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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. ________)*
NetSpeak Corporation
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(Name of Issuer)
Common Stock, $.01 par value
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(Title of Class of Securities)
64115D109
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(CUSIP Number)
Bruce E. Schaeffer
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Gray Cary Ware & Freidenrich LLP
400 Hamilton Avenue
Palo Alto, CA 94301-3699
(650) 328-6561
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(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 3, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SEC 1746 (12-91)
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 2 OF 44 PAGES
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SCHEDULE 13D
CUSIP No. 64115D109 PAGE 2 OF 44 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIED ONLY)
Bay Networks, Inc. I.R.S. Employer Identification Number: 04-2916246
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (See Instructions)
(a) [ ]
(b) [ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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7 SOLE VOTING POWER
1,334,171
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY None
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,334,171
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
None
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,334,171
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.2%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
Item 1. Security and Issuer.
This Schedule 13D relates to the common stock, $.01 par value
("Common Stock") of NetSpeak Corporation, a Florida corporation (the "Issuer").
The principal executive offices of the Issuer are located at 902 Clint Moore
Road, Boca Raton, Florida 33482.
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 2 OF 44 PAGES
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Item 2. Identity and Background.
This Statement is being filed on behalf of Bay Networks, Inc., a
Delaware corporation ("Bay Networks"), having its principal office located at
4401 Great America Parkway, Santa Clara, CA 95052-8185.
Bay Networks, together with its worldwide subsidiaries, develops,
manufactures, markets, sells and supports a comprehensive line of data
networking products and services. Bay Networks provides products that meet the
connectivity requirements of corporate enterprises, network service providers
and telecommunications carriers. Bay Networks offers switches, routers, shared
media hubs, remote and Internet access solutions, Internet Protocol (IP)
services and network management applications, all marketed under the Bay
Networks' Adaptive Networking strategy. Bay Networks' products and technologies
enable customers to transition from today's complex multi-protocol networks to
the IP-optimized networks of tomorrow. These solutions link people to critical
information resources at the desktop, across corporate enterprise networks or
over the public Internet.
During the last five years, Bay Networks has not been (a) convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
or (b) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
The table set forth in Exhibit 1 is incorporated herein by reference and
lists the name, principal occupation or employment, the name, principal business
and address of any corporation or other organization in which such employment is
conducted and citizenship for the directors and executive officers of Bay
Networks. The business address for the directors and executive officers of Bay
Networks is c/o Bay Networks, Inc., 4401 Great America Parkway, Santa Clara, CA
95052-8185. To the knowledge of Bay Networks, none of such directors or
executive officers has, during the last five (5) years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such civil proceeding was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities laws
or finding any violations with respect to such laws.
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 3 OF 44 PAGES
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Item 3. Source and Amount of Funds or Other Consideration.
Bay Networks has purchased 1,334,171 shares of Common Stock of Issuer (the
"Shares") for $28.15 per share, or an aggregate price of $37,556,913.65, with
cash obtained from working capital pursuant to a Stock Purchase Agreement (the
"Purchase Agreement") by and between the Issuer and Bay Networks, dated as of
January 5, 1998.
Item 4. Purpose of Transaction.
Bay Networks entered into the Purchase Agreement with the Issuer for
investment purposes. Pursuant to the Purchase Agreement, if the Issuer issues
additional shares of Common Stock, Bay Networks will have the right, in certain
circumstances, to purchase additional shares of Common Stock so as to allow Bay
Networks to maintain its percentage ownership in Issuer (up to approximately
9.0% on a fully-diluted basis as described in Item 6). Bay Networks does not
have any other plan or proposal to acquire additional securities of the Issuer.
Item 5. Interest in Securities of the Issuer.
Bay Networks has purchased 1,334,171 shares of Common Stock of the Issuer
for $28.15 per share or an aggregate price of $37,556,913.65. As a result, Bay
Networks owns approximately 11.2% of the Issuer's issued and outstanding Common
Stock (approximately 9.0% of the Common Stock on a fully-diluted basis based on
the number of shares of Common Stock outstanding on January 5, 1998). Bay
Networks has sole voting power and sole dispositive power over the entire
1,334,171 shares purchased pursuant to the Purchase Agreement.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
Under the Purchase Agreement, Bay Networks has acquired shares of Common
Stock of the Issuer as described in Item 3. The Purchase Agreement provides Bay
Networks with a right to maintain its percentage ownership of the Issuer. Under
this right, prior to any sale or issuance by the Issuer of any shares of Common
Stock or any security exercisable for or convertible into such Common Stock
("Capital Stock"), Bay Networks shall be given written notice (the "Notice") of
any intention by the Issuer to sell and/or issue such Capital Stock. If the
Issuer consummates the sale and/or issuance, Bay Networks shall have the right
to purchase a portion of such Capital Stock on terms which, subject to certain
conditions, are at least as favorable to Bay Networks as the terms on which the
Issuer has sold such Capital Stock to other investors. The amount of Capital
Stock which Bay Networks is entitled to acquire shall be equal to the lesser of
nine percent (9.0%) of the Common Stock, on a fully diluted basis, or the same
percentage of total shares of Common Stock, on a fully diluted basis, as Bay
Networks held immediately prior to the sale and/or issuance as described in the
Notice.
Pursuant to the Purchase Agreement, Issuer has agreed to indemnify Bay
Networks for certain liabilities in connection with the transactions
contemplated by the Purchase Agreement.
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 4 OF 44 PAGES
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Item 7. Material to be filed as Exhibits.
EXHIBIT NO. DESCRIPTION
1. Responses to Sections (a), (c) and (f) of Item 2 with
respect to the executive officers and directors of Bay
Networks.
2. Stock Purchase Agreement by and between NetSpeak
Corporation, a Florida corporation, and Bay Networks, Inc.,
a Delaware corporation, dated as of January 5, 1998.
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 5 OF 44 PAGES
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After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: February 11, 1998
BAY NETWORKS, INC.
/s/ John J. Poggi, Jr.
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By: John J. Poggi, Jr.
Its: Vice President, General Counsel
and Secretary
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 6 OF 44 PAGES
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EXHIBIT 1
DIRECTORS AND EXECUTIVE OFFICERS OF BAY NETWORKS, INC.
<TABLE>
<CAPTION>
(A) (C) (F)
PRINCIPAL OCCUPATION OR
DIRECTORS EMPLOYMENT AND ADDRESS CITIZENSHIP
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<S> <C> <C>
David L. House Chairman of the Board, President and Chief United States
Executive Officer, Bay Networks, Inc.
Arthur Carr Director, Private Investor United States
Shelby H. Carter, Jr. Director, Adjunct Professor, Graduate School United States
of Business, University of Texas at Austin
Kathleen A. Cote Director, President and Chief Executive Officer, United States
Computervision Corporation
John S. Lewis Director, Managing Partner, Pacific Venture Group; United States
General Partner, Paragon Venture Partners
Benjamin F. Robelen Director, Private Investor United States
Ronald V. Schmidt Director, Founder of Bay Networks, Inc. United States
Paul J. Severino Director, Founder of Bay Networks, Inc. United States
</TABLE>
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 7 OF 44 PAGES
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<TABLE>
<CAPTION>
(A) (C) (F)
PRINCIPAL OCCUPATION OR
DIRECTORS EMPLOYMENT AND ADDRESS CITIZENSHIP
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<S> <C> <C>
David L. House Chairman of the Board, President and Chief United States
Executive Officer, Bay Networks, Inc.
Lloyd A. Carney Executive Vice President and General Manager, United States
Enterprise Business Group
Stephen G. Pearse Executive Vice President and General Manager, United States
Internet/Telecom Business Group
Ralph R. Russo Executive Vice President, Operations United States
David J. Rynne Executive Vice President and Chief Financial United States
Officer
David A. Shrigley Executive Vice President for Marketing, Sales and United States
Service
Michael K. Gallagher Senior Vice President, North America Sales United States
John J. Poggi, Jr. Vice President, General Counsel and Secretary United States
Jane A. Risser Vice President and Corporate Treasurer United States
Rob G. Seim Vice President and Corporate Controller United States
</TABLE>
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 1 OF 44 PAGES
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EXHIBIT 2
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STOCK PURCHASE AGREEMENT
by and between
NETSPEAK CORPORATION
a Florida corporation
and
BAY NETWORKS, INC.
a Delaware corporation.
dated as of January 5, 1998
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 1 OF 44 PAGES
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
January 5, 1998 by and between NetSpeak Corporation, a Florida corporation (the
"Company") and Bay Networks, Inc., a Delaware corporation ("Purchaser").
WHEREAS, Purchaser wishes to purchase, and the Company wishes to
sell, one million three hundred thirty four thousand one hundred seventy one
(1,334,171) shares (the "Shares") of the Company's common stock, par value $.01
per share ("Common Stock") at a price per Share equal to one hundred and twenty
percent (120%) of the average closing price of a Share of the Common Stock as
reported in the western edition of the Wall Street Journal for the twenty (20)
trading days ending December 18, 1997;
NOW, THEREFORE, in consideration of the mutual promises, covenants
and conditions hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1 Sale and Purchase of Shares. On the terms and subject to
the conditions set forth in this Agreement, the Company will issue and sell to
Purchaser, and Purchaser will purchase one million three hundred thirty four
thousand one hundred seventy one (1,334,171) Shares of Common Stock at a price
of Twenty Eight Dollars and Fifteen Cents ($28.15) per Share or an aggregate
price of Thirty Seven Million Five Hundred Fifty Six Thousand Nine Hundred
Thirteen Dollars and Sixty Five Cents ($37,556,913.65).
ARTICLE II
CLOSING
Section 2 Closing Date; Delivery.
2.1 Purchase of the Shares.
(a) Time and Place of Closing. The closing of the purchase
and sale of the Shares (the "Closing") shall be held at the offices of Gray Cary
Ware & Freidenrich, 400 Hamilton Avenue, Palo Alto, California 94301-1825 on or
before February 15, 1998, or at such other time and place as the Company and
Purchaser shall agree upon in writing (the "Closing Date").
