1
Exhibit 10.12
AKAMAI TECHNOLOGIES, INC.
SERIES D CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
DATED AS OF JUNE 21, 1999
2
TABLE OF CONTENTS
ARTICLE I - PURCHASE, SALE AND TERMS OF SHARES................................................................. 1
1.01 The Preferred Shares......................................................................... 1
1.02 The Converted Shares......................................................................... 1
1.03 The Shares................................................................................... 1
1.04 Purchase Price, Closing and Repurchase Option................................................ 1
1.05 Restrictions on Transfer and Standstill Agreement............................................ 3
1.06 Use of Proceeds.............................................................................. 4
1.07 Representations and Warranties by the Purchaser.............................................. 4
ARTICLE II - CONDITIONS TO THE PURCHASER'S OBLIGATION.......................................................... 5
2.01 Representations and Warranties............................................................... 5
2.02 Documentation at Closing..................................................................... 5
2.03 Additional Closing Conditions................................................................ 6
2.04 Consents, Waivers, Etc....................................................................... 7
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................................... 7
3.01 Organization and Standing.................................................................... 7
3.02 Corporate Action............................................................................. 7
3.03 Governmental Approvals....................................................................... 8
3.04 Litigation................................................................................... 8
3.05 Certain Agreements of Officers, Founders and Key Employees................................... 8
3.06 Compliance with Other Instruments............................................................ 9
3.07 Material Contracts........................................................................... 9
3.08 ERISA........................................................................................ 10
3.09 Transactions with Affiliates................................................................. 10
3.10 Assumptions or Guaranties of Indebtedness of Other Persons................................... 10
3.11 Investments in Other Persons; Subsidiaries................................................... 10
3.12 Securities Laws.............................................................................. 10
3.13 Disclosure................................................................................... 10
3.14 Brokers or Finders........................................................................... 11
3.15 Capitalization; Status of Capital Stock...................................................... 11
3.16 Registration Rights.......................................................................... 11
3.17 Books and Records............................................................................ 11
3.18 Title to Assets; Patents..................................................................... 12
3.19 The Year 2000................................................................................ 12
3.20 Financial Statements......................................................................... 13
3.21 No Undisclosed Liabilities................................................................... 13
3.22 Technology................................................................................... 13
ARTICLE IV - COVENANTS OF THE COMPANY.......................................................................... 13
4.01 Affirmative Covenants of the Company Other Than Reporting
Requirements................................................................................. 13
4.02 Negative Covenants of the Company............................................................ 15
- i -
3
4.03 Reporting Requirements....................................................................... 17
ARTICLE V - DEFINITIONS AND ACCOUNTING TERMS................................................................... 19
5.01 Certain Defined Terms........................................................................ 19
ARTICLE VI - MISCELLANEOUS..................................................................................... 22
6.01 No Waiver; Cumulative Remedies............................................................... 22
6.02 Amendments, Waivers and Consents............................................................. 22
6.03 Addresses for Notices........................................................................ 22
6.04 Costs, Expenses and Taxes.................................................................... 23
6.05 Binding Effect; Assignment................................................................... 23
6.06 Survival of Representations and Warranties................................................... 23
6.07 Prior Agreements............................................................................. 23
6.08 Severability................................................................................. 23
6.09 Governing Law................................................................................ 23
6.10 Headings..................................................................................... 24
6.11 Counterparts................................................................................. 24
6.12 Further Assurances........................................................................... 24
6.13 Indemnification.............................................................................. 24
- ii -
4
EXHIBITS
1.01 Designation of Series D Convertible Preferred Stock
2.02B Opinion of Counsel
2.03B Second Amended and Restated Stockholders Agreement
2.03D Second Amended and Restated Registration Rights Agreement
3.01 Foreign Qualifications
3.04 Litigation
3.07 Defaults under Material Contracts
3.08 ERISA
3.09 Transactions with Affiliates
3.11 Investments in Other Persons; Subsidiaries
3.15 Capitalization; Status of Capital Stock
3.16 Registration Rights
3.18(a) Title to Assets
3.18(b) Intellectual Property
3.18(c) Compensation for use of Intellectual Property Rights
3.20 Financial Statements
3.21 Undisclosed Liabilities
3.22 Technology
- iii -
5
AKAMAI TECHNOLOGIES, INC.
