Series B Convertible Preferred Stock Purchase Agreement - Limelight Networks Inc.
EXECUTION VERSION
LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
MAY 18, 2006
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TABLE OF CONTENTS
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1. PURCHASE AND SALE OF SERIES B PREFERRED STOCK....................... 1
1.1 Sale and Issuance of Series B Preferred Stock............... 1
1.2 Closing Delivery............................................ 1
1.3 Funding Commitment Date..................................... 1
1.4 Use of Proceeds; Repurchase; Escrow......................... 2
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 3
2.1 Organization, Good Standing and Qualification............... 3
2.2 Capitalization.............................................. 3
2.3 C Corporation; Subsidiaries................................. 5
2.4 Authorization............................................... 5
2.5 Valid Issuance of Stock; Offering.......................... 5
2.6 Government Consent.......................................... 6
2.7 Litigation.................................................. 6
2.8 Intellectual Property....................................... 6
2.9 Compliance with Other Instruments........................... 9
2.10 Agreements; Action.......................................... 9
2.11 No Conflict of Interest..................................... 10
2.12 Rights of Registration and Voting Rights.................... 11
2.13 Title to Property and Assets................................ 11
2.14 Financial Statements........................................ 11
2.15 Changes..................................................... 11
2.16 Taxes....................................................... 13
2.17 Labor Agreements and Actions................................ 13
2.18 Confidential Information and Invention Assignment
Agreements............................................... 14
2.19 Permits..................................................... 14
2.20 Corporate Documents......................................... 14
2.21 Employee Benefit Plans...................................... 14
2.22 Disclosure.................................................. 15
2.23 Insurance................................................... 16
2.24 Environmental and Safety Law................................ 16
2.25 Real Property Holding Corporation........................... 16
2.26 Investment Company Act of 1940.............................. 16
2.27 Brokers or Finders.......................................... 16
2.28 Section 83(b) Elections..................................... 16
2.29 Obligations of Management................................... 16
2.30 Peering Relationships....................................... 16
2.31 Outstanding Debt............................................ 17
2.32 April 2006 Revenue.......................................... 17
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.................... 17
3.1 Authorization............................................... 17
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3.2 Purchase Entirely for Own Account........................... 17
3.3 Disclosure of Information................................... 17
3.4 Restricted Securities....................................... 18
3.5 No Public Market............................................ 18
3.6 Legends..................................................... 18
3.7 Accredited Investor......................................... 18
3.8 Foreign Investors........................................... 18
4. CONDITIONS TO THE FUNDING COMMITMENT DATE........................... 19
4.1 Representations and Warranties.............................. 19
4.2 Performance................................................. 19
4.3 Compliance Certificate...................................... 19
4.4 Qualifications.............................................. 19
4.5 Stockholders' Agreement..................................... 19
4.6 Management Rights Letter.................................... 19
4.7 Indemnification Agreement................................... 20
4.8 Stockholder Approval; Restated Certificate.................. 20
4.9 Confidential Information and Invention Assignment
Agreement................................................ 20
4.10 Proceedings and Documents................................... 20
4.11 Investors Rights Agreement.................................. 20
4.12 Escrow Agreement............................................ 20
4.13 Exchange Agent Agreement.................................... 21
4.14 Assurances of and "Clear Line of Sight" With Respect to
Shares to Be Tendered.................................... 21
4.15 No Material Adverse Effect.................................. 21
4.16 2006 Sale Participation Program............................. 21
4.17 Approvals................................................... 21
4.18 Termination of Executive Compensation Plan.................. 21
4.19 Allan Kaplan Consulting Agreement........................... 21
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING................ 21
5.1 Representations and Warranties.............................. 21
5.2 Performance................................................. 22
5.3 Compliance Certificate...................................... 22
5.4 Secretary's Certificate..................................... 22
5.5 Restated Certificate........................................ 22
5.6 Opinion of Counsel.......................................... 22
5.7 Board of Directors.......................................... 22
5.8 Closing of Offer to Purchase................................ 22
5.9 Funding Commitment Date Deliverables........................ 22
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.................. 22
6.1 Representations and Warranties.............................. 22
6.2 Performance................................................. 23
6.3 Restated Certificate........................................ 23
6.4 Management Rights Letter and Escrow Agreenment.............. 23
7. HOLD HARMLESS; INDEMNIFICATION...................................... 23
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7.1 Escrow; Hold Harmless....................................... 23
7.2 Indemnification Procedures.................................. 25
7.3 Stockholders' Representative................................ 26
8. CONDUCT OF BUSINESSES PENDING THE CLOSING........................... 28
8.1 Conduct of Business by the Company Pending the Closing...... 28
8.2 Litigation.................................................. 30
8.3 Notification of Certain Matters............................. 30
8.4 Tax Reporting............................................... 30
9. SATISFACTION OF FUNDING COMMITMENT AND CLOSING CONDITIONS;
TERMINATION...................................................... 30
9.1 Satisfaction of Closing Conditions.......................... 30
9.2 Termination Events.......................................... 30
10. MISCELLANEOUS....................................................... 32
10.1 Transfer; Successors and Assigns............................ 32
10.2 Governing Law............................................... 32
10.3 Counterparts................................................ 32
10.4 Titles and Subtitle......................................... 32
10.5 Notices..................................................... 32
10.6 Finder's Fees............................................... 32
10.7 Fees........................................................ 32
10.8 Amendments and Waiver....................................... 33
10.9 Severability................................................ 33
10.10 Delays or Omission.......................................... 33
10.11 Entire Agreement............................................ 33
10.12 Confidentiality............................................. 33
10.13 Exculpation Among Purchasers................................ 34
10.14 Survival of Warranties...................................... 34
10.15 Specific Enforcement........................................ 34
10.16 Other Engagements and Activities............................ 35
10.17 No Promotion................................................ 35
10.18 Exclusivity................................................. 35
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SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Series B Convertible Preferred Stock Purchase Agreement (the
"AGREEMENT") is made as of May 18, 2006 by and between Limelight Networks, Inc.,
a Delaware corporation (the "COMPANY"), the investors listed on Exhibit A
attached hereto (each, a "PURCHASER" and together, the "PURCHASERS") and, with
respect to Section 7 and Section 10.8 only, Michael Gordon as the Stockholders'
Representative (as defined in Section 7).
The parties hereby agree as follows:
1. PURCHASE AND SALE OF SERIES B PREFERRED STOCK.
1.1 Sale and Issuance of Series B Preferred Stock.
(a) The Company shall adopt and file with the Secretary of State of
the State of Delaware on or before the Closing (as defined below) the Amended
and Restated Certificate of Incorporation in the form attached hereto as Exhibit
B (the "RESTATED CERTIFICATE").
(b) Subject to the terms and conditions of this Agreement, each
Purchaser, severally and not jointly, agrees to purchase at the Closing and the
Company agrees to sell and issue to each Purchaser at the Closing that number of
shares of Series B Convertible Preferred Stock (the "SERIES B STOCK") listed
opposite such Purchaser's name on Exhibit A attached hereto at a purchase price
of $4.8909 per share (the "SERIES B PRICE") for an aggregate sale of 25,557,661
shares of Series B Stock for an aggregate purchase price of $124,999,964.23 (the
"PROCEEDS"). The shares of Series B Stock issued to each Purchaser pursuant to
this Agreement are hereinafter referred to as the "STOCK."
1.2 Closing Delivery.
(a) Subject to the satisfaction of Sections 5 and 6 hereof, the
purchase and sale of the Stock shall take place at the offices of Heller Ehrman
LLP, 275 Middlefield Rd., Menlo Park, CA 94025, at 10:00 a.m. (San Francisco
time), no later than the first business day following the satisfaction or waiver
of the conditions set forth in Sections 5 and 6 hereof; or at such other time
and place as the Company and the Purchasers purchasing a majority of the Stock
mutually agree upon, orally or in writing (which time and place are designated
as the "CLOSING").
(b) At the Closing, the Company shall deliver to each Purchaser a
certificate representing the Stock being purchased hereby against payment of the
purchase price by check payable to the Company or wire transfer to the Company's
bank account or the Exchange Agent pursuant to the provisions of Section 1.4(a).
1.3 Funding Commitment Date.
Subject to the satisfaction of Section 4 hereof, each of the
Purchasers shall on the date of such satisfaction deliver a certificate (the
"FUNDING COMMITMENT CERTIFICATE") certifying that (i) such Purchaser confirms
that all conditions of Section 4 have been satisfied or waived, (ii) subject
only to the satisfaction, or waiver by the Purchasers, of the conditions set
forth in
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Section 5 and the satisfaction, or waiver by the Company, of the conditions set
forth in Section 6, such Purchaser has an irrevocable obligation to purchase
that number of shares of Series B Stock listed opposite such Purchaser's name on
Exhibit A and (iii) such Purchaser has sufficient funds to consummate such
purchase. The time and date of the satisfaction of Section 4 are referred to
herein as the "FUNDING COMMITMENT DATE."
1.4 Use of Proceeds; Repurchase; Escrow.
(a) At the Closing, $100,000,000 of the Proceeds (the "OFFERING
FUNDS") shall be delivered to US Bank, National Association (the "EXCHANGE
AGENT") to be held and administered by the Exchange Agent pursuant to the
Exchange Agent Agreement (as defined below). The Company shall use the Offering
Funds to repurchase shares of the Company's capital stock outstanding prior to
the date hereof or issuable upon exercise of securities outstanding on the date
hereof from currently existing stockholders and/or holders of vested stock
options to purchase shares of common stock of the Company and at a per share
purchase price not to exceed the Series B Price (as adjusted for stock splits,
stock combinations, dividends, recapitalizations and the like) pursuant to the
terms of the Offer to Purchase (as defined below) and the Stockholder Tender
Agreement (as defined below) with each of Allan Kaplan, Nathan Raciborski,
Michael Gordon, William Rinehart (and/or their affiliated investment entities)
(collectively, the "FOUNDERS") and Amalia Limited and Northview Investments, LLC
(the "SERIES A HOLDERS" and collectively with the Founders, the "MAJOR
STOCKHOLDERS") (together, the "STOCKHOLDER TENDER AGREEMENTS") (the
"REPURCHASE"); provided, further, that the Company agrees that, unless approved
in writing by holders of a majority in interest of the Series B Preferred, in no
event shall less than $90,000,000 of the Proceeds be used to repurchase shares
of the Company's capital stock in the Repurchase. All tendering stockholders
shall be referred to herein as the "TENDERING STOCKHOLDERS." All payments to the
Tendering Stockholders shall be subject to the provisions of Section 1.4(c)
hereof.
(b) The Company hereby covenants and agrees that the Repurchase shall
be effected by the Company in full compliance with all applicable laws, rules
and regulations, including, without limitation, the Securities Act of 1933, as
amended (the "SECURITIES ACT") and the Securities Exchange Act of 1934, as
amended (the "1934 ACT"). The Repurchase shall be effected pursuant to each of
the Stockholder Tender Agreements substantially in the forms attached hereto as
Exhibit C. the Offer To Purchase (the "OFFER TO PURCHASE") and the Letter of
Transmittal (the "LETTER OF TRANSMITTAL"), in forms that are mutually acceptable
to the Company and the Purchasers purchasing a majority of the Stock, or such
other instruments mutually agreed to by the Company and the Purchasers of a
majority of the Series B Stock issued pursuant to this Agreement. Any shares of
the Company's capital stock repurchased pursuant to the Repurchase shall be
cancelled by the Company upon such repurchase and shall not be reissued by the
Company thereafter. Promptly following the consummation of the Repurchase (and
in any event within ten (10) business days thereafter), the Company shall
deliver to each of the Purchasers a true, correct and complete schedule of the
security holders of the Company as of the Closing (after giving effect to the
Closing and the consummation of the Repurchase) showing the then outstanding
securities held by each such security holder.
(c) Notwithstanding the provisions of Section 1.4(a), subject to and
immediately after the consummation of the Repurchase, the Exchange Agent shall
deliver an
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aggregate of 10% of the actual amount of Offering Funds to be delivered to the
Tendering Stockholders (the "ESCROW") to US Bank, National Association (the
"ESCROW AGENT"), to be held and administered in accordance with Section 7 hereof
and the Escrow Agreement (as defined below), such Escrow to be deducted, pro
rata based on the aggregate amount of the Offering Funds to be received by the
Tendering Stockholder under Section 1.4(a), from the aggregate amount otherwise
payable to each such Tendering Stockholder as of the consummation of the
Repurchase. The Escrow shall serve as the security for the indemnification
obligations of the Tendering Stockholders for Losses (as defined below) under
Section 7 hereof. Any amounts then held in Escrow and not previously paid in
respect of any claims for indemnification under Section 7, and not subject to
any pending claims for indemnification under Section 7, shall be released to the
Tendering Stockholders not more than five (5) days after the Escrow Termination
Date. For the purposes of this Agreement, the "ESCROW TERMINATION DATE" shall
mean the earliest of the following to occur: (i) the 18-month anniversary of the
Closing, (ii) the closing of a Liquidation (as defined in the Restated
Certificate) and (iii) the declaration or ordering of effectiveness of a
registration statement or similar document in compliance with the Securities Act
for the offer and sale of the shares of the Company's Common Stock in which
holders of Series B Preferred convert their shares into shares of Common Stock
in connection with such public offering.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser, except as set
forth on a Schedule of Exceptions delivered to the Purchasers on the date hereof
as follows. Each exception contained on the Schedule of Exceptions indicates
specifically the representation to which it relates and shall be deemed to be a
modification of such representation and warranties contained in the section
indicated; provided, that any information disclosed under any paragraph of the
Schedule of Exceptions shall be deemed disclosed and incorporated into any other
section, subsection, paragraph and clause hereof where it is reasonably apparent
on its face that such disclosure, without reference to extrinsic documentation,
is relevant to such other section, subsection, paragraph or clause. In addition,
for purposes of these representations and warranties, the term "Company" shall
include any subsidiaries of the Company, unless otherwise noted.
2.1 Organization. Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization and has all requisite corporate power and
authority to carry on its business as now conducted and as currently proposed to
be conducted and to own and operate its properties. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to qualify would have a material adverse effect on the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be conducted);
provided, however, that any adverse effect arising from or otherwise relating to
the announcement or pendency of this Agreement or the transactions contemplated
hereby shall not be taken into account in determining whether there has been or
would be, a material adverse effect (a "MATERIAL ADVERSE EFFECT").
2.2 Capitalization. Upon the filing of the Restated Certificate, the
authorized capital of the Company consists, or will consist, immediately prior
to the Closing of:
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(a) 30,214,000 shares of Preferred Stock, $0.001 par value per share,
4,614,000 of which shares have been designated Series A Preferred Stock,
4,614,000 of which are issued and outstanding as of the date hereof, and
25,600,000 of which shares have been designated Series B Preferred Stock, none
of which are issued and outstanding immediately prior to the Closing. All of the
outstanding shares of Series A Preferred Stock have been duly authorized, fully
paid, are validly issued and are nonassessable and have been issued in
compliance with all applicable federal and state securities laws. The rights,
privileges and preferences of the Series A Preferred Stock and Series B Stock
will be as stated in the Company's Restated Certificate.