(b) Delivery. At the Closing, (i) Purchaser shall deliver
the sum of Thirty Seven Million Five Hundred Fifty Six Thousand Nine Hundred
Thirteen Dollars and Sixty Five Cents ($37,556,913.65), less the amount of
expenses payable to Purchaser by the Company pursuant to Section 8.9 and (ii)
the Company shall deliver to Purchaser one million three hundred thirty four
thousand one hundred seventy one (1,334,171) Shares duly registered in the
Purchaser's name.
1
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 2 OF 44 PAGES
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Section 3 Representations and Warranties of the Company. Except as disclosed in
the Company SEC Filings (as defined in Section 3.5) or as set forth in the
disclosure schedule delivered by the Company to Purchaser on or before the date
of this Agreement (which disclosure schedule shall be organized into numbered
Sections corresponding with the Section numbers of this Agreement) (the "Company
Disclosure Schedule"), the Company represents and warrants to Purchaser as
follows:
3.1. Organization, Standing and Power; Qualification. The Company
and each Subsidiary (as defined in Section 3.2 below) thereof are corporations
duly organized, validly existing and in good standing under the laws of the
jurisdiction of their incorporation, have all requisite corporate power to own,
lease and operate their property and to carry on their businesses as now being
conducted and as proposed to be conducted, and are duly qualified to do business
and are in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified and in good standing would have a material
adverse effect on the business, assets (including intangible assets),
properties, liabilities (contingent or otherwise), financial condition,
operations, or results of operation of the Company or its Subsidiaries, taken as
a whole (a "Material Adverse Effect"). Except for the shares held by the Company
listed in Section 3.2 of the Company Disclosure Schedule, neither the Company
nor any of its Subsidiaries directly or indirectly owns any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity. The Company has delivered true and correct
copies of the Certificate of Incorporation, as amended (the "Certificate of
Incorporation") and Bylaws, as amended (the "Bylaws"), of the Company to
Purchaser. The Company is not in violation of any of the provisions of the
Certificate of Incorporation or Bylaws.
3.2. Subsidiaries.
(a) For purposes of this Agreement, "Subsidiary" means, with
respect to any party, any corporation, limited liability company, partnership,
joint venture, or other business association or entity, at least a majority of
the voting securities or economic interests of which is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries.
(b) Section 3.2 of the Company Disclosure Schedule sets
forth a list of all Subsidiaries of the Company, including the name of such
Subsidiary and the jurisdiction in which such Subsidiary is organized. Except as
set forth in Section 3.2 of the Company Disclosure Schedule, all of the issued
and outstanding shares of capital stock of each Subsidiary are owned by the
Company and are validly issued, fully paid, and nonassessable, and there are no
outstanding subscriptions, options, call contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants with respect to any such
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 3 OF 44 PAGES
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Subsidiary's capital stock, including any right obligating any such Subsidiary
to issue, deliver, or sell additional shares of its capital stock.
3.3. Capitalization. The authorized capital stock of the Company
consists of twenty five million (25,000,000) shares of Common Stock, $.01 par
value, and one million (1,000,000) shares of preferred stock, $.01 par value
("Preferred Stock"). As of the date of this Agreement, there were ten million
five hundred fifty four thousand seven hundred twenty one (10,554,721) shares of
Common Stock issued and outstanding and there were no issued and outstanding
shares of Preferred Stock. All such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable, have been
issued in compliance with all applicable state and federal laws concerning the
issuance of securities, and are not subject to any preemptive or similar rights.
The Company has reserved two million seven hundred thousand (2,700,000) shares
of Common Stock for issuance under the Company's 1995 Stock Option Plan (the
"Stock Plan"). Options issued under the Stock Plan to purchase two million four
hundred eighty seven thousand five hundred and fifty (2,487,550) shares of
Common Stock were outstanding as of the date of this Agreement. In addition, the
Company has reserved four hundred fourty seven thousand six hundred and seventy
nine (447,679) shares of Common Stock for issuance upon exercise of outstanding
warrants. Except for such shares of Common Stock reserved for issuance under
such warrants and under the Stock Plan, there are no outstanding options,
warrants, rights (including conversion and preemptive rights or rights of first
refusal), or other agreements to issue or purchase any shares of Common Stock or
Preferred Stock of the Company. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company and its Subsidiaries, any of the Company's
shareholders is a party or subject to any agreement or understanding between any
persons or entities which affects or relates to the voting or giving of written
consents (x) with respect to any securities or (y) by any director of the
Company or any of its Subsidiaries.
3.4. Authority; No Conflicts; Approvals.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement, to issue the Shares and to perform its
obligations under this Agreement. The execution and delivery of this Agreement,
the issuance of the Shares and the performance of the Company's obligations
under this Agreement have been duly authorized by the Board of Directors of the
Company, and no other corporate or shareholder action or proceedings on the part
of the Company, its shareholders or directors are necessary to authorize the
execution and delivery of this Agreement, the issuance of the Shares or the
performance of the Company's obligations hereunder. This Agreement has been duly
executed and delivered by the Company and constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to creditors'
rights generally, and general principles of equity and except as enforceability
of the indemnification provisions herein may be limited by concerns of public
policy.
(b) The execution and delivery by the Company of this
Agreement does not, and the issuance of the Shares and the performance by the
Company of its obligations
3
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 4 OF 44 PAGES
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hereunder will not, (i) conflict with, or result in any violation of or breach
of any provision of the Certificate of Incorporation or Bylaws of the Company,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default under, or give rise to a right of
termination, cancellation or acceleration of any material obligation or loss of
any benefit under any license, assignment, note, mortgage, indenture, lease,
contract or other agreement or obligation to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of its properties or assets may be bound, (iii) conflict with or violate any
judgment, order, decree, statute, law, ordinance, rule or regulation or any
material permit, concession, franchise or license applicable to the Company or
any of its Subsidiaries or any of their respective properties or assets, except
in the case of (ii) for such violations, breaches, defaults, rights of
termination, cancellation or acceleration, or losses of benefits which would not
be reasonably likely to have a Material Adverse Effect.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement, the issuance of the Shares or the
performance the Company's obligations hereunder, except that the filing of one
or more notification and report forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act") may be required with
respect to the acquisition by Purchaser of the Shares and of securities of the
Company pursuant to Section 5.1 of this Agreement, and except for (i) the filing
by the Company of one or more registration statements with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities Act of 1933,
as amended (the "Securities Act"), pursuant to Article VI, (ii) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the laws of any foreign country, and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a Material Adverse Effect.
(d) The Shares when issued in compliance with the provisions
of this Agreement will be validly issued, fully paid, nonassessable, and free of
any liens or encumbrances other than those created by the Purchaser or of which
the Purchaser has notice, except that the Shares shall be subject to
restrictions on transfer under state and/or federal securities laws. Assuming
the accuracy of the representations set forth in Article 4, the Shares will be
issued in compliance with all applicable state and federal securities laws. The
issuance of the Shares is not subject to any preemptive rights or rights of
first refusal.
3.5. SEC Filings. The Company has timely filed all reports,
registration statements, proxy statements and other materials, together with any
amendments thereto, required to be filed by the Company with the Securities and
Exchange Commission ("SEC") under the Securities Exchange of 1934, as amended
(the "Exchange Act"), since May 28, 1997 (the "SEC Reports"). The Company has
furnished to Purchaser copies of its Registration Statement on Form S-1 (No.
333-22123), as amended, filed under the Securities Act (the "IPO Registration
Statement") and all SEC Reports (collectively, the "SEC Filings"). As of the
date filed, the SEC Filings did not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances in which they were made,
4
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CUSIP NO. 64115D109 SCHEDULE 13D PAGE 5 OF 44 PAGES
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not misleading. The financial statements contained in the SEC Filings (the
"Company Financial Statements") fairly present the financial position of the
Company and its Subsidiaries as at the dates thereof and for the periods covered
thereby and have been prepared in accordance with generally accepted accounting
principles ("GAAP") and with the published rules and regulations of the SEC with
respect thereto.
3.6. Absence of Undisclosed Liabilities. Neither the Company nor
any of its Subsidiaries has any material liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with GAAP), and whether due or to become due, other than (i)
liabilities reflected or provided for on the balance sheet as of September 30,
1997 (the "Company Balance Sheet") contained in the Company Financial
Statements, (ii) liabilities specifically described in this Agreement or Section
3.6 of the Company Disclosure Schedule, and (iii) normal or recurring
liabilities incurred since September 30, 1997 in the ordinary course of business
consistent with past practices that could not reasonably be expected to result
in a Material Adverse Effect.
3.7. Absence of Certain Changes or Events. Except as set forth in
Section 3 of the Company Disclosure Schedule, since September 30, 1997, the
Company and its Subsidiaries have conducted their businesses in the ordinary
course and in a manner consistent with past practices, and have not:
(a) suffered any event or occurrence that has had or could
reasonably be expected to have a Material Adverse Effect;
(b) declared, set aside or paid any dividend or made any
other distribution on or in respect of the shares of its capital stock or
declared any direct or indirect redemption, retirement, purchase or other
acquisition of such shares, except for purchases of stock from terminated
non-officer employees in the ordinary course of business and in a manner
consistent with past practices;
(c) issued any shares of their capital stock or any
warrants, rights, or options for, or entered into any commitment relating to
such capital stock, except for (i) grants of stock options under the Stock Plan
and (ii) issuances of capital stock made in the ordinary course of business in
arm's length transactions for value and in a manner consistent with past
practices (including issuances made upon exercises of options granted under the
Stock Plan);
(d) made any material change in the accounting methods or
practices they follow, whether for general financial or tax purposes, or any
change in depreciation or amortization policies or rates;
(e) sold, leased, abandoned or otherwise disposed of any
real property or machinery, equipment or other operating property except in the
ordinary course of business and in a manner consistent with past practices and
in an amount that is not material to the Company and its Subsidiaries taken as a
whole;
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(f) sold, assigned, transferred, licensed, pledged, or
otherwise disposed of or encumbered any patent, trademark, trade name, brand
name, copyright (or pending application for any patent, trademark or copyright),
invention, work of authorship, process, know-how, formula or trade secret or
interest thereunder or other material intangible asset, except for non-exclusive
licenses which were granted in the ordinary course of business and in a manner
consistent with past practices and in an amount that is not material to the
Company and its Subsidiaries taken as a whole;
(g) entered into any material commitment or transaction
(including without limitation any borrowing or capital expenditure) other than
the transactions contemplated by this Agreement; or
(h) paid, loaned or advanced any amount to, or sold,
transferred or leased any properties or assets or rights under license to, or
entered into any agreement or arrangement with any of its officers, directors or
shareholders or any affiliate of any of the foregoing, other than employee
compensation and benefits and reimbursement of employment related business
expenses incurred in the ordinary course of business.