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
As of June 21, 1999
TO: Apple Computer Inc. Ltd.
Re: Series D Convertible Preferred Stock
Ladies and Gentlemen:
Akamai Technologies, Inc., a Delaware corporation (the "Company"),
agrees with you as follows:
ARTICLE I
PURCHASE, SALE AND TERMS OF SHARES
1.01 The Preferred Shares. The Company has authorized the issuance and
sale of up to 685,194 shares of its previously authorized but unissued shares of
Series D Convertible Preferred Stock, par value $.01 per share (the "Series D
Preferred Stock"), at a purchase price of $18.243 per share to Apple Computer
Inc. Ltd. (the "Purchaser"). The designation, rights, preferences and other
terms and conditions relating to the Series D Preferred Stock are as set forth
on Exhibit 1.01 hereto. The Series D Preferred Stock is sometimes referred to
herein as the "Preferred Shares."
1.02 The Converted Shares. The Company has authorized and has reserved
and covenants to continue to reserve, free of preemptive rights and other
preferential rights, a sufficient number of its previously authorized but
unissued shares of Common Stock to satisfy the rights of conversion of the
holders of the Preferred Shares. Any shares of Common Stock issuable upon
conversion of the Preferred Shares, and such shares when issued, are herein
referred to as the "Converted Shares."
1.03 The Shares. The Preferred Shares and the Converted Shares are
sometimes collectively referred to herein as the "Shares."
1.04 Purchase Price, Closing and Repurchase Option.
(a) The Closing. The Company agrees to issue and sell to the
Purchaser and, subject to and in reliance upon the representations, warranties,
covenants, terms and conditions of this Agreement, the Purchaser agrees to
purchase 685,194 shares of Series D Preferred Stock for an aggregate purchase
price of $12,499,994.14. The purchase and sale shall take place at a closing
(the "Closing") to be held on or before June 21, 1999, at 10:00 A.M., at such
location and at such time as may be mutually agreed upon, subject to the
satisfaction of all of the conditions to the Closing specified in Article II
herein. At the Closing the Company will issue and deliver
6
certificates evidencing the shares of Series D Preferred Stock to be sold at the
Closing to the Purchaser (or its nominee) against payment of the full purchase
price therefor by (i) wire transfer of immediately available funds to an account
designated by the Company, (ii) check payable to the order of the Company or its
designee, or (iii) any combination of (i) and (ii) above.
(b) Repurchase Option. The Company and the Purchaser
acknowledge that, simultaneously with the execution of this Agreement, the
Company and Apple Computer, Inc. ("Apple") are entering into a Strategic
Alliance and Master Services Agreement relating to, among other things, the
network that supports QT-TV (the "Services Agreement"). If at any time prior to
the first anniversary of the effective date of this Agreement, Apple
discontinues QT-TV pursuant to Section 7.4 of the Services Agreement (the
discontinuance described in the foregoing clause being hereinafter referred to
as the "Triggering Event"), then the Company shall have the right and option to
purchase all (but not less than all) of the Shares (or the Converted Shares, if
applicable) from the Purchaser (or its successor or assigns), and the Purchaser
(or its successor or assigns) shall be obligated to sell such Shares (or
Converted Shares, if applicable) to the Company, at a purchase price per share
equal to the Market Price. For purposes of this Section 1.04(b), the "Market
Price" shall be determined as follows:
(i) If the Company's Common Stock is listed on a
national securities exchange, the NASDAQ National Market System, the NASDAQ
system, or another nationally recognized exchange or trading system (an
"Exchange") as of the date of the Triggering Event, then the Market Price shall
be deemed to be the average closing price per share of the Company's Common
Stock on such Exchange for the 20 trading days ending on the trading day prior
to the date of the Triggering Event; provided that if the Company's Common Stock
has been listed on an Exchange for fewer than 21 trading days, the Market Price
shall be deemed to be the average closing price per share of the Company's
Common Stock since it has been listed on such Exchange.