(b) 77,000,000 shares of Common Stock, $0.001 par value per share,
23,556,414 shares of which are issued and outstanding as of the date hereof. All
of the outstanding shares of Common Stock have been duly authorized, fully paid,
are validly issued and are nonassessable and have been issued in compliance with
all applicable federal and state securities laws.
(c) The outstanding securities of the Company as of the date hereof
are owned by the security holders and in the numbers specified in Schedule
2.2(c) of the Schedule of Exceptions.
(d) The Company has reserved 8,651,000 shares of Common Stock for
issuance to officers, directors, employees and consultants of the Company
pursuant to its 2003 Incentive Compensation Plan (the "STOCK PLAN"). Of such
reserved shares of Common Stock, 343,767 have been issued upon the exercise of
stock options, 4,880,619 are subject to stock options currently issued and
outstanding and 3,426,614 are issuable upon the exercise of stock options that
remain available for issuance under the Stock Plan. All such outstanding options
have been issued in compliance with state and federal securities laws. Section
2.2(d) of the Schedule of Exceptions lists each "nonqualified deferred
compensation plan" (as such term is defined in Section 409A(d)(1) of the Code)
sponsored or maintained by the Company and each ERISA Affiliate. Each
nonqualified deferred compensation plan has been operated since January 1, 2005
in good faith compliance with Section 409A of the Code and any IRS guidance
issued with respect thereto. No such nonqualified deferred compensation plan has
been "materially modified" (within the meaning of IRS Notice 2005-1) at any time
after October 3, 2004.
(e) Except for (i) the conversion privileges of the Series A Preferred
Stock and the Series B Stock, (ii) outstanding options issued pursuant to the
Stock Plan, (iii) outstanding warrants to purchase three million nine hundred
seventy-two thousand nine hundred seventy-eight (3,972,978) shares of the
Company's Common Stock, (iv) the rights provided in that certain Amended and
Restated Stockholders' Agreement of even date herewith substantially in the form
attached hereto as Exhibit D (the "STOCKHOLDERS' AGREEMENT") and that certain
Amended and Restated Investors' Rights Agreement of even date herewith
substantially in the form attached hereto as Exhibit E (the "INVESTORS RIGHTS
AGREEMENT"), and (v) 2,500,000 shares of Common Stock that are reserved for
issuance to the Founders in the form of non-qualified statutory options (the
"FOUNDERS OPTION SHARES"), there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal or
similar rights) or agreements, orally or in writing, for the purchase or
acquisition from the Company of any shares of its capital stock or securities
convertible into or exchangeable or exercisable for
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shares of capital stock. Immediately after the Closing, the Board will grant the
Founders Option Shares to the Founders pursuant to the allocations set forth in
the Schedule of Exceptions with an effective grant date of the Closing and with
a per share exercise price equal to fair market value of the Common Stock at the
time of grant after taking into account the Repurchase and the other
transactions contemplated hereby. Such Founders Option Shares shall vest as
follows: 1/12th shall vest on each monthly anniversary of the Closing and shall
be subject to the potential acceleration of vesting as provided in the Option
Agreement in substantially the form set forth on Exhibit F.
(f) All outstanding securities of the Company, including, without
limitation, all outstanding shares of the capital stock of the Company, all
shares of the capital stock of the Company issuable upon the conversion or
exercise of all convertible or exercisable securities and all other securities
that the Company is obligated to issue, are subject to a one hundred eighty
(180) day "market stand-off restriction upon an initial public offering of the
Company's securities pursuant to a registration statement filed with the
Securities and Exchange Commission pursuant to the Securities Act in a form
substantially identical to Section 1.5 of the Stockholders' Agreement.
(g) Except as otherwise provided in Section 2.2(e), all options
granted under the Stock Plan vest as follows: twenty-five percent (25%) of the
shares vest one (1) year following the vesting commencement date, with the
remaining seventy-five percent (75%) vesting in equal monthly installments over
the next three (3) years. Except as set forth in the Schedule of Exceptions, no
stock plan, stock purchase, stock option or other agreement or understanding
between the Company and any holder of any securities or rights exercisable or
convertible for securities provides for acceleration of the vesting provisions
of such agreement or understanding as the result of the occurrence of any event.
2.3 C Corporation; Subsidiaries. The Company is a subchapter C corporation.
Except as set forth in the Schedule of Exceptions, the Company does not
currently own or control, directly or indirectly, any interest in any other
corporation, association, or other business entity. The Company is not a
participant in any joint venture, partnership or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors, and stockholders necessary for the authorization, execution
and delivery of this Agreement, the Stockholders' Agreement and any other
agreement contemplated hereby or thereby to which the Company is a party
(collectively, the "TRANSACTION AGREEMENTS"), the performance of all obligations
of the Company hereunder and thereunder (including, without limitation, the
Repurchase) and the authorization, issuance and delivery of the Stock has been
taken or will be taken prior to the Closing, and the Transaction Agreements,
when executed and delivered by the Company, will constitute valid and legally
binding obligations of the Company, enforceable against the Company in
accordance with their terms except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of
general applications affecting enforcement of creditors' rights generally, as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
2.5 Valid Issuance of Stock; Offering.
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(a) The Stock being issued to the Purchasers hereunder, when issued,
sold and delivered in accordance with the terms hereof for the consideration
expressed herein, will be duly and validly issued, fully paid and nonassessable
and free of restrictions on transfer other than restrictions on transfer under
the Transaction Agreements and applicable state and federal securities laws.
Based in part upon the representations of the Purchasers in this Agreement and
subject to the provisions of Section 2.6 below, the Stock will be issued in
compliance with all applicable federal and state securities laws. The Common
Stock issuable upon conversion of the Stock has been duly and validly reserved
for issuance, and upon issuance in accordance with the terms of the Restated
Certificate, will be duly and validly issued, fully paid and nonassessable and
free of restrictions on transfer other than restrictions on transfer under the
Transaction Agreements and applicable federal and state securities laws and will
be issued in compliance with all applicable federal and state securities laws.
(b) Subject in part to the truth and accuracy of each Purchaser's
representations set forth in Section 3 hereof, the offer, sale and issuance of
the Stock contemplated by this Agreement are exempt from the registration
requirements of any applicable state and federal securities laws, and neither
the Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption. The Offer to Purchase and
all other documents and actions contemplated by Section 1.3(a) comply with the
applicable requirements of the Securities Act and the 1934 Act.
2.6 Government Consent. Other than with respect to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, no consent, approval, order or authorization
of, or registration, qualification, designation or filing with, any federal,
state or local governmental authority on the part of the Company is required in
connection with the consummation of the transactions contemplated by this
Agreement, including, without limitation, the Repurchase, except for filings to
be made after the Closing under applicable state securities laws, and the
Securities Act, and the rules thereunder, which filings will be made in a timely
manner.
2.7 Litigation. There is no claim, action, suit, proceeding, arbitration,
complaint, charge or investigation pending or, to the Company's knowledge,
currently threatened against the Company that questions the validity of the
Transaction Agreements or the right of the Company to enter into them, or to
consummate the transactions contemplated thereby, or that would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect, or any change in the current equity ownership of the Company. Neither
the Company nor, to the Company's knowledge, any of its officers or directors,
is a party or is named as subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company pending or which the Company intends to initiate. The foregoing
includes, without limitation, actions, suits, proceedings or investigations
pending or threatened in writing (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business, or any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers.
2.8 Intellectual Property.
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(a) The Company owns or possesses sufficient legal rights to all Technology
and Intellectual Property Rights (exclusive of Non-CDN Intellectual Property
Rights) and, to the Company's knowledge, all Non-CDN Intellectual Property
Rights, necessary for its business as now conducted, or proposed to be
conducted, without any conflict with, or infringement of, the rights of others.
Except as set forth in the Schedule of Exceptions, there are no outstanding
options, licenses or agreements of any kind relating to the foregoing, nor is
the Company bound by or a party to any options, licenses or agreements of any
kind with respect to the Technology or Intellectual Property Rights of any other
person or entity.
(b) The Company has taken all reasonable measures necessary to protect the
proprietary nature of the Company's Technology and Intellectual Property Rights
that are (i) owned or licensed by the Company and (ii) material to the business
of the Company as currently conducted or proposed to be conducted. The Company
is not subject to any "open source," "copyleft," or other similar licenses or
obligations that requires the Company to disclose or make available to any third
party the source code to any of the Company's Technology.
(c) The Company is not aware of any communication, including without
limitation oral communications, alleging that the Company has violated or, by
conducting its business, would violate any of the Intellectual Property Rights
of any other person or entity. No use or proposed use by the Company of its
Technology and Intellectual Property Rights (excluding Non-CDN Intellectual
Property Rights), nor, to the Company's knowledge, any use or proposed use by
the Company of its Non-CDN Intellectual Property Rights has infringed or will
infringe upon any Intellectual Property Rights of others. The use of such
Technology or Intellectual Property Rights (excluding Non-CDN Intellectual
Property Rights), and, to the Company's knowledge, the use of its Non-CDN
Intellectual Property Rights, in the business of the Company will not constitute
an infringement, misappropriation or misuse of any Intellectual Property Rights
of any third party.
(d) None of the Company's officers or, to the knowledge of the Company,
employees are obligated under any contract (including licenses, covenants or
commitments of any nature) or other agreement of any kind, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such officer's or employee's best efforts to promote
the interest of the Company or that would conflict with the Company's business.
Neither the execution or delivery of this Agreement, nor the carrying on of the
Company's business as now conducted and as currently proposed to be conducted by
the officers and employees of the Company, will result in a breach of the terms,
conditions, or provisions of, or constitute a default under, any contract,
covenant or instrument under which any such officer or, to the knowledge of the
Company, employee is now obligated. The Company does not believe it is or will
be necessary to use any Technology or Intellectual Property Rights of any of its
present or former officers or employees (or persons it currently intends to
hire) made prior to their employment by or any other association with the
Company, except as the same have been fully assigned to the Company. The
Company's officers and, to the knowledge of the Company, employees are not
making improper use of any confidential information or other Technology or
Intellectual Property Rights of others, including those of any former employer.
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(e) The Schedule of Exceptions contains a complete list of the Company's
patents (including applications therefor), copyrights, tradenames, domain names
and World Wide Web addresses and sites as of the date hereof.
(f) The Company is not obligated to make any payments by way of royalties,
fees or otherwise to any owner or licensor of or claimant to any Technology or
Intellectual Property Rights with respect to the use thereof in connection with
the conduct of its business as presently conducted, or proposed to be conducted.
There are no agreements, understandings, instruments, contracts, judgments,
orders or decrees to which the Company is a party or by which it is bound that
involve indemnification by the Company with respect to infringements of any
Intellectual Property Rights. No Technology or Intellectual Property Rights of
the Company are subject to any proceeding or outstanding decree, order, judgment
or settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or that may affect the validity,
use or enforceability of such Company Technology or Intellectual Property
Rights.
(g) The products of the Company are free of any defects or errors, which,
or may reasonably be expected to, materially and adversely affect the value,
functionality or fitness for the intended purpose of such products.
(h) "INTELLECTUAL PROPERTY RIGHTS" shall mean any and all of the following
and all rights in, arising out of, or associated therewith: (i) all United
States and foreign patents and utility models and applications therefor, and all
reissues, divisions, re-examinations, renewals, extensions, provisionals,
continuations and continuations in part thereof, and equivalent or similar
rights anywhere in the world in inventions and discoveries including without
limitation invention disclosures ("PATENTS"); (ii) all copyrights, copyright
registrations and applications therefor, and all other similar rights
corresponding thereto throughout the world, including without limitation "moral"
rights ("COPYRIGHTS"); (iii) all industrial designs and any registrations and
applications therefor throughout the world; (iv) mask works, mask work
registrations and applications therefor, and all other similar rights
corresponding thereto throughout the world ("MASK WORKS"); (v) all trade secrets
and other rights in know how and confidential or proprietary information; (vi)
all trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor and all goodwill associated
therewith throughout the world ("TRADEMARKS and (vii) any similar,
corresponding, or equivalent rights to any of the foregoing anywhere in the
world.
"TECHNOLOGY" shall mean any or all of the following (i) works of authorship
including, without limitation, computer programs, source code, and executable
code, whether embodied in Software, firmware or otherwise, architecture,
documentation, designs, files, records, and data; (ii) inventions (whether or
not patentable), discoveries, improvements, and technology; (iii) proprietary
and confidential information, including without limitation technical data and
customer and supplier lists, trade secrets show how, know how, and techniques;
(iv) databases, data compilations and collections and technical data; (v) logos,
trade names, trade dress, trademarks and service marks; (vi) domain names, World
Wide Web addresses and sites; (vii) tools, methods, processes, devices,
prototypes, schematics, bread boards, net lists, mask works, test methodologies,
verilog files, emulation and simulation reports, test vectors and hardware
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development tools; and (viii) any and all instantiations of the foregoing in any
form and embodied in any media.
"NON-CDN INTELLECTUAL PROPERTY RIGHTS" shall mean all Intellectual Property
Rights other than the Intellectual Property Rights owned, licensed or possessed
by any of the entities set forth in Section 2.8(a)(1) of the Schedule of
Exceptions or any affiliates thereof.
2.9 Compliance with Other Instruments. The Company is not in violation or
default of any provisions of its Restated Certificate or Bylaws, as amended. The
Company is not, nor has it ever been, in violation or default of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound or of any provision of any federal or state statue, rule or regulation
applicable to the Company ("LAW"), in each case, the effect of which would have
a Material Adverse Effect. To the Company's knowledge, all parties to material
contracts and commitments with the Company are in compliance therewith in all
material respects. The execution, delivery and performance of the Transaction
Agreements and the consummation of the transactions contemplated hereby or
thereby, including, without limitation, the Repurchase, will not result in any
such violation, or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such Law,
instrument, judgment, order, writ, decree or contract or an event that results
in the creation of any lien, charge or encumbrance upon any assets of the
Company or the suspension, revocation, impairment, forfeiture or nonrenewal of
any material permit, license, authorization or approval applicable to the
Company, its business or operations or of its assets or properties. The Company
has avoided every condition, and has not performed any act, the occurrence of
which would result in the Company's loss of any right granted under any license,
distribution agreement or other agreement.