3.8. Taxes. As used in this Agreement, the terms "Tax" and,
collectively, "Taxes" mean any and all federal, state and local taxes of any
country, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(a) The Company and its Subsidiaries have prepared and
timely filed all returns, estimates, information statements and reports required
to be filed with any taxing authority ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its Subsidiaries or their
operations with respect Taxes for any period ending on or before the Closing
Date, and such Returns have been completed in all material respects in
accordance with applicable law or an adequate reserve has been made for such
Taxes on the Company Balance Sheet.
(b) The Company and its Subsidiaries have (i) paid all Taxes
shown to be payable on such Returns covered by Section 3.8(a), and (ii) withheld
with respect to its employees all Taxes required to be withheld.
(c) There is no Tax deficiency outstanding or assessed
against the Company or any of its Subsidiaries that is not reflected as a
liability on the Company Balance Sheet.
(d) Neither the Company nor any of its Subsidiaries has any
material liabilities for unpaid Taxes that have not been accrued for or reserved
on the Company Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
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(e) Neither the Company nor any of its Subsidiaries is a
party to any tax-sharing agreement or similar arrangement with any other party,
or any contractual obligation to pay any Tax obligations of, or with respect to
any transaction relating to, any other person or to indemnify any other person
with respect to any Tax.
(f) Neither the Internal Revenue Service ("IRS") nor any
foreign, state, local or other taxing authority has, since the Company's
inception, examined or is in the process of examining any Returns of the Company
or any of its Subsidiaries. To the knowledge of the Company and its
Subsidiaries, neither the IRS nor any foreign, federal, state, local or other
taxing authority is now asserting or threatening to assert any deficiency or
claim for additional Taxes (or interest thereon or penalties in connection
therewith).
3.9. Assets and Real Property. The Company owns or leases all
tangible assets materially necessary for the conduct of its business as
currently conducted. Such tangible assets are free from material defects and in
good operating condition and repair (subject to normal wear and tear). No asset
owned by the Company (tangible or intangible) is subject to any lien or other
security interest, other than liens for Taxes not yet due and payable. Each
tangible asset owned or leased by the Company is in the possession or under the
control of the Company or a current employee of the Company. All material real
property leases of the Company and its Subsidiaries ("Material Leases") are in
good standing, valid and effective in accordance with their respective terms,
and neither the Company nor any of its Subsidiaries is in default under any of
such leases, except where the lack of such good standing, validity and
effectiveness or the existence of such default would not be reasonably likely to
have a Material Adverse Effect. To the knowledge of the Company and its
Subsidiaries, no other party to any of the Material Leases is in default under
or in breach or violation of, nor is there any valid basis for any claim of
default, breach or violation against any other party under any of the Material
Leases or any other agreement or instrument to which any of the Material Leases
is subject or subordinate except for such breaches, violations and defaults as
would not be reasonably likely, either individually or in the aggregate, to have
a Material Adverse Effect.
3.10. Intellectual Property.
(a) The Company and its Subsidiaries own or have the right
to use, free and clear of all liens, claims and restrictions, all patents,
patent applications, trademarks, trade names, services marks, mask works, and
copyrights; all applications for and registrations of the foregoing; all
licenses, trade secrets and confidential business information, whether
patentable or unpatentable and including but not limited to (to the extent
secret, confidential or proprietary), know-how, manufacturing and production
processes and techniques, research and development information, copyrightable
works, financial, marketing and business data (including, without limitation,
all market research data), pricing and cost information, business and marketing
plans, and customer and supplier lists and information, inventions, designs,
processes, formulae, methods, schematics, works of authorship, computer software
(including object code and source code), documentation, and technical data and
information and rights with respect to the foregoing; and all designs, drawings,
specifications, documentation, flow charts and diagrams incorporating, embodying
or reflecting any product of the Company or any of its Subsidiaries at
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any stage of its development (a "Company Product"), which are materially
necessary for the conduct of the business of the Company and its Subsidiaries
(all of which are referred to as the "Company Intellectual Property Rights"),
without infringing to the best knowledge of the Company and its Subsidiaries
upon the right or claimed right of any person, corporation or other entity under
or with respect to any of the foregoing. To the knowledge of the Company and its
Subsidiaries, the Company's and its Subsidiaries' products and processes do not
infringe any patent not licensed to the Company and its Subsidiaries held by any
person, corporation or other entity. The Company and its Subsidiaries are not
aware of any facts or information likely to have material adverse affect on the
validity or enforceability of patents licensed by the Company and its
Subsidiaries. Except as set forth in Section 3.10(b) of the Company Disclosure
Schedule, the Company and its Subsidiaries have not received any communication
alleging that the Company or any of its Subsidiaries have violated any of the
patents, trademarks, services marks, trade names, copyrights, works of
authorship, trade secrets or other proprietary rights and processes of any other
person or entity. To the knowledge of the Company and its Subsidiaries, there
are, and have been, no infringements by any third party of any of the Company
Intellectual Property Rights. Except as set forth in Section 3.10(b) of the
Company Disclosure Schedule, the Company and its Subsidiaries are not obligated
or under any liability whatsoever to make any material payments by way of
royalties, fees or otherwise to any owner or licensee of, or other claimant to,
any patent, trademark, service mark, trade name, work of authorship, copyright
or other intangible asset, with respect to the use thereof or in connection with
the conduct of its business or otherwise.
(b) Section 3.10(b) of the Company Disclosure Schedule
contains an accurate and complete list of (i) all material patents and patent
applications, all material trademarks, trade names, service marks and registered
copyrights, included in the Company Intellectual Property Rights, including the
jurisdictions in which each such Company Intellectual Property Right has been
issued or registered or in which any such application for such issuance,
approval or registration has been filed, and (ii) all material licenses,
sublicenses, assignments, distribution agreements and other agreements to which
the Company or any of its Subsidiaries is a party and pursuant to which any
person is authorized to use any material Company Intellectual Property Rights or
has the right to manufacture, reproduce, market or exploit any material Company
Product or any adaptation, derivative or reformulation based on any Company
Product or any portion thereof. Except as set forth in Section 3.10(c) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is
a party to any agreement or arrangement that requires or contemplates the
payment to or receipt from any third party of royalties or similar payments in
connection with the development, manufacture or commercial exploitation of any
material Company Product or Company Intellectual Property Rights.
(c) Neither the Company nor any of its Subsidiaries is (or
as a result of the execution and delivery of this Agreement or the performance
of any obligation hereunder will be) in breach of any material license,
sublicense, assignment or other material agreement relating to the Company
Intellectual Property Rights or any other material license, sublicense,
assignment, asset purchase agreement and other material agreement to which the
Company or any of its Subsidiaries is a party and pursuant to which the Company
or any of its Subsidiaries acquired or is authorized to use any third party
technology, trade secret, know-how, process, application,
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patent, trademark or copyright ("Licensed Intellectual Property"), which is
exploited by, incorporated in or forms a part of any Company Product and which
breach would reasonably have a Material Adverse Effect.
(d) Neither the Company nor any of its Subsidiaries (i) has
received notice that it has been sued in any suit, action or proceeding which
involves a claim of infringement of any patent, trademark, service mark,
copyright, trade secret, or other proprietary right of any third party; (ii) has
knowledge (without having conducted any special investigation) that the
manufacturing, marketing, licensing or sale of any Company Product materially
infringes any material patent, trademark, service mark, copyright, trade secret,
or other proprietary right of any third party; or (iii) has knowledge of any
claim challenging or questioning the validity or effectiveness of any material
license or agreement relating to any Company Intellectual Property Rights or
Licensed Intellectual Property.
(e) The Company and its Subsidiaries have at all times used
commercially reasonable efforts to treat the Company Intellectual Property
Rights as containing trade secrets and have not disclosed or otherwise dealt
with such items in such a manner as to cause the loss of such trade secrets by
their release into the public domain.
(f) Each person currently or formerly employed by the
Company or its Subsidiaries (including consultants, if any), that has or had
access to confidential information of the Company or any of its Subsidiaries,
has executed and delivered to the Company a confidentiality and non-disclosure
agreement ("Confidentiality Agreement") substantially in the form previously
provided to Purchaser. To the knowledge of the Company and its Subsidiaries
without having conducted any special investigation, neither the execution nor
the delivery of any Confidentiality Agreement, nor the carrying on of the
business of the Company and its Subsidiaries by each such employee and
consultant, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any of such persons is obligated.
3.11. Contracts. Neither the Company nor any of its Subsidiaries
is in default under or in breach or violation of, nor is there any valid basis
for any claim of default by the Company or any of its Subsidiaries under, or
breach or violation by the Company or any of its Subsidiaries of, any contract,
license, commitment or restriction to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective properties or assets is bound or affected, except for
such breaches, violations and claims of default as would not be reasonably
likely, either individually or in the aggregate, to have a Material Adverse
Effect. To the knowledge of the Company and its Subsidiaries, no other party is
in default under or in breach or violation of, nor, to the knowledge of the
Company and its Subsidiaries, is there any valid basis for any claim of default
against any other party under, or any breach or violation by any other party of,
any contract, license, commitment, or restriction to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective properties or assets is bound or affected, except for
such breaches, violations and claims of default as would not be reasonably
likely, either individually or in the aggregate, to have a Material Adverse
Effect.