(ii) If the Company's Common Stock is not listed on
an Exchange as of the date of the Triggering Event, then the Market Price shall
be the fair market value per share of the Shares as of the date of the
Triggering Event as determined in good faith by the Company's Board of
Directors; provided, however, that the Purchaser shall have the right to contest
such determination by giving notice thereof to the Company within ten days of
such determination, and in such event the Market Price shall be the fair market
value per share of the Shares as of the date of the Triggering Event as
determined by an independent appraiser to be selected by the Company and
approved by the Purchaser, which approval shall not be unreasonably withheld.
The independent appraiser's fees and expenses shall be paid as follows:
(A) If the Market Price as determined by the
independent appraiser is less than or equal to 110% of the Market Price
determined by the Company's Board of Directors, then the independent appraiser's
fees and expenses shall be paid by the Purchaser.
(B) If the Market Price as determined by the
independent appraiser is greater than 110% of the Market Price determined by the
Company's Board of Directors, then the independent appraiser's fees and expenses
shall be paid by the Company.
The Company may exercise its right to repurchase Shares pursuant to this Section
1.04(b) by delivering written notice (the "Repurchase Notice") to the Purchaser
no later than forty (40) days
2
7
after the Triggering Event. The Purchaser (or its successor or assigns) shall be
obligated to sell such Shares to the Company within ten (10) days after receipt
of the Repurchase Notice upon receipt of the purchase price therefor; provided,
however, that in the event such purchase price shall be determined by an
independent appraiser pursuant to clause (iii) above, the Purchaser shall not be
obligated to sell such Shares to the Company until such determination has been
made and such purchase price has been paid.
1.05 Restrictions on Transfer and Standstill Agreement.
(a) Transfer Restrictions. Without the prior written
permission of the Company, no more than 25% of the Shares may be sold or
transferred by the Purchaser (except to a wholly-owned subsidiary or a
wholly-owned subsidiary of a wholly-owned subsidiary of the Purchaser, or the
like); provided, however, that if the Purchaser wishes to sell or transfer any
Shares to a third party, it shall first submit a written offer to sell such
Shares to the Company on terms and conditions, including price, not less
favorable to the Company than those on which it proposes to sell such Shares to
such third party (the "Offer"). The Offer shall disclose the identity of the
proposed purchaser or transferee, the Shares proposed to be sold or transferred
and the agreed terms of the sale or transfer. If the Offer provides that the
purchase price for the Shares shall be paid other than in cash, then the
per-Share purchase price for the Shares subject to the Offer shall be deemed to
be the Section 1.05 Market Price (as defined below). Within five days after
receipt of the Offer, the Company shall give written notice to the Purchaser of
its intent to purchase all or none of the offered Shares on the same terms and
conditions as set forth in the Offer. The Company can pay the cash equivalent of
any non-cash consideration based on the Section 1.05 Market Price. If the
Company does not purchase all of the Shares offered by the Purchaser pursuant to
the Offer, such Shares may be sold by the Purchaser at any time within 90 days
after the date of the Offer at not less than the price and upon other terms and
conditions, if any, not more favorable to such proposed purchaser or transferee
than those specified in the Offer. All restrictions set forth in this Section
1.05(a) shall terminate upon the earlier of the date one year after the date of
(i) closing of a Qualified Public Offering (as defined in Section 5.01 of the
Agreement) or (ii) registration of a class of the Company's securities under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). For purposes of
this Section 1.05(a), the "Section 1.05 Market Price" shall be determined as
follows:
(i) If the Company's Common Stock is listed on an
Exchange as of the date of the Offer, then the Section 1.05 Market Price shall
be deemed to be the average closing price per share of the Company's Common
Stock on such Exchange for the 20 trading days ending on the trading day prior
to the date of the Offer; provided that if the Company's Common Stock has been
listed on an Exchange for fewer than 21 trading days, the Section 1.05 Market
Price shall be deemed to be the average closing price per share of the Company's
Common Stock since it has been listed on such Exchange.