2.10 Agreements; Action.
(a) Except for agreements explicitly contemplated by the Transaction
Agreements, there are no agreements, understandings, instruments, contracts or
proposed transactions to which the Company is a party or by which it is bound
that involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $50,000 individually, or $100,000 in the aggregate, (ii)
the license of any patent, copyright, trade secret or other proprietary right to
or from the Company (other than standard "off the shelf" product licenses),
(iii) the grant of rights to manufacture, produce, assemble, license, market, or
sell its products to any other person or affect the Company's exclusive right to
develop, manufacture, assemble, distribute, market or sell its products or (iv)
indemnification by the Company with respect to infringements of proprietary
rights (other than as set forth in contracts entered into in the ordinary course
of business).
(b) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $25,000 or in excess of
$50,000 in the aggregate, other than in the ordinary course of business, (iii)
made any loans or advances to any person, other than ordinary advances for
business expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than in the ordinary course of business.
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(c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(d) Except for the Transaction Agreements, there are no agreements,
understandings, or purposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliates thereof.
(e) The Company is not a party to and is not bound by any contract,
agreement, or instrument, or subject to any restriction under its Restated
Certificate, that materially adversely affects its assets, properties, financial
conditions, operating results, business or prospects.
(f) Other than in connection with the transactions contemplated
hereby, the Company has not entered into any letter of intent, memorandum of
understanding or other similar document (i) with any representative of any
corporation or corporations regarding the merger of the Company with or into any
such corporation or corporations, (ii) with any representative of any
corporation, partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all of the
assets of the Company or a transaction or series of related transactions in
which more than fifty percent (50%) of the voting power of the Company would be
disposed of, or (iii) regarding any other form of liquidation, dissolution or
winding up of the Company.
2.11 No Conflict of Interest. The Company is not indebted, directly or
indirectly, to any of its officers or directors or to any members of their
immediate families, or, to the knowledge of the Company, any employees or any
members of their immediate families, in any amount whatsoever other than in
connection with expenses or advances of expenses incurred in the ordinary course
of business consistent with past practice, or relocation expenses of employees,
which are not material in nature. None of the Company's officers or directors,
or any members of their immediate families, or, to the knowledge of the Company,
any employees or any members of their immediate families, are, directly or
indirectly, indebted to the Company or, to the Company's knowledge, have any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company except that officers,
directors and/or stockholders of the Company may own stock in (but not exceeding
two percent (2%) of the outstanding capital stock of) any publicly traded
company that may compete with the Company. None of the Company's officers or
directors or, to the Company's knowledge, any employees or any members of such
officers', directors' or employees' immediate families are, directly or
indirectly, interested in any material contract with the Company. The Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. Section 2.11 of the Schedule of Exceptions sets forth a complete
list of any transaction between (a) the Company and (b) any of its officers or
directors, any members of their immediate families or any of their affiliates
that involve or involved obligations (contingent or otherwise) of, or payments
to or from, the Company in excess of $5,000; other than (i) agreements relating
to the ownership of the Company's securities, (ii) agreements relating to the
employment or consulting
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relationship of such officer or director with the Company, (iii) agreements
executed in connection with the transactions contemplated by the Series B
Agreement and (iv) agreements involving the advancement of expenses in the
ordinary course of business.
2.12 Rights of Registration and Voting Rights. Except as contemplated in
the Investor Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
Except as contemplated by the Stockholders' Agreement, neither the Company nor,
to the Company's knowledge, any stockholder of the Company has entered into any
agreements with respect to voting or giving of written consents of the capital
stock of the Company or the voting or giving of written consents by a director
of the Company.
2.13 Title to Property and Assets. The Company owns its property and assets
free and clear of all mortgages, liens, loans and encumbrances, except such
encumbrances and liens which arise in the ordinary course of business and do not
materially impair the Company's ownership or use of such property or assets.
With respect to the property and assets it leases, the Company is in material
compliance with such leases and, to its knowledge, holds a valid leasehold
interest free of any liens, claims, or encumbrances.
2.14 Financial Statements. The Company has delivered to each Purchaser its
audited financial statements (balance sheet and income and cash flow statements,
including notes thereto) at December 31, 2005 and for the fiscal year then
ended, and its unaudited financial statements (balance sheet and income
statement) as at and for the three (3) month period ended March 31, 2006 (the
"FINANCIAL STATEMENTS"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other, except that the
unaudited Financial Statements may not contain all footnotes required by
generally accepted accounting principles. The Financial Statements fairly
present the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein, subject in the case of the
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to March 31, 2006 (the "FINANCIAL STATEMENT DATE")
and (ii) obligations under contracts and commitments incurred in the ordinary
course of business and not required under generally accepted accounting
principles to be reflected in the Financial Statements, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. The Company maintains and presently intends to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.15 Changes. Since December 31, 2005, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business that have not
been, in the aggregate, materially adverse;
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(b) any material damage, destruction or loss, whether or not covered
by insurance, affecting the business (as such business is presently conducted
and as it is proposed to be conducted), properties, prospects, or financial
condition of the Company;
(c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the business (as such business is presently
conducted and as it is proposed to be conducted), properties, prospects or
financial condition of the Company;
(e) any material change to a material contract or agreement by which
the Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder;
(g) any resignation or termination of employment of any key officer or
employee of the Company; and the Company, to its knowledge, does not know of any
impending resignation or termination of employment of any such officer or
employee;
(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(i) any mortgage, pledge, transfer of a security interest in, or lien,
created by the Company, with respect to any of its material properties or
assets, except liens for taxes not yet due or payable;
(j) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business;
(k) any declaration, setting aside or payment or other distribution in
respect to any of the Company's capital stock, or any direct or indirect
redemption, purchase, or other acquisition of any of such stock by the Company;
(l) any written notification that any customer of the Company who
accounted for more than $30,000 of revenue during calendar year 2005 or was
expected to account for more than $30,000 during calendar year 2006 (each, a
"MAJOR CUSTOMER") is reducing in a material way its relationship with the
Company or the use of the Company's service offerings from the Company's
expectations with respect to such Major Customer;
(m) any sale, lease, license, pledge, grant, encumbrance or other
disposal of any of its properties or assets which are material, individually or
in the aggregate, to its business, except in the ordinary course of business,
consistent with past practice;
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(n) any incurrence of indebtedness for borrowed money or issuance of
any debt securities, except in the ordinary course of business, consistent with
past practice;
(o) any material tax election made by the Company, or settlement or
compromise of any tax liability, or any consent to the extension or waiver of
any statute of limitations with respect to taxes; or
(p) any arrangement or commitment by the Company to do any of the
things described in this Section 2.15.
2.16 Taxes.
(a) Tax Returns and Payments. The Company has filed all tax returns
and reports as required by Law. These returns and reports are true and correct
in all material respects. The Company has paid all taxes and other assessments
due. There is no pending dispute with any taxing authority relating to any of
such returns and the Company has not received notice of any proposed liability
for any tax to be imposed upon the properties or assets of the Company. The
provision for taxes of the Company as shown in the Financial Statements is
adequate for taxes due or accrued as of the date thereof. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended (the "CODE"),
to be treated as a Subchapter S corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made any
other elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation or amortization and other than elections
that are reflected in the Company's tax returns) that would have a material
effect on the Company, its financial condition, its business as presently
conducted or proposed to be conducted or any of its properties or material
assets. The Company has never had any tax deficiency proposed or assessed
against it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge that is still in
effect. None of the Company's federal income tax returns and none of its state
income or franchise tax or sales or use tax returns has ever been audited by
governmental authorities. Since the Financial Statement Date, the Company has
not incurred any taxes, assessments or governmental charges other than in the
ordinary course of business and the Company has made adequate provisions on its
books of account for all taxes, assessments and governmental charges with
respect to its business, properties and operations for such period. The Company
has withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories.
2.17 Labor Agreements and Actions. The Company is not bound by or subject
to (nor are any of its assets or properties bound by or subject to) any written
or oral, express or implied, contract, commitment or arrangement with any labor
union, and no labor union has requested or, to the knowledge of the Company, has
sought to represent any of the employees, representatives or agents of the
Company. There is no strike or other labor dispute involving the Company
pending, or to the Company's knowledge, threatened, that could have a Material
Adverse Effect, nor is the Company aware of any labor organization activity
involving its employees. The employment of each officer and employee of the
Company is terminable at the will of the
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Company. There are no material oral agreements between the Company and any of
its officers or employees regarding employment or compensation. The Company does
not have a present intention to terminate the employment of any officer or
employee whose termination would have an adverse effect on the Company. The
Company has complied in all material respects with all applicable state and
federal equal employment opportunity laws and with other laws related to
employment.
2.18 Confidential Information and Invention Assignment Agreements. Each
current or former employee or consultant of the Company has executed an
agreement with the Company regarding confidentiality and proprietary information
substantially in the forms of the Company's Confidential Information and
Invention Assignment Agreement attached hereto as Exhibit H. The Company is not
aware that any of its employees or consultants is in violation thereof, and the
Company will use its best efforts to prevent any such violation.
2.19 Permits. The Company has all material franchises, permits, licenses
and any similar authority necessary for the conduct of its business as it is now
being conducted and as proposed to be conducted. The Company is not in default
in any material respect under any of such franchises, permits, licenses or other
similar authority.
2.20 Corporate Documents. The Restated Certificate and Bylaws, as amended,
of the Company are in the form made available to the Purchasers. The minutes of
meetings of directors and stockholders and all actions by written consent
without a meeting by the directors and stockholders were made available to
counsel for the Purchasers. Each such minute and action by written consent
accurately reflects all actions by the directors and stockholders with respect
to all transactions referred to in such minutes, or actions by written consent,
in all material respects.
2.21 Employee Benefit Plans.
(a) The following definitions will apply to this Section 2.21:
(i) "COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any ERISA Affiliate for the
benefit of any current or former employee, officer, director, consultant of the
Company or any ERISA Affiliate or with respect to which the Company or any ERISA
Affiliate has or may have any liability or obligation;
(ii) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended;
(iii) "ERISA AFFILIATE" shall mean any other person or entity
under common control with the Company within the meaning of Section 414(b), (c),
(m) or (o) of the Code or 4001 (b) of ERISA, and the regulations issued
thereunder;
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(iv) "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(v) "PENSION PLAN" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA;
(b) Schedule 2.21(b) of the Schedule of Exceptions sets forth a
complete list of all Company Employee Plans.
(c) Neither the Company nor any ERISA Affiliate contributes to or has
any contingent obligations to any Multiemployer Plan. Neither the Company nor
any ERISA Affiliate has incurred any liability (including secondary liability)
to any Multiemployer Plan as a result of a complete or partial withdrawal from
such Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA.
(d) Neither the Company nor any ERISA Affiliate has ever maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code. Neither the
Company nor any ERISA Affiliate has any liability with respect to any
post-retirement benefit under any Company Employee Plan which is a welfare plan
(as defined in section 3(1) of ERISA), other than liability for health plan
continuation coverage described in Part 6 of Title I(B) of ERISA.
(e) To the Company's knowledge, each Company Employee Plan is now and
has always been operated in both form and operation in all material respects in
accordance with its terms and the requirements of all applicable laws, rules and
regulations, including, without limitation, ERISA, the Code and any applicable
securities and employment laws, rules and regulations, and no condition exists
or event has occurred with respect to any such plan which would result in the
incurrence by the Company or any ERISA Affiliate of any material liability, fine
or penalty. No Company Employee Plan is being audited or investigated by any
government agency or is subject to any pending or threatened claim or suit.
Neither the Company nor any ERISA Affiliate nor any fiduciary of any Company
Employee Plan has engaged in a prohibited transaction under Section 406 of ERISA
or Section 4975 of the Code. Each Company Employee Plan may be amended,
terminated or otherwise discontinued at any time without material liability to
the participants, the Purchasers, the Company or any ERISA Affiliate, other than
ordinary administration expenses.
(f) Each Company Employee Plan intended to qualify under Section
401(a) of the Code has received a favorable determination or opinion letter from
the Internal Revenue Service with respect to its qualified status under the
Code, including, without limitation, all amendments to the Code effected by the
Tax Reform Act of 1986 and subsequent legislation, the application for such
letter was accurate and complete, and nothing has occurred since the date of
such letter that would adversely affect the qualified status of such Company
Employee Plan.
2.22 Disclosure. The Company has fully provided the Purchasers with all the
information which the Purchasers have requested for deciding whether to acquire
the Stock and all information which the Company believes is reasonably necessary
to enable the Purchasers to make such a decision. No representation or warranty
of the Company contained in this
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Agreement and the exhibits attached hereto, or any certificate furnished or to
be furnished to the Purchasers at the Closing or to stockholders of the Company
in connection with the Repurchase, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made. The minute books of the Company made available to the
Purchasers contain a true, complete and accurate summary of all meetings of any
actions taken by the directors and stockholders of the Company since the date of
the Company's formation.
2.23 Insurance. The Company holds and maintains valid policies covering
such casualties and contingencies and of such types and amounts as is customary
for companies similarly situated.
2.24 Environmental and Safety Law. The Company is not in violation of any
applicable statute, law or regulation relating to the environment or
occupational heath and safety, and to its knowledge, no material expenditures
are or shall be required in order to comply with any such existing statute, law
or regulation.
2.25 Real Property Holding Corporation. The Company is not a real property
holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder and the Company has filed
with the Internal Revenue Service all statements, if any, which are required
under Section 1.897-2(h) of the Treasury Regulations.
2.26 Investment Company Act of 1940. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
2.27 Brokers or Finders. Except as set forth in the Schedule of Exceptions,
the Company has not incurred, and will not incur, directly or indirectly, as a
result of any action taken by the Company, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any of the transactions contemplated hereby.
2.28 Section 83(b) Elections. To the Company's knowledge, all individuals
who have purchased shares of the Company's Common Stock under agreements that
provide for the vesting of such shares have timely filed elections under Section
83 (b) of the Internal Revenue Code and any analogous provisions of applicable
state tax laws.
2.29 Obligations of Management. Each officer and key employee of the
Company is currently devoting substantially all of his or her business time to
the conduct of the business of the Company. The Company is not aware that any
officer or key employee of the Company is planning to work less than full time
at the Company in the future. No officer or key employee is currently working
or, to the Company's knowledge, plans to work for a competitive enterprise,
whether or not such officer or key employee is or will be compensated by such
enterprise.
2.30 Peering Relationships.
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Section 2.30 of the Schedule of Exceptions sets forth a detailed list of
peering arrangements between the Company and third parties, comprising direct
connections between the Company and any third party and direct connections
between the Company and any peering switch, which shall include the number and
size of all circuits provided by such third party or peering switch, and where
the circuits are interconnected.
2.31 Outstanding Debt.
As of March 31, 2006, the Company has Outstanding Debt (as defined in the
Schedule of Exceptions) of $15,967,551.49. An itemized schedule listing the
obligations and amounts that make up the Company's Outstanding Debt as of March
31, 2006 is attached as Schedule 2.31.