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3.12. Environmental Matters. To the Company's knowledge, as of
the date hereof, no underground storage tanks are present under any property
that either the Company or any of its Subsidiaries has at any time owned,
operated, occupied or leased and no amount of any substance that has been
designated by applicable law or regulation to be radioactive, toxic, hazardous
or otherwise a danger to health or the environment ("Hazardous Material") is
present as a result of the actions of the Company or any of its Subsidiaries,
or, to the knowledge of the Company and its Subsidiaries, any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water, that the Company or any of its
Subsidiaries has at any time owned, operated, occupied or leased, where the
presence of such underground storage tanks or Hazardous Material is reasonably
likely to have a Material Adverse Effect. At no time has the Company or any of
its Subsidiaries transported, stored, used, manufactured, disposed of, released
or exposed its employees or others to Hazardous Materials (collectively,
"Hazardous Materials Activities") in violation of any law, rule, regulation,
treaty or statute promulgated by any governmental entity to prohibit, regulate
or control Hazardous Materials or any Hazardous Material Activity, which
violation has had or is reasonably likely to have a Material Adverse Effect. The
Company and its Subsidiaries hold all environmental approvals, permits,
licenses, and clearances necessary for the conduct of business ("Environmental
Permits"), the absence of which would be reasonably likely to have a Material
Adverse Effect. No action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending or, to the knowledge of the
Company and its Subsidiaries, threatened concerning any Environmental Permit or
any Hazardous Materials Activity of the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries is aware of any fact or
circumstance which is reasonably likely to involve the Company or any of its
Subsidiaries in any environmental litigation or impose upon the Company or any
of its Subsidiaries any environmental liability which would be reasonably likely
to have a Material Adverse Effect.
3.13. Employee Benefit Plans.
(a) No event has occurred, and there exists no condition or
set of circumstances, with respect to the employee benefit plans of the Company
("Company Employee Plans"), which could reasonably be expected to subject the
Company or any of its Subsidiaries to any liability, other than liabilities
which would not be reasonably likely, either individually or in the aggregate,
to have a Material Adverse Effect.
(b) With respect to the Company Employee Plans, individually
and in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves on the
Company's Financial Statements, which would be reasonably likely, either
individually or in the aggregate, to have a Material Adverse Effect.
(c) All the Company Employee Plans comply with and are and
have been operated in accordance with each applicable provision of the Employee
Retirement Income Security Act of 1974 ("ERISA"), the Internal Revenue Code of
1986, as amended (the "Code"), other federal statutes, state law (including,
without limitation, state insurance law) and the
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regulations and rules promulgated pursuant thereto or in connection therewith.
Each Company Employee Plan which is a group health plan (within the meaning of
Section 5000(b)(1) of the Code) complies with and has been maintained and
operated in accordance with each of the requirements of Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA.
(d) Neither the Company nor any of its Subsidiaries nor any
current or former employee of the Company or any of its Subsidiaries or any
trade or business (whether or not incorporated) which is a member or which is
under common control with the Company within the meaning of Section 414 of the
Code ("ERISA Affiliate"), nor any officer, director, agent or employee of the
Company has made any oral or written statement regarding any Company Employee
Plan which could result in any material additional liability to Purchaser, the
Company or any ERISA Affiliate, whether direct or indirect, in excess of any
current or potential liability of the Company or any ERISA Affiliate.
3.14. Employees. The Company has heretofore furnished to
Purchaser a true, complete and correct copy of the Company's employee manual and
each employment, consulting, severance and other similar agreement heretofore
entered into between the Company or any of its Subsidiaries and each person
currently or formerly employed, or engaged as a consultant, by the Company or
any of its Subsidiaries. To the Company's knowledge, no such employee or
consultant is in material violation of any material term of any such employment
or consulting agreement, Confidentiality Agreement, or any other contract or
agreement relating to the relationship of such employee or consultant with the
Company or any of its Subsidiaries or any other party because of the nature of
the business conducted or to be conducted by the Company or any of its
Subsidiaries. Except as set forth in Section 3.14 of the Company Disclosure
Schedule, all employees and consultants are terminable at will.
3.15. Interested Party Transactions. Since the date of the IPO
Registration Statement, except as contemplated hereby, no event has occurred
that would be required to be reported by the Company as a Certain Relationship
or Related Transaction, pursuant to Item 404 of Regulation S-K promulgated by
the SEC.
3.16. Brokers or Finders. Except as set forth in Section 3.16 of
the Disclosure Schedule, no agent, broker, investment banker, financial advisor
or other firm or person is or will be entitled to any broker's or finder's fee
or any other commission or similar fee in connection with any of the
transactions contemplated by this Agreement, and the Company and its
Subsidiaries agree to indemnify and hold Purchaser harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by the Company or any of its Subsidiaries.
3.17. Compliance with Laws. The Company and its Subsidiaries have
complied in all material respects with all applicable federal, state, local and
foreign statutes, laws and regulations, and are not in violation of, and have
not received any notices of violation with respect to, any such statute, law or
regulation, with respect to the conduct, ownership or operation of their
businesses, including, without limitation, the Foreign Corrupt Practices Act and
all United
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States statutes, laws and regulations as from time to time in effect
that govern the license and delivery of technology and products abroad by
persons subject to the jurisdiction of the United States, which violations,
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect. The Company and its Subsidiaries have obtained each material
governmental consent, license, permit, grant or other authorization of a
governmental entity that is materially necessary for the operation of its
business as currently conducted (collectively, the "Company Authorizations"),
and all such Company Authorizations are in full force and effect, except for
such Company Authorizations which, if not obtained by the Company or any of its
Subsidiaries, would not be reasonably likely, either individually or in the
aggregate, to have a Material Adverse Effect.
3.18. Litigation. Except as set forth in Section 3.18 of the
Company Disclosure Schedule, there is no action, suit, proceeding, claim,
arbitration or investigation, pending before any agency, court or tribunal, or
to the knowledge of the Company and its Subsidiaries, threatened, against the
Company, its Subsidiaries or any of their respective properties or officers or
directors (in their capacities as such), and, to the knowledge of the Company
and its Subsidiaries, there is no valid basis for any action, suit, proceeding,
claim, arbitration or investigation, against the Company which if determined
adversely to the Company or any of its Subsidiaries, could reasonably be
expected to have a Material Adverse Effect. There is no judgment, decree or
order against the Company or any of its Subsidiaries or, to the knowledge of the
Company and its Subsidiaries, any of their respective directors or officers (in
their capacities as such) that could prevent, enjoin, or materially alter or
delay any of the transactions contemplated by this Agreement or that could
reasonably be expected to have a Material Adverse Effect.
3.19. Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon the Company or any of its
Subsidiaries which limits or restricts the Company from competing
(geographically, by field of endeavor, or otherwise) or which has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any material current business practice of the Company or any of its
Subsidiaries, or the conduct of business by the Company or any of its
Subsidiaries as currently conducted or as proposed to be conducted in public
announcements by the Company.
3.20. No Misrepresentation. No representation or warranty by the
Company in this Agreement, and no statement, certificate or schedule furnished
or to be furnished by or on behalf of the Company pursuant to this Agreement,
when taken together, contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary in order to
make such statements, in light of the circumstances under which they were made,
not misleading.
3.21. Florida Control Share Act and Florida Affiliated
Transactions Act. The Florida Control Share Act and the Florida Affiliated
Transactions Act (the "Florida Acts") are not applicable to this Agreement or
the OEM Development and Distribution Agreement executed concurrently with this
Agreement (the "OEM Agreement") or to any transactions contemplated
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by this Agreement and the OEM Agreement nor will the Florida Acts be applicable
to any acts to be performed under this Agreement or the OEM Agreement after the
issuance of the Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PURCHASER
Section 4 Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company as follows:
4.1 Organization Purchaser is duly organized and validly
existing under the laws of the State of Delaware. Purchaser has the requisite
power and authority to enter into this Agreement and to carry out its
obligations hereunder.
4.2. Authority.
(a) The execution and delivery of this Agreement, the
purchase of the Shares and the performance of Purchaser's obligations hereunder
have been authorized by all necessary company action on behalf of Purchaser and
constitutes the legal, valid and binding obligation of Purchaser, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to creditors' rights generally, and general
principles of equity.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required by
or with respect to Purchaser in connection with the execution and delivery of
this Agreement, the purchase of the Shares or the performance of Purchaser's
obligations hereunder except that the filing of one (1) or more notification and
report forms under the HSR Act may be required with respect to the acquisition
by Purchaser of the Shares and of securities under Section 5.1 and except for
(i) the filing by the Company of one or more registration statements with the
SEC in accordance with the Securities Act pursuant to Article VI, (ii) such
other consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the laws of any foreign country, and (iii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a material adverse effect on the
ability of Purchaser to execute and deliver this Agreement, to purchase the
Shares and to perform its obligations thereunder.
4.3. Acquisition for Investment.
(a) Purchaser is acquiring the Shares solely for Purchaser's
own account for investment and not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the Securities Act.
Purchaser further represents that Purchaser does not have any present intention
of selling, offering to sell or otherwise disposing of or distributing the
Shares or any portion thereof. Purchaser acknowledges and understands that the
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entire legal and beneficial interest of the Shares Purchaser is acquiring is
being purchased for, and will be held for the account of, Purchaser only and
neither in whole nor in part for any other person. Purchaser understands that
the Shares have not been registered under the Securities Act or other securities
laws in reliance on specific exemptions therefrom, which exemptions depend upon,
among other things, the bona fide nature of Purchaser's investment intent as
expressed herein.