(ii) If the Company's Common Stock is not listed on
an Exchange as of the date of the Offer, then the Section 1.05 Market Price
shall be the fair market value per share of the Shares as of the date of the
Offer as determined in good faith by the Purchaser's Board of Directors;
provided, however, that the Company shall have the right to contest such
determination by giving notice thereof to the Purchaser within ten days of such
determination, and in such event the Section 1.05 Market Price shall be the fair
market value per share of the
3
8
Shares as of the date of the Offer as determined by an independent appraiser to
be selected by the Purchaser and approved by the Company, which approval shall
not be unreasonably withheld. The independent appraiser's fees and expenses
shall be paid as follows:
(A) If the Section 1.05 Market Price as
determined by the independent appraiser is less than or equal to 110% of the
Section 1.05 Market Price determined by the Purchaser's Board of Directors, then
the independent appraiser's fees and expenses shall be paid by the Company.
(B) If the Section 1.05 Market Price as
determined by the independent appraiser is greater than 110% of the Section 1.05
Market Price determined by the Purchaser's Board of Directors, then the
independent appraiser's fees and expenses shall be paid by the Purchaser.
(b) Standstill Agreement. The Purchaser hereby agrees that
from and after the date hereof until the earlier of the date one year after the
date of (i) closing of a Qualified Public Offering (as defined in Section 5.01
of this Agreement) or (ii) registration of a class of the Company's securities
under the 1934 Act, unless such shall have been specifically invited in writing
by the Company, neither Purchaser nor any of its affiliates (as such term is
defined under the ▇▇▇▇ ▇▇▇) or agents will in any manner, directly or
indirectly, (a) effect or seek, offer or propose (whether publicly or otherwise)
to effect, or cause or participate in or in any way assist any other Person to
effect or seek, offer or propose (whether publicly or otherwise) to effect or
participate in, (i) any acquisition of any securities (or beneficial ownership
thereof) or assets of the Company, except that during the one-year period from
and after a Qualified Public Offering, the Purchaser may acquire capital stock
of the Company provided that after any such acquisition, the Purchaser and its
affiliates shall beneficially own no more than 10% of each class of the
Company's voting securities; (ii) any tender or exchange offer, merger or other
business combination involving the Company; (iii) any recapitalization,
restructuring, liquidation, dissolution or other extraordinary transaction with
respect to the Company; or (iv) any "solicitation" of "proxies" (as such terms
are used in the proxy rules of the Commission) or consents to vote any voting
securities of the Company; (b) otherwise act, alone or in concert with others,
to seek control of the Company's Board of Directors; or (c) take any action
which might require the Company to make a public announcement regarding any of
the types of matters set forth in (a) above. Notwithstanding the above in this
Section 1.05(b), if (i) following the Company's initial public offering a bona
fide tender offer that seeks to acquire more than 50% of the outstanding voting
securities of the Company is commenced by a third party unaffiliated with the
Purchaser, or (ii) prior to the Company's initial public offering any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the ▇▇▇▇ ▇▇▇) other than the Purchaser and its affiliates acquires more than
50% of the Company's outstanding voting securities, then any above restriction
contained in this Section 1.05(b) imposed on the Purchaser will immediately
terminate, and the Purchaser shall be free to acquire or offer to acquire any or
all outstanding shares of the Company. Prior to the Company's initial public
offering, the Company will provide written notice to the Purchaser immediately
after the Company learns of any such individual, entity or group acquiring more
than 25% of the Company's outstanding voting securities. Notwithstanding
anything to the contrary in this Section, the Purchaser shall be entitled to
acquire securities of the Company pursuant to Section 4.1 of the Amended and
Restated Stockholders' Agreement (as defined in Section 2.03(b) below).