2.32 April 2006 Revenue.
The Company's revenue as reported on its financial statements for April 2006
shall have been no less than $4,225,000, as calculated consistent with past
practices.
3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, severally and not jointly, hereby represents and warrants
to the Company that:
3.1 Authorization. Such Purchaser has full power and authority to enter
into this Agreement. The Transaction Agreements, when executed and delivered by
the Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors' rights generally, and as limited by laws relating to the availability
of a specific performance, injunctive relief, or other equitable remedies, or
(b) to the extent the indemnification provisions contained in the Investors'
Rights Agreement may be limited by applicable federal or state securities laws.
3.2 Purchase Entirely for Own Account. This Agreement is made with the
Purchaser in reliance upon the Purchaser's representation to the Company, which
by the Purchaser's execution of this Agreement, the Purchaser hereby confirms,
that the Stock to be acquired by the Purchaser will be acquired for investment
for the Purchaser's own account, not as a nominee or agent, and not with a view
to the resale or distribution of any part thereof, and that the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Purchaser further
represents that the Purchaser does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Stock.
3.3 Disclosure of Information. The Purchaser has had an opportunity to
discuss the Company's business, management, financial affairs and the terms and
conditions of the offering of the Stock with the Company's management. The
Purchaser understands that such discussions, as well as any written information
delivered by the Company to the Purchaser, were intended to
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describe the aspects of the Company's business which it believes to be material.
The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of any
Purchaser to rely thereon.
3.4 Restricted Securities. The Purchaser understands that the Stock has not
been, and will not be, registered under the Securities Act, by reason of a
specific exemption from the registration provisions of the Securities Act which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser understands that the Stock is a "restricted security" under applicable
U.S. federal and state securities laws and that, pursuant to these laws, the
Purchaser must hold the Stock indefinitely unless the Stock is registered with
the Securities and Exchange Commission and qualified by state authorities, or an
exemption from such registration and qualification requirements is available.
The Purchaser acknowledges that the Company has no obligation to register or
qualify the Stock for resale except as set forth in the Stockholders' Agreement.
The Purchaser further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Stock, and on requirements relating to the Company which are outside of
the Purchaser's control, and which the Company is under no obligation and may
not be able to satisfy.
3.5 No Public Market. The Purchaser understands that no public market now
exists for any securities issued by the Company, and that the Company has made
no assurances that a public market will ever exist for the Stock.
3.6 Legends. The Purchaser understands that the Stock, and any securities
issued in respect thereof or exchange therefor, may bear one or all of the
following legends:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR, IF REASONABLY REQUESTED BY
THE COMPANY, AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933."
(b) Any legend set forth in the other Transaction Agreements.
(c) Any legend required by the blue sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.
3.7 Accredited Investor. The Purchaser is an accredited investor as defined
in Rule 501 (a) of Regulation D promulgated under the Securities Act.
3.8 Foreign Investors. If the Purchaser is not a United States person (as
defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), such Purchaser hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Stock or any use of this Agreement, including
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(i) the legal requirements within its jurisdiction for the purchase of the
Stock, (ii) and foreign exchange restrictions applicable to such purchase, (iii)
any governmental or other consents that may need to be obtained, and (iv) the
income tax and other tax consequences, if any, that may be relevant to the
purchase, holding, redemption, sale, or transfer of the Stock. Such Purchaser's
subscription and payment for and continued beneficial ownership of the Stock
will not violate any applicable securities or other laws of the Purchaser's
jurisdiction.
4. CONDITIONS TO THE FUNDING COMMITMENT DATE.
With respect to the obligations of each Purchaser to the Company to deliver
the Funding Commitment Certificate under this Agreement, such obligations are
subject to the fulfillment on or before the Funding Commitment Date of each of
the following conditions set forth below, unless otherwise waived in writing by
each of such Purchaser and the Company.
4.1 Representations and Warranties. The representations and warranties of
the Company contained in Sections 2 shall be true and correct as of the date
hereof and shall be true and correct in all material respects on and as of the
Funding Commitment Date with the same effect as though such representations and
warranties had been made on and as of the date of the Funding Commitment Date.
4.2 Performance. The Company shall have performed and complied in all
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
or by it on or before the Funding Commitment Date.
4.3 Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to the Purchasers at the Funding Commitment Date a certificate
certifying that the conditions specified in Sections 4.1 and 4.2 have been
fulfilled.
4.4 Qualifications. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance, sale and
purchase of the Stock pursuant to this Agreement shall be obtained and effective
as of the Closing, including, without limitation, any and all filing
requirements, waiting periods and other conditions of the Company and the
Purchasers under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
4.5 Stockholders' Agreement. The Company, each Purchaser and the
stockholders of the Company necessary to amend that certain Stockholders'
Agreement dated September 4, 2003 shall have executed and delivered the
Stockholders' Agreement to the Escrow Agent. The Escrow Agent shall hold such
agreement in escrow pending the satisfaction of the conditions set forth in
Section 5 and 6 (as evidenced by a certificate signed by the Company and the
Purchasers purchasing a majority of the Stock) at which time the Escrow Agent
shall release such agreement to the parties hereto and such agreement shall be
effective upon such release.
4.6 Management Rights Letter. The Company shall have executed and delivered
to the Escrow Agent a letter relating to board observer and information rights
in a form that is mutually acceptable to the Company and the Purchasers
purchasing a majority of the Stock, which letter shall be finalized no later
than three (3) business days following the date hereof, for
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the benefit of GS Capital Partners V Institutional, L.P. (the "Management Rights
Letter"). The Escrow Agent shall hold such Management Rights Letter in escrow
pending the satisfaction of the conditions set forth in Section 5 and 6 (as
evidenced by a certificate signed by the Company and the Purchasers purchasing a
majority of the Stock) at which time the Escrow Agent shall release such letter
to the parties hereto and such letter shall be effective upon such release.
4.7 Indemnification Agreement. The Company shall have executed an
Indemnification Agreement for Pete Perrone, Joseph Gleberman and two other
directors designated by an affiliate of GS Group (defined below) in the form
attached hereto as Exhibit G and delivered such agreements to the Escrow Agent.
The Escrow Agent shall hold such agreements in escrow pending the satisfaction
of the conditions set forth in Section 5 and 6 (as evidenced by a certificate
signed by the Company and the Purchasers purchasing a majority of the Stock) at
which time the Escrow Agent shall release such agreements to the parties hereto
and such agreement shall be effective upon such release.
4.8 Stockholder Approval; Restated Certificate. The Company shall have
received the necessary consents from its stockholders to effect the transactions
contemplated hereunder, including the consent necessary to adopt the Restated
Certificate. The Company shall have delivered the duly executed Restated
Certificate to the Escrow Agent. The Escrow Agent shall hold the Restated
Certificate in escrow pending the satisfaction of Section 5.8 at which time the
Escrow Agent shall automatically release such document to the Company to be
filed with the Delaware Secretary of State.
4.9 Confidential Information and Invention Assignment Agreement. The
Company and each of its current or former employees and consultants shall have
entered into the Company's standard form Confidential Information and Invention
Assignment Agreement, a form of which is attached hereto as Exhibit H.
4.10 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Purchaser's counsel, and the Purchaser's counsel shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request.
4.11 Investors Rights Agreement. The Company, each Purchaser and the
stockholders of the Company necessary to amend that certain First Amended and
Restated Investors' Rights Agreement dated January 9, 2004 shall have executed
and delivered the Investors Rights Agreement to the Escrow Agent. The Escrow
Agent shall hold such agreement in escrow pending the satisfaction of the
conditions set forth in Section 5 and 6 (as evidenced by a certificate signed by
the Company and the Purchasers purchasing a majority of the Stock) at which time
the Escrow Agent shall release such agreement to the parties hereto.
4.12 Escrow Agreement. The Company, the Stockholders' Representative and
the Escrow Agent shall have executed and delivered an escrow agreement that is
mutually acceptable to the Company and the Purchasers purchasing a majority of
the Stock, which agreement shall be finalized no later than three (3) business
days following the date hereof (the "ESCROW AGREEMENT").
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4.13 Exchange Agent Agreement. The Company and the Exchange Agent shall
have executed and delivered an exchange agent agreement that is mutually
acceptable to the Company and the Purchasers purchasing a majority of the Stock,
which agreement shall be finalized no later than three (3) business days
following the date hereof (the "EXCHANGE AGENT AGREEMENT"). Such Exchange Agent
Agreement shall be effective only upon the Closing.
4.14 Assurances of and "Clear Line of Sight" With Respect to Shares to Be
Tendered. Securityholders of the Company shall have delivered Stockholder Tender
Agreements and all related documents identified therein and/or the documents
specified in the Offer to Purchase obligating them to sell at least 18,401,522
shares of capital stock in accordance with the terms of the Offer to Purchase.
4.15 No Material Adverse Effect. No Material Adverse Effect has occurred
with respect to the Company and its subsidiaries, taken as a whole.
4.16 2006 Sale Participation Program. The Company shall have received the
necessary consents from its stockholders to adopt a sale participation program
in substantially the form attached hereto as Exhibit K.
4.17 Approvals. The Company shall have received all authorizations,
consents, and approvals required to undertake the transactions contemplated
thereby under its agreements with Silicon Valley Bank, Partners for Growth and
Quova, Inc.
4.18 Termination of Executive Compensation Plan. The Company shall have
terminated its Executive Compensation Plan, effective as of the end of the
Company's second fiscal quarter.
4.19 Allan Kaplan Consulting Agreement. The Company shall have entered into
a written consulting agreement with Allan Kaplan, in a form reasonably
acceptable to a majority in interest of the Purchasers, which shall provide for
an annual compensation of at least $75,000 and health coverage consistent with
Mr. Kaplan's current coverage. The term of such agreement shall be one year,
renewable with mutual consent of the Company and Mr. Kaplan.
5. CONDITIONS OF THE PURCHASERS' OBLIGATIONS AT CLOSING.
The obligations of each Purchaser to the Company under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, unless otherwise waived in writing by such Purchaser:
5.1 Representations and Warranties. The representations and warranties of
the Company contained in Sections 2 shall be true and correct on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing (except to the extent such
representations and warranties are specifically made as of a particular date, in
which case such representations and warranties shall be true and correct as of
such date) except where the failure to be true and correct, individually or in
the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect on the Company.
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5.2 Performance. The Company shall have performed and complied in all
material respects with all covenants, agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with
or by it on or before the Closing.
5.3 Compliance Certificate. The Chief Executive Officer of the Company
shall deliver to the Purchasers at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 Secretary's Certificate. The Secretary of the Company shall deliver to
each Purchaser at the Closing a certificate stating that the copies of the
Company's Restated Certificate and Bylaws and Board of Director and stockholder
resolutions relating to the sale of the Stock attached thereto are true and
complete copies of such documents and resolutions.
5.5 Restated Certificate. Upon the release of the Restated Certificate by
the Escrow Agent, the Company shall have filed the Restated Certificate with the
Secretary of State of Delaware on or prior to the Closing, which shall continue
to be in full force and effect as of the Closing.
5.6 Opinion of Counsel. Heller Ehrman LLP, special counsel to the Company,
shall have delivered to the Purchasers an opinion in substantially the form
attached hereto as Exhibit I and Greenberg Traurig LLP, corporate counsel to the
Company, shall have delivered to the Purchasers an opinion in substantially the
form attached hereto as Exhibit J.
5.7 Board of Directors. As of the Closing, the size of the Board of
Directors shall be set at seven (7) persons and shall consist of: Allan Kaplan,
Nathan Raciborski, William Rinehart, Pete Perrone, Joseph Gleberman and two
other directors designated by an affiliate of GS Group (defined below).
5.8 Closing of Offer to Purchase. At least 18,401,522 shares of capital
stock shall have been validly tendered in accordance with the terms of the Offer
to Purchase and not withdrawn, all conditions to the Company's obligations to
accept such shares for payment have been satisfied or waived, and the Company
shall have accepted such shares for payment and have an irrevocable obligation
to make payment for such shares.
5.9 Funding Commitment Date Deliverables. All documents required to be
delivered by the Company at or prior to the Funding Commitment Date shall be
delivered by the Company to the Purchasers unmodified, except to change dates as
appropriate.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to each Purchaser under this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions, unless otherwise waived:
6.1 Representations and Warranties. The representations and warranties of
each Purchaser contained in Section 3 shall be true and correct on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of the Closing.
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6.2 Performance. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the Closing shall
have been performed or complied with.
6.3 Restated Certificate. After the release of the Restated Certificate by
the Escrow Agent, the Company shall have filed the Restated Certificate with the
Secretary of State of Delaware on or prior to the Closing, which shall continue
to be in full force and effect as of the Closing.
6.4 Management Rights Letter and Escrow Agreenment. The Company and the
Purchasers shall negotiate the Management Rights Letter and Escrow Agreement, in
forms reasonably acceptable to the Company.
7. HOLD HARMLESS; INDEMNIFICATION
7.1 Escrow; Hold Harmless.
(a) After the Closing, the Purchasers and their affiliates and their
respective officers, directors and employees (collectively, the "Indemnified
Parties") shall be held harmless by the Tendering Stockholders for any claims,
liabilities, losses, damages, costs, deficiencies, expenses, and penalties
incurred by or on behalf of the Indemnified Parties including, without
limitation, reasonable attorneys' fees and expenses of investigation and defense
incurred, sustained or paid by the Indemnified Parties, directly or indirectly,
net of any recoveries under insurance policies or indemnities from third parties
(collectively, "Losses"), arising out of, based upon or resulting from:
(i) any inaccuracy or breach of any representation or warranty
or, with respect only to claims relating to Section 2.8 hereof, any alleged
inaccuracy or alleged breach of any representation or warranty in such Section
2.8, made by the Company in this Agreement or in any certificate, instrument or
other document delivered by or on behalf of the Company to the Purchasers
pursuant to this Agreement;
(ii) the breach of any covenant or agreement made by the Company
in this Agreement or in any certificate, instrument or other document delivered
by or on behalf of the Company to the Purchasers pursuant to this Agreement;
(iii) any claims made by any Tendering Stockholder in connection
with this Agreement or the transactions contemplated hereby, whether based upon
any breach of fiduciary or other duty by any officer, director or stockholder of
the Company or otherwise, or any claims by any officer, director or stockholder
of the Company to indemnification by the Company with respect to any such
claims; and
(iv) any Taxes of the Company attributable to any full or partial
Tax periods ending on or prior to the Closing in excess of any specific reserve
therefore reflected in the Financial Statements.