(b) Purchaser is an "accredited" investor as defined in
Regulation D under the Securities Act.
(c) Purchaser further acknowledges and understands that the
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available.
(d) Purchaser understands that Rule 144 promulgated under
the Securities Act permits 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 securities, the
availability of certain current public information about the Company, more than
one year having elapsed between the resale and the date the security to be sold
was last held by the Company or an affiliate of the Company, the sale being made
through a "broker's transaction" or in transactions directly with a "market
maker," and the number of shares being sold during any three-month period not
exceeding specified limitations. Purchaser is further aware that Rule 144(k)
permits persons who have not been affiliates of the Company for at least three
months and whose shares have been beneficially owned by a person other than the
Company or its affiliates for at least two years after full payment for such
shares to sell such shares without regard to the current public information,
manner of sale and volume limitations described above.
4.4. Brokers or Finders. Except as set forth in Section 3.16 of
the Disclosure Schedule, no agent, broker, investment banker, financial adviser
or other firm or person is or will be entitled to any broker's or finder's fee,
or any other commission or similar fee, in connection with any of the
transactions contemplated by this Agreement, and Purchaser agrees to indemnify
and hold the Company and its Subsidiaries harmless from and against any and all
claims, liabilities or obligations with respect to any such fees or commissions
asserted by any person on the basis of any act or statement determined to have
been made to such person by Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5 Additional Agreements.
5.1 Right to Maintain Participation.
(a) Prior to any sale and/or issuance by the Company of any
shares of Common Stock of the Company or any security exercisable for or
convertible into such Common Stock (the "Common Equivalents") (other than a sale
or issuance excluded from the provisions of this Section 5.1(a) by the
provisions of Section 5.1(c)), the Company shall give Purchaser written
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notice (the "Notice of Issuance") of the Company's intention to sell and/or
issue such Common Stock or Common Equivalents, setting forth the proposed price,
quantity and other material terms and conditions under which the Company
proposes to make such sale and/or issuance. If the Company consummates the sale
or issuance of Common Stock or Common Equivalents described in the Notice of
Issuance, Purchaser shall have the right to purchase or otherwise acquire a
number of shares of Common Stock or Common Equivalents on terms which, subject
to this Section 5.1, are at least as favorable to Purchaser as the terms on
which the Company sold or otherwise issued such Common Stock or Common
Equivalents to the persons who purchased or otherwise acquired the Common Stock
or Common Equivalents referred to in the Notice of Issuance, such that,
immediately after the purchase or other acquisition by the Purchaser,
Purchaser's ownership of the total number of outstanding shares of Common Stock
(assuming the exercise for or conversion of all Common Equivalents into Common
Stock) equals the lesser of nine percent (9%) of the Common Stock (assuming the
exercise for or the conversion of all Common Equivalents into Common Stock) or
the same percentage of the total shares of Common Stock (assuming the exercise
for or conversion of all Common Equivalents into Common Stock) as Purchaser held
immediately prior to the sale or issuance described in the Notice of Issuance.
Purchaser shall have thirty (30) days from the giving of the Notice of Issuance
(the "Election Date") to notify the Company in writing that it elects to
purchase or otherwise acquire some or all of its share of the Common Stock or
Common Equivalents which it is entitled to purchase or otherwise acquire under
this Section 5.1 (the date such notice is received by the Company is hereinafter
referred to as the "Notice Date").
(b) If Purchaser elects to purchase or otherwise acquire
Common Stock or Common Equivalents pursuant to this Section 5.1, Purchaser and
the Company shall use their reasonable best efforts to consummate the purchase
or acquisition and sale or issuance of such Common Stock or Common Equivalents
within thirty (30) days after the Election Date, subject to the expiration or
termination of any applicable HSR Act waiting period, and, subject to this
Section 5.1, the terms of such purchase or acquisition and sale or issuance
shall be at least as favorable to Purchaser as those set forth in the Notice of
Issuance. The closing of such transaction shall take place as promptly as
practicable after all regulatory approvals required for the consummation of such
purchase (including expiration or termination of any HSR Act waiting period)
have been obtained, at such time, on such date, and at such location as the
parties shall mutually agree. Payment for such Common Stock or Common
Equivalents shall be by check (or wire transfer of immediately available funds
to an account designated by the Company by written notice delivered to Purchaser
not less than two (2) business days prior to the scheduled closing of such
purchase) against delivery of Purchaser's Common Stock or Common Equivalents at
the executive offices of the Company at the time of the scheduled closing
therefor. The Company shall take all such action as may reasonably be required
by any regulatory authority in connection with the exercise by Purchaser of the
right to purchase Common Stock or Common Equivalents as set forth in this
Section 5.1.
(c) The right contained in this Section 5.1 shall not apply
to the following sales and/or issuances by the Company on or after the date
hereof of Common Stock or Common Equivalents:
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(i) Common Stock or Common Equivalents issued to
employees, officers, directors and consultants pursuant to any stock
option plan, stock inventive or purchase plan or agreement approved
by the Board of Directors of the Company or Common stock issued upon
exercise of Common Equivalents so issued;
(ii) Common Stock or Common Equivalents issued in
connection with or upon exercise or conversion of securities issued
in connection with a merger, consolidation, share exchange, or other
reorganization or business combination, involving the Company, in
which the Company is the acquiring corporation or shareholders of
the Company immediately prior to such merger, consolidation or other
reorganization or business combination own securities with a
majority of the voting power of the resulting entity;
(iii) Common Stock or Common Equivalents issued pursuant
to rights distributed to holders of Common Stock generally or Common
stock issued upon exercise of such Common Equivalents;
(iv) Common Stock or Common Equivalents issued in
connection with any stock split, stock dividend or recapitalization
of the Company; and
(v) Common Stock issued pursuant to the exercise of any
stock options or warrants or any other rights to acquire shares of
Common Stock (including, but not limited to, the warrants issued in
connection with the Company's initial public offering) outstanding
on the date hereof.
(d) The right contained in this Section 5.1 shall terminate
upon the earliest of (i) the closing of any merger, consolidation, share
exchange, or other reorganization or business combination of the Company with
any corporation in which the shareholders of the Company immediately prior to
such merger, consolidation, share exchange or other reorganization or business
combination do not own more than fifty percent (50%) of the voting capital stock
of the surviving or acquiring corporation or resulting entity immediately
following such merger, consolidation, share exchange or other reorganization or
business combination, or (ii) the sale of all or substantially all of the
Company's assets (a "Sale of the Company").
(e) The rights of the Purchaser provided by this Section 5.1
may not be assigned by the Purchaser.
5.2. Board Information and Observation Rights; General Information
Inspection and Rights.
(a) Effective on the day after the Closing Date and as long
as Purchaser beneficially owns not less than five percent (5%) of the Company's
outstanding Common Stock (including shares issuable upon exercise or conversion
of Common Equivalents), Purchaser shall be entitled to designate one individual
who shall receive notice of all meetings of the Board of Directors of the
Company and any executive committee of the Board of Directors of the Company and
any other committee or body performing the functions of an executive committee
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(the "Executive Committee") and who shall be entitled to attend and participate
in all such meetings as an observer on behalf of Purchaser (the "Observer"). The
Observer shall be entitled to, and the Company will provide to the Observer the
same information (including reports, financial statements, notices and other
information) at the same time (subject to the same general conflicts-of-interest
rules applicable to all members of the Board of Directors and Executive
Committee of the Company, reasonably and consistently applied) as shall be
provided to the Directors of the Company and the members of the Executive
Committee.
(b) The Company shall deliver to Purchaser, promptly after
transmission thereof, copies of all such financial statements, proxy statements,
notices and reports as the Company shall send to its public stockholders and
copies of all registration statements (without exhibits), other than
registration statements on Form S-8 or any similar successor form, and all
reports which it files with the SEC (or any governmental body or agency
succeeding to the functions of the SEC). Purchaser shall have the right to
discuss such financial statements, proxy statements, notices, reports,
registration statements and filings with such officers of the Company as
Purchaser may reasonably designate upon reasonable notice and at reasonable
times, and to share such information with Purchaser's professional advisers,
subject to the confidentiality provisions set forth in Section 5.3.
(c) The Company shall permit representatives of Purchaser to
visit and inspect, at Purchaser's expense, any of the properties of the Company,
to discuss the affairs, finances and accounts of the Company and its
Subsidiaries with the principal officers of the Company, all upon reasonable
notice and at such reasonable times and as often as Purchaser may reasonably
request.
(d) The rights of the Purchaser under this Section 5.2 shall
terminate upon a Sale of the Company.
(e) The rights of the Purchaser under this Section 5.2 may
not be assigned by the Purchaser.
5.3. Confidentiality. At the Company's request, Purchaser shall
sign a confidentiality agreement, in form and substance reasonably satisfactory
to Purchaser and the Company, as a condition to the receipt of confidential
nonpublic information of the Company pursuant to Sections 5.2.
5.4. Public Announcements. Each of the parties hereto will
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
and any of the transactions contemplated hereby, and neither party hereto
directly or indirectly through its officers and directors shall make any further
announcement, news release or disclosure without first consulting with the other
party hereto except (a) with the prior written consent of the other party or (b)
to the extent such party believes in good faith, after consultation with legal
counsel, that such announcement, release or disclosure is required by law.
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5.5. HSR Act. As soon as practicable (and in no event later than
ten (10) business days) after the execution of this Agreement, the Company and
Purchaser shall file notification and report forms under the HSR Act, and shall
thereafter promptly make any and all further filings and submissions which may
be required, relating to the acquisition by Purchaser of the Shares. The Company
and Purchaser shall furnish to the other such necessary information and
reasonable assistance as may be reasonably requested in connection with the
preparation of necessary filings or submissions to any governmental agency or
authority necessary under the provisions of the HSR Act. The Company and
Purchaser will supply each other with copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof) between such
party or its representatives, on the one hand, and any such governmental agency
or authority, on the other hand, with respect to this Agreement or the
transactions contemplated hereby.