4
9
(c) "Most Favored Nation". If (i) the Company sells securities
to a Strategic Investor (as defined in Section 4.6(m) of the Amended and
Restated Stockholders' Agreement) and (ii) in connection with its purchase of
such securities, such Strategic Investor is subject to provisions less
restrictive than those set forth in Sections 1.05(a) or 1.05(b) above to
purchase and/or sell securities of the Company, then the Company shall amend
such sections, and/or take such other actions as may be required (including
releasing restrictions imposed by Sections 1.05(a) or 1.05(b)), in order that
the Purchaser obtains rights no less favorable than those obtained by such
Strategic Investor to purchase and/or sell securities of the Company.
1.06 Use of Proceeds. The Company shall use the proceeds from the sale
of the Preferred Shares under this Agreement for working capital and general
corporate purposes.
1.07 Representations and Warranties by the Purchaser. The Purchaser
represents and warrants that (a) it will acquire the Preferred Shares for its
own account and that the Preferred Shares are being acquired by it for the
purpose of investment and not with a view to distribution or resale thereof; (b)
the execution of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of the Purchaser, and this Agreement has been duly executed and delivered,
and constitutes a valid, legal, binding and enforceable agreement of the
Purchaser; (c) it has taken no action which would give rise to any claim by any
other person for any brokerage commissions, finders' fees or the like relating
to this Agreement or the transactions contemplated hereby; (d) the Purchaser has
had the opportunity to ask questions of and receive answers from representatives
of the Company concerning the terms of the offering of the Preferred Shares and
to obtain additional information concerning the Company and its business; and
(e) the Purchaser has the ability to evaluate the merits and risks of an
investment in the Preferred Shares and can bear the economic risks of such
investment. The acquisition by the Purchaser of the Preferred Shares shall
constitute a confirmation of the representations and warranties made by the
Purchaser as at the date of such acquisition. The Purchaser further represents
that it understands and agrees that, until registered under the Securities Act
or transferred pursuant to the provisions of Rule 144 as promulgated by the
Commission, all certificates evidencing any of the Shares, whether upon initial
issuance or upon any transfer thereof, shall bear a legend, prominently stamped
or printed thereon, reading substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD, MORTGAGED,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND APPLICABLE STATE SECURITIES LAWS, OR THE
AVAILABILITY OF AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE SECURITIES
LAWS."
The Purchaser further represents that it understands and agrees that all
certificates evidencing any of the Shares, whether upon initial issuance or upon
any transfer thereof, shall bear legends, prominently stamped or printed
thereon, reading substantially as follows:
5
10
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
REPURCHASE BY THE CORPORATION UNDER A SERIES D CONVERTIBLE
PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF JUNE 21, 1999."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER UNDER A SERIES D CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT DATED AS OF JUNE 21, 1999."
ARTICLE II
CONDITIONS TO THE PURCHASER'S OBLIGATION
The obligation of the Purchaser to purchase and pay for the Preferred
Shares at the Closing is subject to the satisfaction of the following
conditions:
2.01 Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article III hereof shall be true and
correct on the date of the Closing.
2.02 Documentation at Closing. The Purchaser shall have received prior
to or at the Closing all of the following documents or instruments, or evidence
of completion thereof, each in form and substance satisfactory to the Purchaser:
(a) A copy of the Certificate of Incorporation of the Company
(the "Certificate of Incorporation"), certified by the Secretary of State of the
State of Delaware together with a certified copy of the Certificate of
Designation of the Series D Preferred Stock, a copy of the resolutions of the
Board of Directors and, if required, the stockholders of the Company evidencing
the adoption of the Company's Certificate of Designation of the Series D
Preferred Stock, the approval of this Agreement, the issuance of the Preferred
Shares and the other matters contemplated hereby, and a copy of the By-laws of
the Company, all of which shall have been certified by the Secretary of the
Company to be true, complete and correct in every particular, and certified
copies of all documents evidencing other necessary corporate or other action and
governmental approvals, if any, with respect to this Agreement and the Shares.
(b) The opinion of ▇▇▇▇ and ▇▇▇▇ LLP, counsel to the Company,
in the form of Exhibit 2.02B attached hereto.