(b) Notwithstanding anything to the contrary contained in this
Agreement:
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(i) with respect to indemnification by the Tendering
Stockholders, except with respect to indemnification claims for Losses based on
fraud, willful misconduct or intentional misrepresentation (x) the Escrow shall
be the sole and exclusive right and remedy for any Losses arising out of any and
all claims relating to the subject matter of this Agreement, and (y) the maximum
amount that may be recovered from any single Tendering Stockholder shall be
limited to such stockholder's pro-rata share of the Escrow;
(ii) subject to Section 7.1(b)(iii), and except with respect to
indemnification claims for Losses based on a breach of a representation or
warranty contained in Section 2.2 or Section 2.16, no payment from the Escrow
with respect to any Losses otherwise payable hereunder shall be payable until
such time as all such Losses including any Excess IP Expenses, shall aggregate
to more than $300,000 (the "ESCROW BASKET"), after which time only such Losses
in excess of such amount may be reimbursable from the Escrow. For purposes of
determining if a claim should be included in calculating the aggregate value of
the claims, no individual claim with a value of less than $15,000 shall be
included, however, related claims of any size shall be treated as one "claim"
and shall be aggregated to determine if such claim exceeds the $15,000
threshold; and thus should be included in the Escrow Basket. With respect to
indemnification claims for Losses based on a breach of a representation or
warranty contained in Section 2.2 or Section 2.16, no payment from the Escrow
with respect to any Losses otherwise payable hereunder shall be payable until
such time as all such Losses shall aggregate to more than $15,000, after which
time only such Losses in excess of such amount may be reimbursable from the
Escrow;
(iii) with respect only to any alleged inaccuracy or alleged
breach of Section 2.8 hereof, the following provisions shall apply: with respect
to any claim by a third party alleging infringement of its Intellectual Property
Rights or otherwise alleging facts that would constitute a breach of Section 2.8
hereof (the "THIRD PARTY INFRINGEMENT CLAIM"), the Company shall bear the
expenses for defending and settling any such Third Party Infringement Claim;
provided that upon the occurrence of the Company incurring expenses in excess of
$500,000 with respect to all such Third Party Infringement Claims ("EXCESS IP
EXPENSES"), such Excess IP Expenses shall be deemed to be Losses and be
aggregated with all Losses until the Escrow Basket amount has been reached.
After the Escrow Basket amount has been reached, 50% of any further Excess IP
Expenses incurred by the Company shall be payable by the Tendering Stockholders
to the Company out of the Escrow. All such payments of further Excess IP
Expenses pursuant to this Section 7.1(b)(iii) shall be made by Escrow Agent to
the Company upon notice from the Company that the Company has incurred such
further Excess IP Expenses. For purposes of determining if a claim or expense
should be included in calculating the aggregate value of the claims and expenses
with respect to satisfying the aforementioned $500,000 threshold and the Excess
IP Expenses, if any, no individual claim or expense with a value of less than
$15,000 shall be included, however, related claims of any size shall be treated
as one "claim" and shall be aggregated to determine if such claim exceeds the
$15,000 threshold; and thus should be applied toward the $500,000 threshold and
included in the Excess IP Expenses;
(iv) no claim for indemnification from the Tendering Stockholders
shall be made unless asserted by a written notice delivered to the Stockholders'
Representative
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(as defined below) on or prior to the Escrow Termination Date in accordance with
the Escrow Agreement;
(v) in the event that any Losses that would otherwise have been
payable pursuant to this Section 7 are satisfied in whole or in part by an
adjustment to the conversion price of the Series B Preferred Stock as provided
under Article IV Section A(4)(e) of the Restated Certificate, then no claim for
indemnification shall be made or paid to the extent and only to the extent that
such Losses were compensated through such adjustment; and
(vi) except with respect to claims based on fraud, willful
misconduct or intentional misrepresentation, an Indemnified Party shall have no
recourse for a claim against the Company if such claim is subject to
indemnification by the Tendering Stockholders pursuant to this Section 7 until
the earlier of the Escrow Termination Date or the date on which the entire
Escrow has been distributed and provided that no claim shall be made against the
Company until such time as all such claims shall aggregate to more than $15,000
after which time only those claims in excess of such amount may be made.
Notwithstanding the foregoing, an Indemnified Party shall be entitled to pursue
any claim against the Company if such Indemnified Party reasonably believes in
good faith that (a) the funds remaining in Escrow will likely not be sufficient
to satisfy such claim and (b) the delay in filing such claim pending resolution
of an indemnification claim hereunder is likely to cause such Indemnified Party
to lose its right to pursue such claim under applicable statutes of limitations.
7.2 Indemnification Procedures.
(a) The obligations and liabilities of Indemnifying Parties under this
Section 7 with respect to Losses arising from (i) actual claims or demands or
(ii) claims or demands threatened in writing and for which an actual claim or
demand is made within a reasonable period of time of such threat by any third
party which are subject to the indemnification provided for in this Section 7
("Third Party Claims") shall be governed by and be contingent upon the following
additional terms and conditions. If an Indemnified Party shall receive notice of
any Third Party Claim, the Indemnified Party shall give the Stockholders'
Representative notice of such Third Party Claim within fifteen (15) days of the
receipt by the Indemnified Party of such notice; provided, however, that the
failure to provide such notice shall not release an Tendering Stockholders from
any of its obligations under this Section 7 except to the extent that such
Tendering Stockholders is actually prejudiced by such failure. The notice of
claim shall describe in reasonable detail the facts known to the Indemnified
Party giving rise to such indemnification claim, and the amount or good faith
estimate of the amount arising therefrom.
(b) The Tendering Stockholders shall be entitled to assume and control
the defense of any Third Party Claim through counsel of its choice (such counsel
to be reasonably acceptable to the Indemnified Party) if it gives notice of its
intention to do so to the Indemnified Party and acknowledges to the Indemnified
Party in writing the Tendering Stockholders' obligation to indemnify the
Indemnified Party with respect to all elements of such claim (subject to any
limitations on such liability contained in this Agreement); provided, however,
under all circumstances and notwithstanding anything in this Agreement to the
contrary, the Company shall be entitled to and shall defend such all Third Party
Infringement Claims. If, however, the Tendering Stockholders fails or refuses to
undertake the defense of such Third Party Claim
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within fifteen (15) days after written notice of such claim has been delivered
to the Tendering Stockholders by the Indemnified Party, the Indemnified Party
shall have the right to undertake the defense, compromise and settlement of such
Third Party Claim with counsel of its own choosing (such counsel to be
reasonably acceptable to the Tendering Stockholders) and the costs and expenses
of such defense shall be paid from the Escrow. If the Indemnified Party is
entitled to control the defense of an action, the Tendering Stockholders shall
be entitled to consent to a settlement of, or the stipulation of any judgment
arising from, any such claim or legal proceeding, which consent shall not be
unreasonably withheld or delayed; provided, however, that such consent shall not
be required in connection with a settlement of, or the stipulation of any
judgment arising from a Third Party Infringement Claim. The Indemnified Party
shall cooperate with the Tendering Stockholders in such defense and make
available to the Tendering Stockholders, at the Tendering Stockholders' expense,
all witnesses, pertinent records, materials and information in the Indemnified
Party's possession or under the Indemnified Party's control relating thereto as
is reasonably requested by the Tendering Stockholders. In the event the
Indemnified Party or the Company, as the case may be, is entitled to control the
defense of an action (including a Third Party Infringement Claim), the
Indemnified Party or the Company, as the case may be, shall provide the
Stockholders' Representative with periodic updates regarding the defense of such
actions and such information as the Stockholders' Representative may reasonably
request, provided that such information need not be provided if the Indemnified
Party or the Company, as the case may be, reasonably believes that such
exclusion is necessary to preserve attorney-client, work product or similar
privilege. The Indemnified Party shall be entitled to participate in (but not
control) the defense of any such action, with its counsel (such counsel to be
reasonably acceptable to the Tendering Stockholders) at its own expense;
provided, however, that if there exists a conflict of interest between the
Tendering Stockholders and the Indemnified Party, then the Indemnified Party
shall have the right to engage separate counsel (such counsel to be reasonably
acceptable to the Tendering Stockholders), the reasonable costs and expenses of
which shall be paid from the Escrow, but in no event shall the Tendering
Stockholders be liable for the costs and expenses of more than one such separate
counsel. Except with the written consent of the Indemnified Party (not to be
unreasonably withheld or delayed), the Tendering Stockholders will not, in the
defense of a Third Party Claim, consent to the entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving to the Indemnified Party and the Company by the third party of a release
from all liability with respect to such suit, claim, action, or proceeding.
Notwithstanding the foregoing, however, except with respect to Third Party
Infringement Claims which shall be defended by the Company, the Indemnified
Party shall be entitled to the control of the defense of any such action if it
(i) is reasonably likely to result in liabilities which, taken with other then
existing claims by any of the Indemnified Parties under this Section 7, would
not be fully indemnified hereunder, or (ii) is reasonably likely to result in a
material adverse effect as to the Indemnified Party even if the Tendering
Stockholders pays all indemnification amounts in full.
7.3 Stockholders' Representative.
(a) Michael Gordon (such person and any successor or successors being
the "Stockholders' Representative") shall act as the representative of the
Tendering Stockholders, and shall be authorized to act on behalf of the
Tendering Stockholders and to take any and all actions required or permitted to
be taken by the Stockholders' Representative under this
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Agreement with respect to any claims (including the settlement thereof) made by
an Indemnified Party for indemnification pursuant to this Section 7 and with
respect to any actions to be taken by the Stockholders' Representative pursuant
to the terms of the Escrow Agreement. The Stockholder Representative shall be
entitled to exercise power with respect to the foregoing, including, without
limitation, to (i) authorize the delivery of amounts from the Escrow to an
Indemnified Party in satisfaction of claims by an Indemnified Party, (ii) agree
to, negotiate, enter into settlements and compromises of, and comply with orders
of courts with respect to any claims for indemnification, and (iii) take all
actions necessary in the judgment of the Stockholders' Representative for the
accomplishment of the foregoing. In all matters relating to the foregoing, the
Stockholders' Representative shall be the only party entitled to assert the
rights of the Tendering Stockholders. The Indemnified Parties shall be entitled
to rely on all statements, representations and decisions of the Stockholders'
Representative. The Stockholders' Representative is not entitled to amend this
Agreement or take any actions relating to this Agreement prior to the Closing.
(b) The Tendering Stockholders shall be bound by all actions taken by
the Stockholders' Representative in his capacity thereof, except for any action
that conflicts with the limitations set forth in subsection (d) below. The
Stockholders' Representative shall promptly, and in any event within ten
business days, provide written notice to the Tendering Stockholders of any
action taken on behalf of them by the Stockholders' Representative pursuant to
the authority delegated to the Stockholders' Representative under this Section
7. The Stockholders' Representative shall at all times act in his or her
capacity as Stockholders' Representative in a manner that the Stockholders'
Representative believes to be in the best interest of the Tendering
Stockholders. Neither the Stockholders' Representative nor any of its directors,
officers, agents or employees, if any, shall be liable to any person for any
error of judgment, or any action taken, suffered or omitted to be taken under
this Agreement or the Escrow Agreement, except in the case of its gross
negligence, bad faith or willful misconduct. The Stockholders' Representative
may consult with legal counsel, independent public accountants and other experts
selected by it. The Stockholders' Representative shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the Escrow Agreement. As to any
matters not expressly provided for in this Agreement or the Escrow Agreement,
the Stockholders' Representative shall not exercise any discretion or take any
action.
(c) Each Tendering Stockholder on whose behalf a portion of its
consideration was contributed to the Escrow shall, severally and not jointly,
hold harmless and reimburse the Stockholders' Representative from and against
such Tendering Stockholder's ratable share of any and all liabilities, losses,
damages, claims, costs or expenses suffered or incurred by the Stockholders'
Representative arising out of or resulting from any action taken or omitted to
be taken by the Stockholders' Representative as Stockholder Representative under
this Agreement or the Escrow Agreement ("STOCKHOLDER REPRESENTATIVE EXPENSES"),
other than such liabilities, losses, damages, claims, costs or expenses
(including the reasonable fees and expenses of any legal counsel retained by the
Stockholders' Representative) arising out of or resulting from the Stockholders'
Representative's gross negligence, bad faith or willful misconduct; provided,
however, that no such Tendering Stockholder shall be liable in excess of such
Tendering Stockholder's pro rata portion of the Escrow. The Stockholders'
Representative shall be entitled to recover up to $500,000 of any Stockholder
Representative Expenses paid to third parties from
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the Escrow at any time prior to the distribution of funds to the Tendering
Stockholders. In the event there are any remaining funds in the Escrow to be
distributed to stockholders of the Company immediately prior to the final
distribution from the Escrow pursuant to the Escrow Agreement, the Stockholders'
Representative shall be entitled to recover any such expenses in excess of
$500,000 from the Escrow prior to the distribution of funds to the Tendering
Stockholders.
(d) Notwithstanding anything to the contrary herein or in the Escrow
Agreement, the Stockholders' Representative is not authorized to, and shall not,
accept on behalf of any Tendering Stockholder any consideration to which such
Tendering Stockholder is entitled under this Agreement and the Stockholders'
Representative shall not in any manner exercise, or seek to exercise, any voting
power whatsoever with respect to shares of capital stock of the Company or
Purchasers now or hereafter owned of record or beneficially by any Tendering
Stockholder unless the Stockholders' Representative is expressly authorized to
do so in a writing signed by such Tendering Stockholder.
(e) In the event of the resignation, removal, death or incapacity of
the Stockholders' Representative, a successor shall thereafter be appointed by
an instrument in writing signed by such successor and by the Tendering
Stockholders holding a majority of the outstanding shares of Common Stock of the
Company immediately prior to the Closing, and such appointment shall become
effective as to any such successor when a copy of such instrument shall have
been delivered to Purchasers in accordance with Section 10.5.