5.6. Legends. Each certificate representing the Shares may be
endorsed with substantially the following legends, and any other legends
required by law:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF
THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING
THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM
THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
The Company need not register a transfer of legended Shares, and may also
instruct its transfer agent not to register the transfer of the Shares, unless
the conditions specified in each of the foregoing legend is satisfied. The
foregoing legend shall be removed from any Shares legended pursuant to this
Section 5.6, and the Company shall issue a certificate without such legend to
the holder of such Shares, if such Shares are registered and sold under the
Securities Act and a prospectus meeting the requirements of Section 10 of the
Securities Act is available or if such holder satisfies the requirements of Rule
144(k), or the holder provides the Company with an opinion of counsel,
reasonably satisfactory to the Company, to the effect that (i) such holder meets
the requirements of Rule 144(k) or (ii) a public sale, transfer or assignment of
such Shares may be made without registration. The stop transfer instructions
with respect to any legended Shares shall be removed if the foregoing legend is
removed in accordance with this Section 5.6.
5.7. Indemnification.
(a) The Company shall indemnify and hold harmless Purchaser;
each person who controls Purchaser within the meaning of the Exchange Act; each
of the respective
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stockholders, managers, partners, officers, directors, employees, agents and
affiliates of the foregoing; and the Observer (the "Purchaser Indemnitees") from
and against all actions, suits, claims, proceedings, costs, damages judgments,
amounts paid in settlement and expenses (including, without limitations,
attorneys' fees and disbursements) relating to or arising out of any claim,
demand or cause of action asserted by any third party as a result of any of the
transactions contemplated by this Agreement (including without limitation acts
or omissions since the commencement of the negotiations leading to such
transactions, but excluding any action by Purchaser's stockholders against
Purchaser relating to Purchaser's decision to enter into this Agreement);
provided, however, that the indemnification provided hereby shall not extend to
costs, damages, judgment, amounts paid in settlement and expenses directly and
primarily attributable to activities of a Purchaser Indemnitee which do not
involve any wrongful act or omission of the Company or any of its directors,
officers, employees, agents or representatives.
(b) If the Company elects not to assume the defense of a
Purchaser Indemnitee pursuant to Section 5.7(c), the Company shall reimburse the
Purchaser Indemnitees for all out-of-pocket expenses (including attorneys' fees
and disbursements) as they are incurred in connection with investigating,
preparing to defend or defending any such action, suit, claim or proceeding
(including any inquiry or investigation) whether or not a Purchaser Indemnitee
is a party thereto. If a Purchaser Indemnitee makes a claim hereunder for
payment or reimbursement of expenses, such expenses shall be paid or reimbursed
promptly upon receipt of appropriate documentation relating thereto even if the
Company reserves the right to dispute whether this Agreement requires the
payment or reimbursement of such expenses.
(c) A Purchaser Indemnitee seeking indemnification hereunder
shall give written notice to the Company of any claim with respect to which it
seeks indemnification promptly after the discovery by such party of any matters
giving rise to a claim for indemnification; provided that the failure of any
Purchaser Indemnitee to give notice as provided herein shall not relieve the
Company of its obligations under this Section 5.7 unless the Company shall have
been materially prejudiced by the failure of Purchaser Indemnitee to make such
notification. In case any such action, suit, claim or proceeding is brought
against Purchaser Indemnitee, the Company shall be entitled to participate in
the defense thereof and, to the extent that it may wish, to assume the defense
thereof, with counsel reasonably satisfactory to Purchaser Indemnitee, and after
notice from the Company of its election so to assume the defense thereof, the
Company will not be liable to such Purchaser Indemnitee under this Section 5.7
for any legal or other expense subsequently incurred by such Purchaser
Indemnitee in connection with the defense thereof; provided that (i) if the
Company shall elect not to assume the defense of such claim or action or (ii) if
Purchaser Indemnitee reasonably determines that there may be a conflict between
the positions of the Company and of Purchaser Indemnitee in defending such claim
or action, then separate counsel shall be entitled to participate in and conduct
the defense, and the Company shall be liable for any legal or other expenses
incurred by Purchaser Indemnitee in connection with the defense; provided that
in no event shall Company be required to pay the fees or expenses of more than
one counsel. The Company shall not be liable for any settlement of any action,
suit, claim or proceeding effected without its written consent; provided,
however, that the Company shall not unreasonably withhold, delay or condition
its consent. The Company further agrees that it will not, without Purchaser
Indemnitee's prior written consent, settle or compromise
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any claim or consent to entry of any judgment in respect thereof in any pending
or threatened action, suit, claim or proceeding in respect of which
indemnification may be sought hereunder (whether or not any Purchaser Indemnitee
is an actual or potential party to such action, suit, claim or proceeding)
unless such settlement or compromise includes an unconditional release of
Purchasers and each other Purchaser Indemnitee from all liability arising out of
such action, suit, claim or proceeding.
(d) If the indemnification provided for in this Section 5.7
is held by a court of competent jurisdiction to be unavailable to a Purchaser
Indemnitee with respect to any loss, liability, claim, damage, or expense
referred to therein, then the Company, in lieu of indemnifying such Purchaser
Indemnitee hereunder, shall contribute to the amount paid or payable by such
Purchaser Indemnitee as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the Company on the one hand and of Purchaser Indemnitee on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Company and of Purchaser Indemnitee
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 Company or by Purchaser Indemnitee
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the provisions of this Section 5.7, to
the extent that the provisions on indemnification and contribution contained in
any underwriting agreement contemplated in Article VI and entered into in
connection with an underwritten public offering thereunder are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control. The Purchaser Indemnitees other than the Company shall be deemed third
party beneficiaries of this Section 5.7.
(f) The rights of Purchaser and the other Purchaser
Indemnitees under this Section 5.7 shall be in addition to any liability that
the Company might otherwise have to Purchaser or the other Purchaser Indemnitees
under this Agreement, at common law or otherwise. The Company shall not be
liable under this Section 5.7 to indemnify the Purchaser and the other Purchaser
Indemnitees for more than the aggregate purchase price of the Shares. The other
Purchaser Indemnitees shall be deemed third party beneficiaries of the Company's
rights under this Section 5.7.
5.8. Further Assurances.
(a) At any time or from time to time after the Closing, each
party shall execute and deliver to the other party or parties such other
documents and instruments, provide such materials and information and take such
other actions as either party may reasonably request more effectively to carry
out the provisions of this Agreement.
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ARTICLE VI
REGISTRATION RIGHTS
Section 6 Registration Rights.
6.1. Definitions. For purposes of this Article VI:
(a) The term "Holder" means the Purchaser or any other
person who shall subsequently own or have the right to acquire Registrable
Securities or any assignee thereof in accordance with Section 6.12 hereof.
(b) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(c) The term "Registrable Securities" means (i) the Shares;
(ii) stock issued in lieu thereof in any reorganization, which has not been sold
to the public; or (iii) stock issued in respect of the stock referred to in (i)
or (ii) as a result of a stock split, stock dividend, recapitalization or the
like, which has not been sold to the public excluding in all cases, however, any
of the foregoing sold by a Holder pursuant to a registration statement under
this Agreement, a transaction pursuant to Rule 144 promulgated under the
Securities Act, or sold in any other transaction in which registration rights
are not transferred pursuant to Article VI hereof.
6.2. Request for Registration.
(a) If the Company shall receive, at any time after the
first to occur of the date two (2) years after the date of this Agreement or the
date the OEM Agreement has terminated or is otherwise no longer in effect (the
"Registration Rights Initiation Date"), a written request from one or more
Holders representing at least 25% of the Registrable Securities then
outstanding, that the Company file a registration statement under the Securities
Act covering the registration with respect to all or a part of the Registrable
Securities then outstanding, having an aggregate offering price, net of
underwriting discounts and commissions, of at least $3,000,000, the Company
shall, within fifteen (15) days of the receipt thereof, give written notice of
such request to all Holders of Registrable Securities identified to the Company
in accordance with Section 6.12 and shall, subject to the limitations of Section
6.2(c), file as soon as practicable, and in any event within one hundred twenty
(120) days of the receipt of such request, a registration statement under the
Securities Act covering all Registrable Securities which such Holders request to
be registered within twenty (20) days of the mailing of such notice by the
Company in accordance with Section 8.7 of this Agreement. Any registration
statement filed pursuant to under this Section 6.2 may, subject to the
provisions of Section 6.2(b), include securities of the Company other than
Registrable Securities.
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(b) If the Holders of Registrable Securities initiating the
registration request pursuant to Section 6.2(a) ("Initiating Holders") intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to this Section 6.2 and the Company shall include such information in
the written notice referred to in Section 6.2(a). In such event, the right of
any such Holder to include such Holder's Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in Section 6.2(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders, which underwriter or underwriters shall be reasonably acceptable to the
Company. If the Company, on its own behalf or on behalf of other holders of
securities other than Registrable Securities, requests inclusion in such
registration, the Initiating Holders, to the extent they deem advisable and
consistent with the goals of such registration, shall, on behalf of all Holders,
offer to include such securities other than Registrable Securities in the
underwriting (the "Other Securities") and may condition such offer on the
acceptance by such persons of the terms of this Section 6.2. In the event,
however, that the number of shares so included exceeds the number of shares of
Registrable Securities included by all Holders, such Registration shall be
treated as governed by Section 6.3 hereof rather than Section 6.2, and it shall
not count as a registration for purposes of Section 6.2 hereof. Notwithstanding
any other provision of this Section 6.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Other Securities shall first be
excluded from such registration to the extent required by such limitation. If a
further limitation of the number of shares to be underwritten is still required,
then the Initiating Holders shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares of Registrable Securities that may be included in the underwriting
shall be allocated among all Holders thereof, including the Initiating Holders,
in proportion (as nearly as practicable) to the amount of Registrable Securities
owned by each Holder. If any Holder of Registrable Securities, or a holder of
Other Securities entitled (upon request) to be included in such Registration,
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holders delivered at least seven (7) days prior to the effective date of the
Registration Statement. The securities so withdrawn shall also be withdrawn from
the Registration Statement.