(c) A certificate of the Secretary of the Company which shall
certify the names of the officers of the Company authorized to sign this
Agreement, the certificates for the Preferred Shares and the other documents,
instruments or certificates to be delivered pursuant to this Agreement by the
Company or any of its officers, together with the true signatures of such
officers. The Purchaser may conclusively rely on such certificate until it shall
receive a further certificate of the Secretary or an Assistant Secretary of the
Company canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate.
(d) A certificate of the President of the Company stating that
the representations and warranties of the Company contained in Article III
hereof and otherwise
6
11
made by the Company in writing in connection with the transactions contemplated
hereby are true and correct and that all conditions required to be performed
prior to or at the Closing have been performed as of the Closing.
(e) Certificates of Good Standing for the Company from the
Secretaries of State of the States of Delaware and California, and the
Commonwealth of Massachusetts shall have been provided to the Purchaser.
(f) The Company and the Purchaser shall have entered into the
Services Agreement.
2.03 Additional Closing Conditions. The Purchaser shall have received
prior to or at the Closing evidence of satisfaction or completion of the
following, in form and substance satisfactory to the Purchaser:
(a) The Certificate of Designation of the Series D Preferred
Stock shall provide for the designation of the rights and preferences of the
Series D Preferred Stock in the forms set forth in Exhibit 1.01A attached hereto
(the "Series D Certificate of Designation").
(b) A Second Amended and Restated Stockholders' Agreement in
the form set forth in Exhibit 2.03B (the "Amended and Restated Stockholders'
Agreement") shall have been executed by the parties named therein.
(c) The Company shall have paid the costs, expenses, taxes and
filing fees identified in Section 6.04.
(d) The Company, the Purchaser and the other parties named
therein shall have entered into a Second Amended and Restated Registration
Rights Agreement in the form set forth in Exhibit 2.03D (the "Amended and
Restated Registration Rights Agreement").
(e) The Company's By-laws shall be in form and substance
reasonably satisfactory to the Purchaser.
2.04 Consents, Waivers, Etc. Prior to the Closing, the Company shall
have obtained all consents or waivers, if any, necessary to execute and deliver
this Agreement, issue the Preferred Shares and to carry out the transactions
contemplated hereby and thereby, including without limitation the waivers and/or
consents of the holders of Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock of the Company in connection with the transactions
contemplated hereby, and all such consents and waivers shall be in full force
and effect. All corporate and other action and governmental filings necessary to
effectuate the terms of this Agreement, the Preferred Shares and other
agreements and instruments executed and delivered by the Company in connection
herewith shall have been made or taken, except for any post-sale filing that may
be required under federal or state securities laws. In addition to the documents
set forth above, the Company shall have provided to the Purchaser any other
information or copies of documents that they may reasonably request.
ARTICLE III
7
12
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows as of the date
hereof and as of the date of the Closing:
3.01 Organization and Standing. The Company is a duly organized and
validly existing corporation in good standing under the corporate laws of the
State of Delaware and has all requisite corporate power and authority for the
ownership and operation of its properties and for the carrying on of its
business as now conducted or as now proposed to be conducted. The Company is
duly licensed or qualified and in good standing as a foreign corporation
authorized to do business in all jurisdictions wherein the character of the
property owned or leased, or the nature of the activities conducted, by it makes
such licensing or qualification necessary as set forth in Exhibit 3.01, except
where the failure to so qualify would not have a material adverse effect on the
business, operations, affairs or condition of the Company or in its properties
or assets taken as a whole, or which might call into question the validity of
this Agreement, any of the Shares, or any action taken or to be taken pursuant
hereto or thereto (a "Material Adverse Effect").