8. CONDUCT OF BUSINESSES PENDING THE CLOSING
8.1 Conduct of Business by the Company Pending the Closing. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, the Company agrees (except to the
extent that a majority in interest of the Purchasers shall otherwise consent in
writing), to carry on its business in the usual, regular and ordinary course and
in substantially the same manner as previously conducted, to use all reasonable
efforts consistent with past practices and policies to preserve intact its
present business organization, keep available the services of its present
officers and key employees and consultants and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it, to the end that its goodwill and ongoing businesses
would be unimpaired, in any material respect, at the Closing. The Company shall
promptly notify Purchasers of any material event or occurrence not in the
ordinary course of business of the Company. By way of amplification and not
limitation, except as contemplated by this Agreement, the Company shall not,
between the date of this Agreement and the Closing, do any of the following
without the prior written consent of a majority in interest of the Purchasers:
(a) amend or otherwise change its Certificate of Incorporation or
Bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, authorize or
propose the issuance, sale, pledge, disposition, grant or encumbrance of any
shares of its capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any
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shares of such capital stock or any other ownership interest (including, without
limitation, any phantom interest), of the Company, or accelerate the vesting of
any such security, except pursuant to the terms of options, warrants or
preferred stock outstanding on the date of this Agreement;
(c) sell, lease, license, pledge, grant, encumber or otherwise dispose
of any of its properties or assets which are material, individually or in the
aggregate, to its business, except in the ordinary course of business,
consistent with past practice;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;
(e) split, combine, subdivide, redeem or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or purchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service by such party, and except in connection with the
transactions contemplated hereby;
(f) acquire (including, without limitation, by merger, consolidation,
or acquisition of stock or assets) any interest or any assets in any
corporation, partnership, other business organization or any division thereof;
(g) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person, or make any loans or
advances; except in the ordinary course of business, consistent with past
practice;
(h) enter into any lease or contract for the purchase or sale of any
property, real or personal except in the ordinary course of business, consistent
with past practice;
(i) increase, or agree to increase, the compensation (cash, equity or
otherwise) payable, or to become payable, to its officers or employees, except
(A) pursuant to agreements outstanding on the date hereof, (B) as previously
disclosed in writing and delivered to Purchasers and (C) with respect to
non-officer employees only, such increases as approved by the Company,
consistent with past practices and provided that the Company used reasonable
efforts to obtain the prior approval of the Purchasers, or grant any severance
or termination pay (cash, equity or otherwise) to, or enter into any employment
or severance agreement with, any of its directors, officers or other employees,
or establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
Company Employee Plan, agreement, trust, fund, policy or arrangement for the
benefit of any director, officer or employee; provided, however, that the
foregoing provisions of this subsection shall not apply to any amendments to
employee benefit plans described in Section 3(3) of ERISA that may be required
by Law;
(j) authorize cash payments in exchange for any options granted under
any of such plans except as specifically required by the terms of such plans or
any such agreement or
29
<PAGE>
any related agreement in effect as of the date of this Agreement and disclosed
in the Schedule of Exceptions;
(k) make or change any material tax election, settle or compromise any
tax liability, or consent to the extension or waiver of any statute of
limitations with respect to taxes.
8.2 Litigation. The Company shall notify the Purchasers in writing promptly
after learning of any material claim, action, suit, arbitration, mediation,
proceeding or investigation by or before any court, arbitrator or arbitration
panel, board or other governmental entity initiated by it or against it, or
known by it to be threatened against it or any of its officers, directors,
employees or stockholders in their capacity as such.
8.3 Notification of Certain Matters. Purchasers shall give reasonably
prompt notice to the Company, and the Company shall give reasonably prompt
notice to Purchasers, of (i) the occurrence, or non-occurrence, of any event the
occurrence, or non-occurrence, of which would be likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate, in any material respect, or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied, in any
material respect; and (ii) any failure or inability of Purchasers or the
Company, as the case may be, to comply, in any material respect, with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder.
8.4 Tax Reporting. The parties hereto agree and acknowledge that each party
hereto shall (A) take the position for federal income tax purposes and all
comparable provisions of state law that the Series B Preferred Stock issued
pursuant to this Agreement is not "preferred stock" for purposes of Section 305
of the Code and (B) file all tax returns and reports (including information
returns) so as not to include any amount in income of the holder of the Series B
Preferred Stock under Section 305(b)(4) or (5) of the Code with respect to the
holding or issuance of the Series B Preferred Stock issued pursuant to this
Agreement.
9. SATISFACTION OF FUNDING COMMITMENT AND CLOSING CONDITIONS; TERMINATION.
9.1 Satisfaction of Closing Conditions. The Company and the Purchasers
shall each use its reasonable best efforts to satisfy the conditions set forth
in Section 4, Section 5 and Section 6, respectively.
9.2 Termination Events. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of the Company and the Purchasers;
(b) by either the Company or the Purchasers, if the Closing shall not
have been consummated by August 30, 2006 for any reason; provided, however, that
the right to terminate this Agreement under this Section 9.2(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Closing to
30
<PAGE>
occur on or before such date and such action or failure to act constitutes a
material breach of this Agreement.
(c) by either Company or the Purchasers, if a governmental entity
shall have issued an order, decree or ruling or taken any other action after the
date hereof, in any case having the effect of permanently restraining, enjoining
or otherwise prohibiting the Closing, which order, decree, ruling or other
action shall have become final and nonappealable;
(d) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of the Purchasers set forth in this Agreement,
or if any representation or warranty of the Purchasers shall have become untrue,
in either case such that the conditions set forth in Section 6.1 or Section 6.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in the Purchasers' representations and warranties or breach by the
Purchasers is curable by the Purchasers through the exercise of its commercially
reasonable efforts, then the Company may not terminate this Agreement under this
Section 9.2(d) for thirty (30) days after delivery of written notice from the
Company to the Purchasers of such breach, provided the Purchasers continue to
exercise commercially reasonable efforts to cure such breach or inaccuracy (it
being understood that the Company may not terminate this Agreement pursuant to
this paragraph (d) if such breach or inaccuracy by the Purchasers is cured
during such thirty (30) day period);
(e) by the Purchasers upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 5.1 or Section 5.2
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company through the exercise of its commercially
reasonable efforts, then the Purchasers may not terminate this Agreement under
this Section 9.2(e) for thirty (30) days after delivery of written notice from
the Purchasers to the Company of such breach, provided the Company continues to
exercise commercially reasonable efforts to cure such breach or inaccuracy (it
being understood that the Purchasers may not terminate this Agreement pursuant
to this paragraph (e) if such breach or inaccuracy by the Company is cured
during such thirty (30)-day period);
(f) by the Purchasers, if a Material Adverse Effect has occurred prior
to the Funding Commitment Date with respect to the Company and its subsidiaries
taken as a whole; provided, that if such Material Adverse Effect is curable by
the Company or any of its subsidiaries through the exercise of its commercially
reasonable efforts, then the Purchasers may not terminate this Agreement under
this Section 9.2(f) for thirty (30) days after delivery of written notice from
the Purchasers to the Company of such Material Adverse Effect, provided the
Company continues to exercise commercially reasonable efforts to cure such
Material Adverse Effect (it being understood that the Purchasers may not
terminate this Agreement pursuant to this paragraph (f) if such Material Adverse
Effect is cured during such thirty (30)-day period).
31
<PAGE>
10. MISCELLANEOUS.
10.1 Transfer; Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except for the persons
intended to be benefited pursuant to Section 7 or as expressly provided in this
Agreement.
10.2 Governing Law. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of Delaware,
without giving effect to principles of conflicts of law.
10.3 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original and all
of which together shall constitute one instrument.
10.4 Titles and Subtitle. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
10.5 Notices. Any notice required or permitted by this Agreement shall be
in writing and shall be deemed sufficient upon delivery, when delivered
personally or by overnight courier or sent by confirmed electronic mail or
facsimile if sent during normal business hours of the recipient (if not, then on
the next business day), or forty-eight (48) hours after being deposited in the
U.S. mail, as certified or registered mail, with postage prepaid, addressed to
the party to be notified at such party's address as set forth on the signature
page hereto, with a copy to Wilson Sonsini Goodrich & Rosati, P.C., 650 Page
Mill Road, Palo Alto, CA 94304, Attn: Mark L. Reinstra and to Goldman Sachs &
Co., One New York Plaza, 30th Floor, NY, NY 10004, Attn: Ben Adler, or as
subsequently modified by written notice, and if to the Company, with a copy to
Heller Ehrman LLP, 275 Middlefield Road, Menlo Park, CA 94025, Attn: Jon
Gavenman.
10.6 Finder's Fees. Each party represents that, except as set forth in the
Schedule of Exceptions, it neither is nor will be obligated for any finder's fee
or commission in connection with this transaction. Each Purchaser agrees to
indemnify and to hold harmless the Company from any liability for any commission
or compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which each Purchaser
or any of its officers, employees, or representatives is responsible. The
Company agrees to indemnify and hold harmless each Purchaser from any liability
for any commission or compensation in the nature of a finder's fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.
10.7 Fees. If the Closing is effected, the Company will pay the reasonable
fees and expenses of Wilson Sonsini Goodrich & Rosati, PC, special legal counsel
to the GS Entities (defined below), KPMG LLP and McKinsey & Company, If any
action at law or in equity (including arbitration) is necessary to enforce or
interpret the terms of any of the Transaction
32
<PAGE>
Agreements, the prevailing party shall be entitled to reasonable attorney's
fees, costs and necessary disbursements in addition to any other relief to which
such party may be entitled.
10.8 Amendments and Waiver. Any term of this Agreement may be amended or
waived only with the written consent of the Company and the holders of at least
a majority of the shares of Common Stock issued or issuable upon conversion of
the Stock purchased hereunder; provided, however, that (a) any amendment to or
waiver of Sections 1.4(c) and 7 shall require the consent of the Stockholders'
Representative and (b) any amendment to or waiver of Section 10.12 shall require
the consent of the majority of the Board of Directors, including the approval of
a majority of the Common Directors, as such term is defined by the Restated
Certificate. Any amendment or waiver effected in accordance with this Section
10.8 shall be binding upon the Purchasers and each transferee of the Stock, each
future holder of all such Stock, and the Company.
10.9 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
10.10 Delays or Omission. No delay or omission to exercise any right, power
or remedy accruing to any party under this Agreement, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party of any breach or default under
this Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
10.11 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements relating
to the subject matter hereof existing between the parties hereto are expressly
canceled.
10.12 Confidentiality. Each Purchaser agrees, during the period ending five
(5) years from the date hereof, severally and not jointly, to use, and to use
commercially reasonable efforts to ensure that its authorized representatives
use, the same degree of care as such Purchaser uses to protect its own
confidential information to keep confidential any information furnished to it
which the Company identifies in writing as being proprietary or confidential
except such information that (a) was in the public domain prior to the time it
was furnished to such Purchaser, (b) is or becomes (through no willful improper
action or inaction by such Purchaser) generally available to the public, (c) was
in its possession or known by such Purchaser without
33
<PAGE>
restriction prior to receipt from the Company, (d) was rightfully disclosed to
such Purchaser by a third party without restriction or (e) was independently
developed without any use of the Company's confidential information.
Notwithstanding the foregoing, each Purchaser may disclose such proprietary or
confidential information to (i) any former partner who has retained an economic
interest in such Purchaser, current or prospective partner, limited partner,
general partner or management company of such Purchaser (or any employee or
representative of any of the foregoing) (each of the foregoing persons, a
"PERMITTED DISCLOSEE") or (ii) a person acting as an advisor to Purchaser, or a
potential co-investor with Purchaser, except with the consent of the Company or
pursuant to a subpoena, Civil Investigative Demand (or similar process), order,
statute, rule or other legal requirement promulgated or imposed by a court or by
a judicial, regulatory, self-regulatory or legislative body, organization,
agency or committee or otherwise in connection with any judicial or
administrative proceeding (including, in response to oral questions,
interrogatories or requests for information or documents) in which a Permitted
Disclosee is involved. Furthermore, nothing contained herein shall prevent any
Purchaser or Permitted Disclosee from (a) entering into any business, entering
into any agreement with a third party, or investing in or engaging in investment
discussions with any other company (whether or not competitive with the
Company), provided that such Purchaser or Permitted Disclosee does not, except
as permitted in accordance with this Section 10.12, disclose any proprietary or
confidential information of the Company in connection with such activities, or
(b) making any disclosures required by law, rule, regulation or court or other
governmental order. Notwithstanding the provisions of this Section 10.12, in the
event that the Company and a Purchaser have executed a nondisclosure agreement
relating to the subject matter of this Agreement, such nondisclosure agreement
shall govern the confidentiality obligations of the Company and such Purchaser
and shall supercede the provisions of this Section 10.12.
10.13 Exculpation Among Purchasers. Each Purchaser acknowledges that it is
not relying upon any person, firm or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Purchaser agrees that no Purchaser nor the respective controlling
persons, officers, directors, partners, agents, or employees of any Purchaser
shall be liable to any other Purchaser for any action heretofore or hereafter
taken or omitted to be taken by any of them in connection with the purchase of
the Stock.
10.14 Survival of Warranties. Except with respect to Section 2.2, Section
2.16 and Section 10.12, the warranties, representations and covenants of the
Company and the Purchasers contained in or made pursuant to this Agreement shall
survive for a period of 18 months after the Closing and shall in no way be
affected by any investigation of the subject matter thereof made by or on behalf
of the Purchasers or the Company. The representations, warranties and covenants
of the Company and the Purchasers set forth in Section 2.2, Section 2.16 and
Section 10.12 shall survive the Closing. Except as set forth in Section
7.1(b)(vi), nothing contained in Section 7 or elsewhere herein shall be
construed to limit the Purchasers' ability to seek recourse against the Company
for breaches of any surviving representation, warranty and covenant.
10.15 Specific Enforcement. It is agreed and understood that monetary
damages would not adequately compensate an injured party for the breach of this
Agreement by any other party, that this Agreement shall be specifically
enforceable, and that any breach or threatened breach of this Agreement shall be
the proper subject of a temporary or permanent injunction or restraining
34
<PAGE>
order. Further, each party hereto waives any claim or defense that there is an
adequate remedy at law for such breach or threatened breach.
10.16 Other Engagements and Activities. The investment in the Company being
made by certain investment funds affiliated with The Goldman Sachs Group, Inc.
("GS GROUP") (each, a "GS ENTITY") pursuant to this Agreement is being made
notwithstanding any engagement, prior to or subsequent to the date hereof by the
Company of any affiliate of GS Group as financial advisor, agent or underwriter
to the Company, and none of the other Purchasers hereto have relied on GS Group
to make their investment decision to purchase any Shares.
10.17 No Promotion. Except as required by Law, the Company agrees that
neither it nor any of its directors, officers, employees, agents or
representatives will, without the prior written consent of GS Group, (i) use in
advertising, publicity, or otherwise the name of The Goldman Sachs Group, Inc.
or Goldman, Sachs & Co., or any GS Entity or any partner or employee thereof,
nor any trade name, trademark, trade device, service mark, symbol or any
abbreviation, contraction or simulation thereof owned by GS Group or any of its
affiliates, or (ii) represent, directly or indirectly, that any product or any
service provided by the Company has been approved or endorsed by GS Group,
Goldman Sachs & Co. or any GS Entity. Notwithstanding the foregoing, so long as
the GS Entities are stockholders of the Company, the Company and any Purchaser
may disclose that the GS Entities are stockholders of the Company and the amount
or percentage of Company securities held by the GS Entities. In the event the
Company or any of its subsidiaries is required to make a filing with any
Governmental Authority (as defined below) that references any of the GS Entities
(or their affiliates) or contains information relating to any of the GS Entities
(or their affiliates) (the "GS INFORMATION"), the Company shall (i) furnish a
copy of such filing to the GS Group as promptly as practicable prior to the time
the Company makes such filing and (ii) consult with the GS Group with respect to
the disclosure of the GS Information in such filing. For purposes of this
Section 10.17, "Governmental Authority" shall mean any supernational, national,
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority. This Section 10.17 shall survive
termination of this Agreement.
