESS
UNVESTED
OPTIONS
Matrix Partners (1) 1,802,394 N/A Matrix Partners,
2500 Sand Hill Road,
Suite113,
Menlo Park, CA 94025
(1) Includes 1,704,775 shares held by Matrix Partners IV L.P. and 97,619 shares
held by Matrix IV Entrepreneurs Fund L.P.
<PAGE>
Annex A
SPOUSAL CONSENT
The undersigned is fully aware of, understands, and fully consents to
the provisions of this Agreement and its binding effect upon any community
property or other interest that he or she may now or hereafter own in the Common
Shares subject to this Agreement, and agrees that the termination of his or her
marital relationship with the Stockholder Party for any reason, including his or
her death, will not remove any Common Shares otherwise subject to this
Agreement, from the coverage of this Agreement and that his or her awareness,
understanding, consent, and agreement are evidenced by his or her signature to
this Agreement.
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