3.02 Corporate Action. The Company has all necessary corporate power
and has taken all corporate action required to enter into and perform this
Agreement, the Amended and Restated Registration Rights Agreement, the Amended
and Restated Stockholders Agreement and any other agreements and instruments
executed in connection herewith (collectively, the "Financing Documents"). The
Financing Documents are valid and binding obligations of the Company,
enforceable in accordance with their terms. The issuance, sale and delivery of
the Preferred Shares in accordance with this Agreement, and the issuance, sale
and delivery of the Converted Shares, have been duly authorized by all necessary
corporate action on the part of the Company. Sufficient authorized but unissued
shares of Common Stock have been reserved by appropriate corporate action in
connection with the prospective conversion of the Preferred Shares at the
initial conversion price, and the issuance of the Preferred Shares is not, and
the issuance of the Converted Shares upon the conversion of the Preferred Shares
will not be, subject to preemptive rights or other preferential rights in any
present stockholders of the Company and will not conflict with any provision of
any agreement or instrument to which the Company is a party or by which it or
its property is bound.
3.03 Governmental Approvals. Except for the filing of any notice
subsequent to the Closing that may be required under applicable state and/or
federal securities laws (which, if required, shall be filed on a timely basis
and a copy of which shall be provided to the Purchaser), no authorization,
consent, approval, license, exemption of or filing or registration with any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary for the execution
and delivery by the Company of this Agreement, for the offer, issue, sale and
delivery of the Preferred Shares, or for the performance by the Company of its
obligations under this Agreement or the Shares.
3.04 Litigation. Except as set forth in Exhibit 3.04, there is no
litigation or governmental proceeding or investigation pending or, to the
knowledge of the Company, threatened against the Company affecting any of its
respective properties or assets, or against any officer or Key Employee relating
to such person's performance of duties for the Company
8
13
or relating to his stock ownership in the Company or otherwise relating to the
business of the Company, nor to the knowledge of the Company has there occurred
any event or does there exist any condition on the basis of which any such
litigation, proceeding or investigation might properly be instituted. Neither
the Company nor, to the knowledge of the Company, any officer or Key Employee of
the Company (other than the Purchaser) is in default with respect to any order,
writ, injunction, decree, ruling or decision of any court, commission, board or
other governmental agency specifically naming the Company or an officer or Key
Employee of the Company. Except as set forth in Exhibit 3.04, there are no
actions or proceedings pending or, to the knowledge of the Company, threatened
against the Company or against any officer or Key Employee which could
reasonably be expected to result, either in any case or in the aggregate, in any
Material Adverse Effect. The foregoing sentences include, without limiting their
generality, actions pending or, to the knowledge of the Company, threatened (or
any basis therefor), involving the prior employment of any of the Company's
officers or employees (including any Key Employees) or their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers.
3.05 Certain Agreements of Officers, Founders and Key Employees.
(a) To the knowledge of the Company, no officer or Key
Employee of the Company is in violation of any term of any employment contract,
patent disclosure agreement, proprietary information agreement, noncompetition
agreement, or any other contract or agreement or any restrictive covenant
relating to the employment of any such officer or Key Employee by the Company,
the nature of the business conducted or to be conducted by the Company or
relating to the use of trade secrets or proprietary or confidential information
of others. The Company has no reason to believe that the employment of the
Company's officers and Key Employees will subject the Company or the Purchaser
to any liability to third-parties. The Company has entered into noncompetition
and nonsolicitation agreements and invention and nondisclosure agreements with
each of its employees.
(b) To the knowledge of the Company, no officer of the Company
nor any Key Employee of the Company whose termination, either individually or in
the aggregate, would have a Material Adverse Effect, has expressed any present
intention of terminating his employment with the Company.
3.06 Compliance with Other Instruments. The Company is in compliance in
all respects with the terms and provisions of this Agreement and of its
Certificate of Incorporation and By-laws, and in all material respects with the
terms and provisions of all mortgages, indentures, leases, agreements and other
instruments by which it is bound or to which it or any of its respective
properties or assets are subject. The Company is in compliance with all
judgments specifically naming the Company or any of the Founders, decrees,
governmental orders specifically naming the Company or any of the Founders,
statutes, rules or regulations by which it is bound or to which any of its
properties or assets are subject. Neither the execution and delivery of this
Agreement or the issuance of the Shares, nor the consummation of any transaction
contemplated by this Agreement, has constituted or resulted in or will
constitute or result in a default or violation of any term or provision of any
of the foregoing documents, instruments, judgments, agreements, decrees, orders,
statutes, rules and regulations.