(c) The Company is obligated to effect only two (2)
registrations under this Section 6.2 and shall not be obligated to effect any
registrations under this Section 6.2 within one hundred twenty (120) days of the
effective date of any registration statement pertaining to securities of the
Company.
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(d) Notwithstanding the foregoing, if the Company shall
furnish to the Initiating Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors of the
Company it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve-month period.
6.3. Company Registration.
(a) If (but without any obligation to do so), after the
Registration Rights Initiation Date, the Company proposes to register (including
for this purpose a registration effected by the Company for shareholders other
than the Holders) any of its Common Stock under the Securities Act in connection
with a secondary offering of such securities solely for cash (other than a
registration relating solely to the sale of securities to participants in a
Company stock option, stock purchase or similar plan, or a registration relating
solely to a transaction of the type described in Rule 145(a) under the
Securities Act), the Company shall, at such time, promptly give each Holder
written notice of such registration. Upon the written request of any Holder
given within twenty (20) days after mailing of such notice by the Company in
accordance with Section 8.7 of this Agreement, the Company shall, subject to the
provisions of Section 6.3(b), include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Securities that each such Holder has
requested to be registered.
(b) In connection with any offering involving an
underwriting of shares being issued by the Company, the Company shall not be
required under Section 6.3 to include any Holder's securities in such
underwriting unless such Holder accepts the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it, and then only in
such quantity as will not, in the reasonable opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders
(including the Holders) with rights to include such securities in the offering
exceeds the amount of securities sold other than by the Company that the
underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
reasonably believe will not jeopardize the success of the offering. If a
limitation of the number of shares to be underwritten is required, then the
number of shares, including the Registrable Securities, that may be included in
the underwriting shall be allocated among all shareholders entitled to include
such shares in such underwriting, including the Holders, in proportion (as
nearly practicable) to the amount of securities owned by each such shareholder,
including each Holder, relative to the amount of securities owned by all such
shareholders, but in no event shall (i) the amount of securities included in
such offering held by Motorola, Inc. or Creative Technology Ltd., or their
respective assigns, with respect to which such holders have piggyback
registration rights, be reduced below thirty percent (30%) each of the total
amount of securities included in such offering, or (ii)
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notwithstanding (i) above, any shares being sold by a stockholder exercising a
demand registration right similar to that granted in Section 6.2 be excluded
from such offering . If any Holder disapproves of the terms of any such
underwriting, it may elect to withdraw therefrom by written notice to the
Company and the underwriter delivered at least seven (7) days prior to the
effective date of the Registration Statement. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration. The Holders shall have no right to participate in the
selection of the underwriters for an offering pursuant to Section 6.3.
(c) The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 6.3 prior to the
effectiveness of such registration whether or not any Holder has elected to
include securities in such registration.
(d) The Purchaser may not exercise its rights under this
Section 6.3 if it has exercised those rights during the preceding 365 days
unless the amount of securities which it was permitted to include in an offering
upon such prior exercise of its rights has reduced pursuant to the provisions of
Section 6.3(b).
(e) The Company shall not be obligated to effect, or take
any action to effect, any piggyback registration of Registrable Securities
pursuant to this Section 6.3 after the Company was effected three (3) piggyback
registrations of Registrable Securities pursuant to this Section 6.3 and such
registrations have been declared effective.
6.4. Form S-3. After the Company has qualified for the use of
Form S-3 and after the Registration Rights Initiation Date in addition to the
rights contained in the foregoing provisions of this Article VI, one or more
Holders shall have the right to request registrations on Form S-3 (such requests
shall be in writing and shall state the number of shares of Registrable
Securities to be disposed of and the intended methods of disposition of such
shares by Purchaser), provided, however, that the Company shall not be obligated
to effect any such registration: (a) if the Holders, together with the holders
of any other securities of the Company entitled to inclusion in such
registration, propose to sell Registrable Securities and such other securities
(if any) on Form S-3 at an aggregate price to the public of less than
$1,000,000; (b) in the event that the Company shall furnish the certification
described in Section 6.2(d) (but subject to the limitations set forth therein);
(c) after the Company has effected two (2) such registrations pursuant to this
Section 6.4; or (d) within one hundred twenty (120) days of the effective date
of a Company registration statement of the type described in Section 6.3;
provided, however, that the limitations contained in clauses (b), (c) and (d) of
this Section 6.4 to the Company's obligation to effect a registration requested
under this Section 6.4 shall not apply to a registration requested hereunder by
the Holders in the twelve (12) month period following the exclusion in
accordance with the provisions of Section 6.3(b) of a portion of the Registrable
Securities sought by the Holders to be included in an underwritten registration
initiated by the Company (other than in consequence of a demand by a shareholder
of the Company having contractual demand rights) pursuant to Section 6.3.
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6.5. Obligations of the Company. Whenever required under this
Agreement to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its reasonable
best efforts to cause such registration statement to become effective, and, upon
the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to one
hundred eighty (180) days;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) furnish to the Holders covered by such registration
statement such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of such Registrable Securities;
(d) use its reasonable best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders thereof, provided that (i) the Company shall not be
required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such states
or jurisdictions and (ii) notwithstanding anything in this Agreement to the
contrary, in the event any jurisdiction in which the securities shall be
qualified imposes a non-waiveable requirement that expenses incurred in
connection with the qualification of the securities be borne by selling
shareholders, such expenses shall be payable pro rata by selling shareholders;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) notify each Holder participating in the registration
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing; in the event of a pending material event or transaction not
publicly disclosed by the Company, then upon written notice of such event or
transaction, each Holder shall suspend any sales or trades of the Company's
securities under any registration statement for up to thirty (30) days
immediately
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following such notice, provided that the Company may not require the Holders to
suspend sales or trades for more than sixty (60) days in any one (1) year
period;
(g) cause all such Registrable Securities registered
pursuant to this Agreement to be listed on each securities exchange or national
market system on which similar securities issued by the Company are then listed
or traded;
(h) provide a transfer agent and registrar for all
Registrable Securities registered pursuant to such registration statement and a
CUSIP number for all such Registrable Securities, in each case not later than
the effective date of such registration;
(i) to the extent economically feasible, use its reasonable
best efforts to comply with all applicable rules and regulations of the SEC, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen (18) months, beginning with the first month after the effective
date of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(j) furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Agreement, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Agreement, if such securities
are being sold through underwriters, or, (i) an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering, addressed to the underwriters.
6.6. Provision of Information. It shall be a condition precedent
to the obligations of the Company to take any action pursuant to this Article VI
that the selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to effect the registration
of the Registrable Securities.
6.7. Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 6.2 and 6.4,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
participating Holders up to a maximum of Five Thousand Dollars ($5,000) for each
registration under Section 6.2 or 6.4, if Company counsel does not make itself
available for this purpose, shall be borne by the Company; provided, however,
that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 6.2 if the registration
request is
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subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders
shall bear such expenses); provided, however, that if at the time of such
withdrawal, such Holders have learned of a material adverse change in the
condition, business or prospects of the Company from that known to such Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 6.2.
6.8. Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 6.3 for each Holder thereof (which right may be assigned as
provided in Section 6.12), including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees relating or
apportionable thereto, and the reasonable fees and disbursements of one counsel
for the participating Holders selected by a majority in interest thereof up to a
maximum of Five Thousand Dollars ($5,000) for each registration under Section
6.3, but excluding underwriting discounts and commissions relating to
Registrable Securities included in such registration.
6.9. Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Agreement.
6.10. Indemnification. In the event any Registrable Securities
are included in a registration statement under this Agreement:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder of such Registrable Securities, the
officers and directors of each such Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Securities Act, the Exchange Act, any state securities law or any
rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities law; and the Company will reimburse each such Holder, officer
or director, underwriter or controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this Section 6.10(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld or delayed), nor shall the Company be liable in
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any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder, officer, director,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who have signed the registration statement, each person, if any, who
controls the Company within the meaning of the Securities Act, any underwriter
and any other Holder selling securities in such registration statement or any of
its directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, or underwriter or controlling
person, or other such Holder or director, officer or controlling person may
become subject, under the Securities Act, the Exchange Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or controlling person,
other Holder, officer, director, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section
6.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement in effected without the consent
of the Holder from whom indemnification is sought (which consent shall not be
unreasonably withheld or delayed); provided, that, in no event shall any
indemnity under this Section b exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 6.10 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 6.10, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 6.10, but the omission so to deliver
written notice to the indemnifying
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party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 6.10.
(d) The obligations of the Company and Holders under this
Section 6.10 shall survive the completion of any offering of Registrable
Securities in a registration statement filed pursuant to this Agreement, and
otherwise.
6.11. Reports Under the Exchange Act. With a view to making
available to the Holders the benefits of Rule 144 under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
Holder to sell securities of the Company to the public without registration, the
Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times;
(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; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the Commission which permits
the selling of any such securities without registration.
6.12. Assignment of Registration Rights to Affiliates. The rights
to cause the Company to register Registrable Securities pursuant to this
Agreement may be assigned by a Holder to an affiliate (as defined under the
Securities Act of 1933, as amended, except that a person or entity shall not be
deemed to be an affiliate solely because of its stock ownership in the Company)
of such Holder; provided, that within a reasonable time after such transfer, the
Company is furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Securities Act. Any assignee or transferee asserting rights
under this Agreement shall be deemed to have consented to the terms and
conditions hereof. Holders' rights to cause the Company to register their
Registrable Securities and to keep information available, granted to them by the
Company under this Article VI, may be assigned (or assigned in part and retained
in part) to one or more transferees or assignees who receive at least 700,000
shares of Registrable Securities (as adjusted for stock dividends, stock split,
recapitalizations and the like that occur after the date of this Agreement),
provided that (i) the Company is given written notice by such Holder at the time
of or within a reasonable time after said transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such rights are being
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assigned, and (ii) upon request by the Company, such permitted transferee or
assignee executes a counterpart to Article VI of this Agreement.