10.18 Exclusivity. Until the earliest of (a) the Closing or (b) the
termination of this Agreement pursuant to Section 9, the Company will not, and
will cause any person acting on its behalf not to, directly or indirectly
solicit, negotiate with respect to, facilitate, or accept any offers for the
purchase of, or sell or transfer (whether by merger, consolidation, or
otherwise), any shares of capital stock, or options or warrants to purchase any
such stock or any securities convertible into or exchangeable for any such stock
and shall terminate any existing activities or discussions with any party other
than the Purchasers and their representatives, and the Company shall promptly
advise the Purchasers of any inquiry or proposal relating thereto that may be
received, including the terms of the proposal and identity of the inquirer or
offeror.
* * *
35
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
COMPANY:
LIMELIGHT NETWORKS, INC.
By: /s/ William Rinehart
------------------------------------
William Rinehart
Chief Executive Officer
STOCKHOLDERS' REPRESENTATIVE:
/s/ Michael Gordon
----------------------------------------
Michael Gordon
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
GS CAPITAL PARTNERS V FUND, L.P.
BY: GSCP V Advisors, L.L.C
its General Partner
BY: /s/ Joseph Gleberman
------------------------------------
GS CAPITAL PARTNERS V OFFSHORE FUND,
L.P.
BY: GSCP V Offshore Advisors, L.L.C.
its General Partner
BY: /s/ Joseph Gleberman
------------------------------------
GS CAPITAL PARTNERS V GmbH & CO. KG
BY: GS Advisors V. L.L.C.
its Managing Limited Partner
BY: /s/ Joseph Gleberman
------------------------------------
GS CAPITAL PARTNERS V INSTITUTIONAL,
L.P.
BY: GS Advisors V, L.L.C.
its General Partner
BY: /s/ Joseph Gleberman
------------------------------------
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
THE SAN DOMENICO TRUST UDT DATED
AUGUST 12, 1999
By: /s/ Susan Reinstra
------------------------------------
Name: Susan Reinstra
Title: TRUSTEE
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
WS INVESTMENT COMPANY, LLC (2006A)
By: /s/ Ken Clark
------------------------------------
Name: Ken Clark
Title: Member
WS INVESTMENT COMPANY, LLC (2006C)
By: /s/ Ken Clark
------------------------------------
Name: Ken Clark
Title: Member
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
PURCHASER:
FOR INDIVIDUAL:
/s/ Jon Gavenman
----------------------------------------
Signature
Jon Gavenman
Print Name
Address 288 N. Avalon Drive
Los Altos, CA 94022
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
Address:
-------------------------------
-------------------------------
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
PURCHASER:
FOR INDIVIDUAL:
/s/ Mark Windfield - Hansen
----------------------------------------
Signature
Mark Windfield - Hansen
Print Name
Address: 918 Dunston Rd.
Redwood City, CA 94062
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
Address:
-------------------------------
-------------------------------
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
PURCHASER:
FOR INDIVIDUAL:
----------------------------------------
Signature
----------------------------------------
Print Name
Address:
-------------------------------
-------------------------------
FOR ENTITY:
VLGI 2006
Printed Name of Entity
By: /s/ Mark Royer
------------------------------------
Signature
Mark Royer, Fund Manager
Printed Name and Title
Address: 275 MIDDLEFIELD ROAD
WENLO PARK, CA 94025
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
The parties have executed this Series B Convertible Preferred Stock
Purchase Agreement as of the date first written above.
PURCHASER:
FOR INDIVIDUAL:
/s/ Steven Tonsfeldt
----------------------------------------
Signature
Steven Tonsfeldt
Print Name
Address: 75 Holbrook Lane
Atherton, CA 94027
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
Address:
-------------------------------
-------------------------------
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
<PAGE>
LIMELIGHT NETWORKS, INC.
FIRST AMENDMENT TO
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Amendment to the Series B Convertible Preferred Stock Purchase
Agreement is made as of the 22nd day of June, 2006, by and among Limelight
Networks, Inc., a Delaware corporation (the "COMPANY") and the holders of at
least a majority of the shares of Common Stock issued or issuable upon
conversion of the Company's Series B Preferred Stock to be purchased pursuant to
the Series B Convertible Preferred Stock Purchase Agreement dated as of May 18,
2006 (the "PURCHASE AGREEMENT," and such holders, the "INITIAL PURCHASERS").
RECITALS
A Pursuant to Section 10.8 of the Purchase Agreement, any term of the
Purchase Agreement may be amended or waived only with the written consent of the
Company and the holders of at least a majority of the shares of Common Stock
issued or issuable upon conversion of the Series B Preferred Stock purchased
thereunder.
B. The Company and the Initial Purchasers wish to amend the Purchase
Agreement to provide for, among other things, an increase in the Offering Funds
(as defined therein), subsequent revisions of the schedule of purchasers,
clarification of the indemnification obligations of the Tendering Stockholders
(as defined therein) and such other changes as set forth herein.
AGREEMENT
The parties hereby agree as follows:
1. Increase in Offering Funds. The reference to "$100,000,000" in the
definition of Offering Funds as provided in Section 1.4(a) of the Purchase
Agreement is hereby replaced with "$102,300,000."
2. Clarification of Indemnification Obligation. Section 7.l(b)(i) of the
Purchase Agreement is hereby replaced in its entirety to read as follows:
"7.1(b)(i) Except with respect to indemnification claims for Losses
based on fraud, willful misconduct or intentional misrepresentation
(x) the Escrow shall be the sole and exclusive right and remedy for
any Losses arising out of any and all claims relating to the subject
matter of this Agreement, and (y) the maximum amount that may be
recovered from any single Tendering Stockholder shall be limited to
such stockholder's pro-rata share of the Escrow, and with respect to
indemnification claims for Losses based on fraud, willful misconduct
or intentional misrepresentation (A) of a Tendering Stockholder, the
sole and exclusive right and remedy
<PAGE>
for any such Losses shall be against such Tendering Stockholder and
(B) of the Company, to the extent that the Tendering Stockholder's are
held liable therefor, the maximum amount that may be recovered from
any single Tendering Stockholder shall be limited to such
stockholder's pro-rata share of the Offering Funds used for the
Repurchase; provided, however, that if such Tendering Stockholder
shall have had knowledge of such fraud, willful misconduct or
intentional misrepresentation, the limitation in this Section
7.l(b)(i) shall not apply."
3. New Condition to Closing. The currently existing provisions of Section
4.4 of the Purchase Agreement relating to, among other things, requirements
under the Hart-Scott-Rodino Act, shall be moved to a new Section 5.10 of the
Purchase Agreement and Section 4.4 shall now read "[Intentionally Omitted]".
4. Revised Schedule of Purchasers. Until the Closing (as defined in the
Purchase Agreement), upon the mutual consent of the Company and the holders of a
majority in interest held by the Initial Purchasers, the Schedule of Purchasers
may be amended to revise the parties listed thereto and the amounts of
investment to which any Purchaser (including an Initial Purchaser) may be
entitled to purchase; provided however, that in no event may the Schedule of
Purchasers be amended such that the Company is obligated to sell more than
25,557,661 shares of Series B Preferred Stock. Upon the delivery to the Company
of a signature page to the Purchase Agreement, any additional parties (as
approved upon mutual consent of the Company and the holders of a majority in
interest held by the Initial Purchasers) added to the Schedule of Purchasers
shall be considered "Purchasers" for the purposes of the Purchase Agreement.
5. Allan Kaplan Employment Agreement. All references to a "consulting"
agreement in Section 4.19 shall be deemed to be replaced with references to
"employment" agreement.
6. Original Agreement. Except as set forth above, the remainder of the
Purchase Agreement shall remain in full force and effect and shall be binding on
all parties thereto.
7. Counterparts. This First Amendment to Series B Convertible Preferred
Stock Purchase Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
[Signatures Follow]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
COMPANY:
LIMELIGHT NETWORKS, INC.
By: /s/ William Rinehart
------------------------------------
William Rinehart
Chief Executive Officer
PURCHASERS:
GS CAPITAL PARTNERS V FUND, L.P.
BY: GSCP V Advisors, L.L.C.
its General Partner
BY:
------------------------------------
GS CAPITAL PARTNERS V OFFSHORE FUND,
L.P.
BY: GSCP V Offshore Advisors, L.L.C.
its General Partner
BY:
------------------------------------
GS CAPITAL PARTNERS V GMBH & CO. KG
BY: GS Advisors V. L.L.C.
its Managing Limited Partner
BY:
------------------------------------
GS CAPITAL PARTNERS V INSTITUTIONAL,
L.P.
BY: GS Advisors V, L.L.C.
its General Partner
BY:
------------------------------------
[Signature Page to First Amendment to Series B Convertible Preferred Stock
Purchase Agreement]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
COMPANY:
LIMELIGHT NETWORKS, INC.
By:
------------------------------------
William Rinehart
Chief Executive Officer
PURCHASERS:
GS CAPITAL PARTNERS V FUND, L.P.
BY: GSCP V Advisors, L.L.C.
its General Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
NAME: JOSEPH P. DISABATO
TITLE: MANAGING DIRECTOR
GS CAPITAL PARTNERS V OFFSHORE FUND,
L.P.
BY: GSCP V Offshore Advisors, L.L.C.
its General Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
NAME: JOSEPH P. DISABATO
TITLE: MANAGING DIRECTOR
GS CAPITAL PARTNERS V GMBH & CO. KG
BY: GS Advisors V. L.L.C.
its Managing Limited Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
NAME: JOSEPH P. DISABATO
TITLE: MANAGING DIRECTOR
GS CAPITAL PARTNERS V
INSTITUTIONAL, L.P.
BY: GS Advisors V, L.L.C.
its General Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
NAME: JOSEPH P. DISABATO
TITLE: MANAGING DIRECTOR
[Signature Page to First Amendment to Series B Convertible Preferred Stock
Purchase Agreement]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
STOCKHOLDERS' REPRESENTATIVE:
/s/ Michael Gordon
----------------------------------------
Michael Gordon
[Signature Page to First Amendment to Series B Convertible Preferred Stock
Purchase Agreement]
<PAGE>
LIMELIGHT NETWORKS, INC.
SECOND AMENDMENT TO
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Second Amendment to the Series B Convertible Preferred Stock Purchase
Agreement (the "AMENDMENT") is made as of the 11th day of July, 2006, by and
among Limelight Networks, Inc., a Delaware corporation (the "COMPANY"), the
holders of at least a majority of the shares of Common Stock issued or issuable
upon conversion of the Company's Series B Preferred Stock to be purchased
pursuant to the Series B Convertible Preferred Stock Purchase Agreement dated as
of May 18, 2006 and amended as of June 22, 2006 (the "PURCHASE AGREEMENT," and
such holders, the "INITIAL PURCHASERS"), and the Stockholders' Representative
(as defined in Section 7 of the Purchase Agreement).
RECITALS
A Pursuant to Section 10.8 of the Purchase Agreement, any term of the
Purchase Agreement may be amended or waived only with the written consent of the
Company and the holders of at least a majority of the shares of Common Stock
issued or issuable upon conversion of the Series B Preferred Stock purchased
thereunder.
B. The Company and the Initial Purchasers wish to further amend the
Purchase Agreement to provide for, among other things, a potential increase in
the number of shares of Series B Stock (as defined therein) issued and sold
pursuant to the Purchase Agreement, the ability to hold multiple closings, a
potential increase in the Offering Funds (as defined therein), and such other
changes as set forth herein.
AGREEMENT
The parties hereby agree as follows:
1. INCREASE IN FINANCING. Section 1.1(b) of the Purchase Agreement is
hereby replaced in its entirety to read as follows:
"1.1(b) Subject to the terms and conditions of this Agreement,
each Purchaser, severally and not jointly, agrees to purchase at the
Closing and the Company agrees to sell and issue to each Purchaser at
the Closing that number of shares of Series B Convertible Preferred
Stock (the "SERIES B STOCK") listed opposite such Purchaser's name on
Exhibit A attached hereto at a purchase price of $4.8909 per share
(the "SERIES B PRICE") for an aggregate sale of a minimum of
25,557,664 shares and a maximum of 26,579,976 shares of Series B Stock
for an aggregate purchase price of at least $124,999,978.90 and up to
$130,000,004.62 (the "PROCEEDS"). The shares of Series B Stock issued
to each Purchaser pursuant to this Agreement are hereinafter referred
to as the "STOCK.""
<PAGE>
2. SUBSEQUENT CLOSINGS.
(a) Section 1.2 of the Purchase Agreement is hereby replaced in its
entirety to read as follows:
"1.2. Closing; Delivery.
(a) Subject to the satisfaction of Sections 5 and 6 hereof,
the purchase and sale of the Stock shall take place at the
offices of Heller Ehrman LLP, 275 Middlefield Rd., Menlo Park, CA
94025, at 10:00 a.m. (San Francisco time), no later than the
first business day following the satisfaction or waiver of the
conditions set forth in Sections 5 and 6 hereof; or at such other
time and place as the Company and the Purchasers purchasing a
majority of the Stock mutually agree upon, orally or in writing
(which time and place are designated as the "INITIAL CLOSING").
In the event there is more than one closing, the term "Closing"
shall apply to each such closing unless otherwise specified
herein.
(b) At each Closing, the Company shall deliver to each
Purchaser a certificate representing the Stock being purchased
thereby against payment of the purchase price by check payable to
the Company or wire transfer to the Company's bank account or the
Exchange Agent pursuant to the provisions of Section 1.4(a).
(c) If less than 26,579,976 shares of Series B Stock are
sold at the Initial Closing, the Company shall have the right,
any time within 90 days of the Initial Closing, to sell such
remaining shares of Series B Stock to one or more additional
purchasers as mutually agreed upon by the Company, the majority
of the Board of Directors of the Company, including a majority of
the Common Directors (as such term is defined by the Restated
Certificate) and the holders of at least a majority of the shares
of Common Stock issued or issuable upon conversion of the Series
B Stock purchased hereunder, or to any Purchaser hereunder who
wishes to acquire additional shares of Series B Stock at the
price and on the terms set forth herein, provided that any such
additional purchaser shall (i) become a party to this Agreement,
the Stockholders' Agreement and the Investors' Rights Agreement
(each as defined in Section 2.2(e) below), and (ii) have the
rights and obligations hereunder and thereunder, by executing and
delivering to the Company an additional counterpart signature
page to each of such agreements. Any additional purchaser so
acquiring shares of Series B Stock shall be considered a
"Purchaser" for purposes of this Agreement, and any Series B
Stock so acquired by such additional purchaser shall be
considered "Series B Stock" for purposes of this Agreement, the
Stockholders' Agreement and the Investors' Rights Agreement.
Promptly after each Closing pursuant to this Section 1.2(c),
Exhibit A will be amended to list the Purchasers in that Closing,
including
-2-
<PAGE>
the name of each Purchaser, the number of shares of Series B
Stock purchased and the aggregate Series B Price paid for such
shares."