6.13. Termination of Registration Rights. The Company's
obligations pursuant to this Agreement shall terminate as to any Holder of
Registrable Securities when the Holder can sell all of such Holder's Registrable
Securities pursuant to Rule 144(k) under the Securities Act.
6.14. No Inconsistent Agreements. The Company shall not on or
after the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Purchaser and
other Holders in this Article VI or otherwise conflicts with the provisions of
this Article VI. The Company represents and warrants to Purchaser that the
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with any registration rights granted to any holders of the
Company's securities.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7 Conditions to Closing.
7.1. Conditions to Purchaser's Obligation to Acquire the
Shares. The obligation of Purchaser to purchase the Shares hereunder is subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived by Purchaser, in Purchaser's sole
discretion, to the extent permitted by law:
(a) Representations and Warranties Correct. The
representations and warranties made by the Company in this Agreement shall be
true and correct in all material respects when made, and shall be true and
correct in all material respects on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date, and the Company
shall have delivered to Purchaser a certificate to such effect, executed by the
chief executive officer and chief financial officer of the Company and dated the
Closing Date.
(b) Performance of Obligations. The Company shall have
performed in all material respects all covenants, agreements and other
obligations required to be performed or observed by the Company pursuant to this
Agreement on or prior to the Closing Date, and the Company shall have delivered
to Purchaser a certificate to such effect, executed by the chief executive
officer and chief financial officer of the Company and dated the Closing Date.
(c) Absence of Material Adverse Effect. No Material Adverse
Effect shall have occurred, and there shall exist no fact or circumstance which
would reasonably be expected to result in a Material Adverse Effect.
(d) Consents and Waivers. The Company shall have obtained
all consents, permits and waivers necessary for the consummation of the
transactions contemplated by this Agreement.
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(e) Legal Investment. At the time of the Closing, the
issuance by the Company, and the acquisition by Purchaser, of the Shares
hereunder shall be legally permitted by all laws and regulations to which
Purchaser and the Company are subject, and no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such acquisition shall be in effect.
(f) HSR Act Filing and Approval. The waiting period
applicable to the consummation of the transactions contemplated in this
Agreement under the HSR Act shall have expired or been terminated.
(g) Opinion of Company's Counsel. Broad and Cassel, counsel
to the Company, shall have delivered an opinion addressed to Purchaser, dated
the Closing Date, substantially in the form as that attached hereto as Exhibit
7.1(g).
7.2. Conditions to Company's Obligation to Issue the Shares. The
Company's obligation to sell and issue the Shares to Purchaser hereunder is
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, any of which may be waived by the Company, in its sole discretion,
to the extent permitted by law:
(a) Representations and Warranties Correct. The
representations and warranties made by Purchaser in this Agreement shall be true
and correct in all material respects when made, and shall be true and correct in
all material respects on the Closing Date with the same force and effect as if
they had been made on and as of the Closing Date, and Purchaser shall have
delivered to the Company a certificate to such effect, executed by a duly
authorized member of Purchaser and dated the Closing Date.
(b) Performance of Obligations. Purchaser shall have
performed in all material respects all covenants, agreements and other
obligations required to be performed or observed by Purchaser pursuant to this
Agreement on or prior to the Closing Date, and Purchaser shall have delivered to
the Company a certificate to such effect, executed by a duly authorized member
of Purchaser and dated the Closing Date.
(c) Legal Investment. At the time of the Closing, the
issuance by the Company, and the acquisition by Purchaser, of the Shares
hereunder shall be legally permitted by all laws and regulations to which either
Purchaser or the Company is subject, and no preliminary or permanent injunction
or other order by any court of competent jurisdiction prohibiting or otherwise
restraining such acquisition shall be in effect.
ARTICLE VIII
MISCELLANEOUS
Section 8 Miscellaneous.
8.1. Access to Information. No information or knowledge obtained
in any investigation by Purchaser shall affect or be deemed to modify any
representation or warranty
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contained in this Agreement or the conditions to the respective obligations of
the parties set forth in Article VII.
8.2. Waivers and Amendments. This Agreement or any provision
hereof may be amended, waived, discharged or terminated only by a statement in
writing signed by the party against which enforcement of the amendment, waiver,
discharge or termination is sought.
8.3. Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of Florida applicable to contracts to
be wholly performed therein, without respect to the conflicts or the laws or
rules thereof.
8.4. Survival. The representations, warranties, covenants and
agreements made in this Agreement shall survive the Closing for a period of two
years, notwithstanding any investigation made by Purchaser. All statements as to
factual matters contained in any certificate delivered by or on behalf of the
Company pursuant hereto or in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder as of the date of such certificate or instrument.
8.5. Successors and Assigns. Except as expressly provided or
contemplated by this Agreement, neither this Agreement nor any right, obligation
or interest hereunder shall be assigned, either in whole or in part, by any
party hereto (other than by operation of law) without the prior written consent
of the other parties; provided, that nothing herein shall prevent or limit the
ability of Purchaser to assign any or all of its rights under this Agreement to
an any majority-owned and controlled affiliate of Purchaser. Subject to the
foregoing limitations, the provisions hereof shall inure to the benefit of, and
be binding upon and enforceable by, the parties hereto and their respective
successors and assigns.
8.6. Entire Agreement. This Agreement, and the other certificates
and documents delivered pursuant hereto, constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and supersede all other prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties with respect thereto.
8.7. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or by
overnight courier or mailed by first class mail, or Express Mail, postage
prepaid, or via facsimile, addressed (a) if to Purchaser, to Bay Networks, Inc.,
4401 Great America Parkway, Santa Clara, CA 95054, Attn: General Counsel, with a
copy of the said notice to be sent to Gray Cary Ware & Freidenrich, A
Professional Corporation, 400 Hamilton Avenue, Palo Alto, CA 94301, Attn: Bruce
E. Schaeffer, or to such other address (including electronic mail address) as
Purchaser shall have furnished to the Company in writing or by electronic mail,
or (b) if to the Company, to NetSpeak Corporation, 902 Clint Moore Road, Suite
104, Boca Raton, Florida 33487, Attn: John Staten, Chief Financial Officer, with
a copy of any said notice to be sent to Broad and Cassel, 201 S. Biscayne Blvd.,
Miami, FL 33131, Attn: Dale S. Bergman, Esq., or to such other address
(including electronic mail address) as the Company shall have furnished to
Purchaser in writing or
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by electronic mail. Notices that are mailed by (i) first class mail shall be
deemed received three (3) business days after deposit in the mail and (ii)
Express Mail or overnight courier shall be deemed received one (1) business day
after deposit in the mail or delivery to such courier. In the event that the
notice is sent by facsimile, notice shall be deemed to have been received when
sent and confirmed as to receipt.
8.8. Severability. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby.
8.9. Expenses. The Company shall reimburse Purchaser for all (i)
out-of-pocket expenses associated with this Agreement and the transactions
described herein which are incurred through or otherwise payable at the Closing,
including but not limited to travel and expenses associated with Purchaser's due
diligence, plus customary and reasonable legal fees and expenses of Purchaser's
counsel, and (ii) all filing fees (including, but not limited, to HSR Act filing
fees) and other out-of-pocket expenses (whether incurred or payable before or
after the Closing), including but not limited to customary and reasonable legal
fees and expenses of counsel, in connection with any HSR Act filing(s) relating
to the transactions contemplated by this Agreement. The Company's reimbursement
obligation arising solely from this Section 8.9 shall not exceed One Hundred
Thousand Dollars ($100,000). The foregoing reimbursement shall be in addition
to, and not in limitation of the payment of expenses provided by Sections 6.7
and 6.8 and any other express obligation to pay or reimburse expenses provided
by any other provision of this Agreement.
8.10. Interpretation. The table of contents and the titles of the
Articles and Sections of this Agreement are for convenience of reference only
and are not to be considered in construing this Agreement. When reference is
made in this Agreement to an "article" or "Article" or to a "section" or
"Section", such reference shall be to an Article or a Section of this Agreement
unless otherwise specified. Whenever the words "include", "includes", or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation." The words "herein," "hereof" and words of
similar import refer to this Agreement as a whole, and not to any single
provision thereof.
8.11. Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but both of which together
shall constitute one instrument.
8.12. Delays or Omissions. No delay or omission to exercise any
right, power or remedy accruing to the Company or to Purchaser shall impair any
such right, power or remedy of the Company or Purchaser, nor shall it be
construed to be a waiver of any breach or default under this Agreement, or an
acquiescence therein or in any similar breach or default thereafter occurring;
nor shall any delay or omission to exercise any right, power or remedy or any
waiver of any single breach or default be deemed a waiver of any other right,
power or remedy or breach or default theretofore or thereafter occurring. All
remedies, either under this Agreement, or by law otherwise afforded to the
Company or Purchaser, shall be cumulative and not alternative.
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IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be duly executed as of the date and year first above written.
NETSPEAK CORPORATION, a Florida corporation
By: /s/ Stephen R. Cohen
--------------------------------------------
Name: Stephen R. Cohen
------------------------------------------
Title: Chairman and Chief Executive Officer
-----------------------------------------
BAY NETWORKS, INC., a Delaware corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
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IN WITNESS WHEREOF, Purchaser and the Company have caused this
Agreement to be duly executed as of the date and year first above written.
NETSPEAK CORPORATION, a Florida corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
BAY NETWORKS, INC., a Delaware corporation
By: /s/ David J. Rynne
--------------------------------------------
Name: David J. Rynne
------------------------------------------
Title: Executive Vice President and
Chief Financial Officer
-----------------------------------------
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