2.2 The conditions set forth in each of Sections 5.6 [Opinion of
Counsel], 5.7 [Board of Directors], 5.8 [Closing of Offer to Purchase] and 5.9
[Funding Commitment Date Deliverables] shall only apply to the Initial Closing.
3. INCREASE IN OFFERING FUNDS. The reference to "$102,300,000" in the
definition of Offering Funds as provided in Section 1.4(a) of the Purchase
Agreement is hereby replaced with "a minimum of $102,150,000, and up to
$103,500,000 as mutually agreed by the Company and the Purchasers purchasing a
majority of the Stock hereunder,".
4. ESCROW CLARIFICATION. The Company hereby confirms that any claims,
liabilities, losses, damages, costs, deficiencies, expenses and penalties
incurred by the Company in connection with the lawsuit filed by Akamai
Technologies against the Company shall be deemed Losses under the Purchase
Agreement and the Purchasers shall be indemnified with respect thereto to the
extent provided in and pursuant and subject to the provisions of Section 7 of
the Purchase Agreement.
5. CHANGE IN AUTHORIZED SHARES.
(a) Section 2.2(a) shall be amended such that all references to
"30,214,000" with respect to the number of authorized shares of Preferred Stock
are hereby replaced with "33,314,000" and all references to "25,600,000" with
respect to the number of authorized shares of Series B Preferred Stock are
hereby replaced with "28,700,000."
(b) Section 2.2(b) shall be amended such that all references to
"77,000,000" with respect to the number of authorized shares of Common Stock are
hereby replaced with "80,100,000."
6. SECOND QUARTER REVENUE. Section 2.32 shall be amended and restated in
its entirety to read as follows:
"2.32 Second Quarter Revenue.
The Company's revenue, as reported on its financial statements, for the period
from April 1, 2006 through June 30, 2006 shall have been no less than $14.9
million, as calculated consistent with past practices."
7. AMENDMENT PROVISION. Subclause (b) of Section 10.8 shall be amended to
read as follows:
"(b) any amendment to or waiver of Sections 1.1, 1.2 or 10.12 shall require
the consent of the majority of the Board of Directors, including the approval of
a majority of the Common Directors, as such term is defined by the Restated
Certificate."
-3-
<PAGE>
8. MISCELLANEOUS
(a) Except as set forth above, the remainder of the Purchase Agreement
shall remain in full force and effect and shall be binding on all parties
thereto. All capitalized terms not defined herein shall have the meanings
ascribed in the Purchase Agreement.
(b) This Amendment and the rights and obligations of the parties
hereunder shall inure to the benefit of, and be binding upon, their respective
successors, assigns and legal representatives.
(c) If one or more provisions of this Amendment are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, the (i) such provision
shall be excluded from this Amendment, (ii) the balance of the Amendment shall
be interpreted as if such provision were so excluded and (iii) the balance of
the Amendment shall be enforceable in accordance with its terms.
(d) This Amendment and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed
and interpreted in accordance with the laws of the State of Delaware, without
giving effect to principles of conflicts of law.
(e) This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
[Signatures Follow]
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
COMPANY:
LIMELIGHT NETWORKS, INC
By: /s/ William H. Rinehart
------------------------------------
William H. Rinehart
Chief Executive Officer
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SECOND AMENDMENT TO SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
STOCKHOLDERS' REPRESENTATIVE:
/s/ Michael Gordon
----------------------------------------
Michael Gordon
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SECOND AMENDMENT TO SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Second Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
PURCHASERS:
GS CAPITAL PARTNERS V FUND, L.P.
BY: GSCP V Advisors, L.L.C.
its General Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
Name: Joseph P. DiSabato
Title: Managing Director
GS CAPITAL PARTNERS V OFFSHORE FUND,
L.P.
BY: GSCP V Offshore Advisors, L.L.C
its General Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
Name: Joseph P. DiSabato
Title: Managing Director
GS CAPITAL PARTNERS V GMBH & CO. KG
BY: GS Advisors V. L.L.C.
its Managing Limited Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
Name: Joseph P. DiSabato
Title: Managing Director
GS CAPITAL PARTNERS V INSTITUTIONAL,
L.P.
BY: GS Advisors V, L.L.C.
its General Partner
BY: /s/ Joseph P. DiSabato
------------------------------------
Name: Joseph P. DiSabato
Title: Managing Director
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
SECOND AMENDMENT TO SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
LIMELIGHT NETWORKS, INC.
THIRD AMENDMENT TO
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Third Amendment to the Series B Convertible Preferred Stock Purchase
Agreement (the "AMENDMENT") is made as of the 15th day of September, 2006, by
and among Limelight Networks, Inc., a Delaware corporation (the "COMPANY"), the
holders of at least a majority of the shares of Common Stock issued or issuable
upon conversion of the Company's Series B Preferred Stock to be purchased
pursuant to the Series B Convertible Preferred Stock Purchase Agreement dated as
of May 18, 2006 and amended as of June 22, 2006 and July 11, 2006 (the "PURCHASE
AGREEMENT," and such holders, the "INITIAL PURCHASERS") and the Stockholders'
Representative (as defined in Section 7 of the Purchase Agreement).
RECITALS
A. Pursuant to Section 10.8 of the Purchase Agreement, any term of the
Purchase Agreement may be amended or waived only with the written consent of the
Company and the holders of at least a majority of the shares of Common Stock
issued or issuable upon conversion of the Series B Preferred Stock purchased
thereunder; provided, however, that any amendment to or waiver of Section 7
shall require the consent of the Stockholders' Representative.
B. The Company, the Initial Purchasers and the Stockholders' Representative
wish to further amend the Purchase Agreement to clarify certain of the escrow
provisions.
AGREEMENT
The parties hereby agree as follows:
1. ESCROW CLARIFICATION. Section 7.1(b)(iii) is amended and restated in its
entirety to read as follows:
"(iii) with respect only to any alleged inaccuracy or alleged breach of
Section 2.8 hereof, the following provisions shall apply: with respect to any
claim by a third party alleging infringement of its Intellectual Property Rights
or otherwise alleging facts that would constitute a breach of Section 2.8 hereof
(the "THIRD PARTY INFRINGEMENT CLAIM"), the Company shall bear the expenses for
defending and settling any such Third Party Infringement Claim; provided that
upon the occurrence of the Company incurring expenses in excess of $500,000 with
respect to all such Third Party Infringement Claims ("EXCESS IP EXPENSES"), such
Excess IP Expenses shall be deemed to be Losses and be aggregated with all
Losses until the Escrow Basket amount has been reached; provided however, that
all claims, liabilities, losses, damages, costs, deficiencies, expenses and
penalties incurred by the Company in connection with the lawsuit filed by Akamai
Technologies against the Company and any future disputes between the Company and
Akamai Technologies during the Escrow Period (the "AKAMAI EXPENSES") shall be
deemed to be Excess IP Expenses and shall be deemed to be Losses and shall be
payable by the Tendering
<PAGE>
Stockholders to the Company out of the Escrow without regard to the Escrow
Basket but such Akamai Expenses shall be subject to the 50% payment allocation
as set forth in the following sentence. After the Escrow Basket amount has been
reached (or with respect to all Akamai Expenses), 50% of any further Excess IP
Expenses (including all Akamai Expenses) incurred by the Company shall be
payable by the Tendering Stockholders to the Company out of the Escrow. All such
payments of further Excess IP Expenses (including Akamai Expenses) pursuant to
this Section 7.1(b)(iii) shall be made by Escrow Agent to the Company upon
notice from the Company that the Company has incurred such further Excess IP
Expenses. For purposes of determining if a claim or expense should be included
in calculating the aggregate value of the claims and expenses with respect to
satisfying the aforementioned $500,000 threshold (to the extent applicable) and
the Excess IP Expenses, if any, no individual claim or expense with a value of
less than $15,000 shall be included, however, related claims of any size shall
be treated as one "claim" and shall be aggregated to determine if such claim
exceeds the $15,000 threshold; and thus should be applied toward the $500,000
threshold (if applicable) and included in the Excess IP Expenses;"
2. MISCELLANEOUS
(a) Except as set forth above, the remainder of the Purchase Agreement
shall remain in full force and effect and shall be binding on all parties
thereto. All capitalized terms not defined herein shall have the meanings
ascribed in the Purchase Agreement.
(b) This Amendment and the rights and obligations of the parties
hereunder shall inure to the benefit of, and be binding upon, their respective
successors, assigns and legal representatives.
(c) If one or more provisions of this Amendment are held to be
unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, the (i) such provision
shall be excluded from this Amendment, (ii) the balance of the Amendment shall
be interpreted as if such provision were so excluded and (iii) the balance of
the Amendment shall be enforceable in accordance with its terms.
(d) This Amendment and all acts and transactions pursuant hereto and
the rights and obligations of the parties hereto shall be governed, construed
and interpreted in accordance with the laws of the State of Delaware, without
giving effect to principles of conflicts of law.
(e) This Amendment may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
[Signatures Follow]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
COMPANY:
LIMELIGHT NETWORKS, INC.
By: /s/ William H. Rinehart
------------------------------------
William H. Rinehart
Chief Executive Officer
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
THIRD AMENDMENT TO SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
STOCKHOLDERS' REPRESENTATIVE:
/s/ Michael Gordon
----------------------------------------
Michael Gordon
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
THIRD AMENDMENT TO SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Third Amendment to
Series B Convertible Preferred Stock Purchase Agreement on the day and year
first set forth above.
PURCHASERS:
GS CAPITAL PARTNERS V FUND, L.P.
BY: GSCP V Advisors, L.L.C.
its General Partner
BY: /s/ Joseph Gleberman
------------------------------------
GS CAPITAL PARTNERS V OFFSHORE FUND,
L.P.
BY: GSCP V Offshore Advisors, L.L.C.
its General Partner
BY: /s/ Joseph Gleberman
------------------------------------
GS CAPITAL PARTNERS V GMBH & CO. KG
BY: GS Advisors V. L.L.C.
its Managing Limited Partner
BY: /s/ Joseph Gleberman
------------------------------------
GS CAPITAL PARTNERS V INSTITUTIONAL,
L.P.
BY: GS Advisors V, L.L.C.
its General Partner
BY: /s/ Joseph Gleberman
------------------------------------
SIGNATURE PAGE TO LIMELIGHT NETWORKS, INC.
THIRD AMENDMENT TO SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/25, 2006 FOR INDIVIDUAL:
----------------------------------------
Signature
----------------------------------------
Print Name
FOR ENTITY:
AMALIA LIMITED
Printed Name of Entity
By: /s/ Elias N. Hallak
------------------------------------
Signature
Elias N. Hallak
Printed Name and Title
ATTORNEY-IN-FACT
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/29, 2006 FOR INDIVIDUAL:
/s/ Gary Baldus
----------------------------------------
Signature
Gary Baldus
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 9/1/2006 FOR INDIVIDUAL:
/s/ Wayne Bouchard
----------------------------------------
Signature
Wayne Bouchard
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of Aug 29, 2006 FOR INDIVIDUAL:
/s/ Andrea Dowd
----------------------------------------
Signature
Andrea Dowd
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/31/2006 FOR INDIVIDUAL:
/s/ Michael Flatin
----------------------------------------
Signature
Michael Flatin
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of August 29, 2006 FOR INDIVIDUAL:
/s/ Erik Gabler
----------------------------------------
Signature
Erik Gabler
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of August 28, 2006 FOR INDIVIDUAL:
/s/ Michael Gordon and Lauren Gordon
----------------------------------------
Signature
Michael Gordon and Lauren Gordon
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of Aug 23, 2006 FOR INDIVIDUAL:
/s/ Henry Heflich
----------------------------------------
Signature
Henry Heflich
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of Sep 4, 2006 FOR INDIVIDUAL:
----------------------------------------
Signature
----------------------------------------
Print Name
FOR ENTITY:
Kaplan Group Investments
Printed Name of Entity
By: /s/ Allan Kaplan
------------------------------------
Signature
Allan Kaplan
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8-23, 2006 FOR INDIVIDUAL:
----------------------------------------
Signature
----------------------------------------
Print Name
FOR ENTITY:
Kay Z Ventures LLC
Printed Name of Entity
By: /s/ Jason Kay
------------------------------------
Signature
JASON KAY, PRESIDENT
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of August 28, 2006 FOR INDIVIDUAL:
/s/ Alexander F. Obbard
----------------------------------------
Signature
Alexander F. Obbard
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of AUG 28, 2006 FOR INDIVIDUAL:
/s/ Wayne Pratt
----------------------------------------
Signature
WAYNE PRATT
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby Approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 9.19, 2006 FOR INDIVIDUAL:
/s/ Nathan Raciborski
----------------------------------------
Signature
Nathan Raciborski
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of August 28, 2006 FOR INDIVIDUAL:
----------------------------------------
Signature
----------------------------------------
Print Name
FOR ENTITY:
Raciborski Group Limited Partnership
Printed Name of Entity
By: /s/ Nathan Raciborski
------------------------------------
Signature
Nathan Raciborski, Partner
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 9.19, 2006 FOR INDIVIDUAL:
----------------------------------------
Signature
----------------------------------------
Print Name
FOR ENTITY:
Rinehart Family Trust
Printed Name of Entity
By: /s/ William Rinehart
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/28, 2006 FOR INDIVIDUAL:
/s/ Noah Ring
----------------------------------------
Signature
NOAH RING
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/23, 2006 FOR INDIVIDUAL:
/s/ Jim Scannell
----------------------------------------
Signature
Jim Scannell
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/24, 2006 FOR INDIVIDUAL:
/s/ Lee A Stafford
----------------------------------------
Signature
Lee A Stafford
Print Name
FOR ENTITY:
----------------------------------------
Printed Name of Entity
By:
------------------------------------
Signature
----------------------------------------
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of August 28, 2006 FOR INDIVIDUAL:
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Signature
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Print Name
FOR ENTITY:
Thunder Road Capital LLC
Printed Name of Entity
By: /s/ Michael Gordon
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Signature
MICHAEL GORDON, MEMBER/MANAGER
Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8/29, 2006 FOR INDIVIDUAL:
/s/ John C. Wachter
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Signature
JOHN C. WACHTER
Print Name
FOR ENTITY:
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Printed Name of Entity
By:
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Signature
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Printed Name and Title
<PAGE>
The undersigned Tendering Stockholder hereby approves the Third Amendment
to the Series B Convertible Preferred Stock Purchase Agreement and authorizes
the Stockholders' Representative to take all necessary action relating thereto.
Dated as of 8-30-2006 FOR INDIVIDUAL
/s/ David Weiss
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Signature
DAVID WEISS
Print Name
FOR ENTITY:
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Printed Name of Entity
By:
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Signature
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Printed Name and Title