9
14
3.07 Material Contracts.
(a) Except as set forth on Exhibit 3.07, the Company is not in
default under any (i) contract not made in the ordinary course of business, or
involving a commitment or payment by the Company in excess of $100,000 or, in
the Company's belief, otherwise material to the business of the Company; (ii)
contract among stockholders or granting a right of first refusal or for a
partnership or a joint venture or for the acquisition, sale or lease of any
assets or capital stock of the Company or any other Person or involving a
sharing of profits; (iii) mortgage, pledge, conditional sales contract, security
agreement, factoring agreement or other similar contract with respect to any
real or tangible personal property of the Company; (iv) loan agreement, credit
agreement, promissory note, guarantee, subordination agreement, letter of credit
or any other similar type of contract; (v) contract with any governmental
agency; or (vi) binding commitment or agreement to enter into any of the
foregoing (collectively, the "Material Contracts"). The Company has delivered or
otherwise made available to the Purchaser true, correct and complete copies of
the Material Contracts, other than those related to the Company's customers,
licensees, licensors, strategic partners or suppliers, together with all
amendments, modifications, supplements or side letters affecting the obligations
of any party thereunder.
(b) (i) Each of the Material Contracts is valid and
enforceable in accordance with its terms, and there is no default under any
Material Contract by the Company or, to the knowledge of the Company by any
other party thereto, and no event has occurred with respect to any of the
Material Contracts that with the lapse of time or the giving of notice or both
would constitute a default by the Company thereunder except where such default
is not reasonably expected to have a Material Adverse Effect and (ii) no
previous or current party to any Material Contract has given written notice to
the Company of or made a written claim with respect to any breach or default
thereunder and the Company has no knowledge of any notice of or claim with
respect to any such breach or default.
(c) With respect to the Material Contracts that were assigned
to the Company by a third party, all necessary consents to such assignment have
been obtained.
3.08 ERISA. Except as set forth on Exhibit 3.08, the Company does not
make and has no present intentions to make any contributions to any employee
pension benefit plans for its employees that are subject to ERISA.
3.09 Transactions with Affiliates. Except as set forth on Exhibit 3.09,
as contemplated hereby or consented to by the Purchaser in accordance with this
Agreement, there are no loans, leases, royalty agreements or other continuing
transactions between any Founder, officer, employee or director of the Company
or any Person owning 5% or more of any class of capital stock of the Company or
any member of the immediate family of such Founder, officer, employee, director
or stockholder or any corporation or other entity controlled by such officer,
employee, director or stockholder or a member of the immediate family of such
officer, employee, director or stockholder.
3.10 Assumptions or Guaranties of Indebtedness of Other Persons. Except
as contemplated hereby or consented to by the Purchaser in accordance with this
Agreement, the Company has not assumed, guaranteed, endorsed or otherwise become
directly or contingently
10
15
liable on (including, without limitation, liability by way of agreement,
contingent or otherwise, to purchase, to provide funds for payment, to supply
funds to or otherwise invest in the debtor or otherwise to assure the creditor
against loss), any Indebtedness of any other Person.
3.11 Investments in Other Persons; Subsidiaries. Except as set forth on
Exhibit 3.11 or consented to by the Purchaser in accordance with this Agreement,
the Company has not made any loan or advance to any Person which is outstanding
on the date of this Agreement, nor is it committed or obligated to make any such
loan or advance, nor does the Company own any capital stock, assets comprising
the business of, obligations of, or any interest in, any Person except as
disclosed in this Agreement. The Company has no Subsidiaries.
3.12 Securities Laws. The Company has complied with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Shares. Prior to the Closing, neither the Company nor anyone acting
on its behalf has sold, offered to sell or solicited offers to buy the Shares or
similar securities to, or solicited offers with respect thereto from, or entered
into any preliminary conversations or negotiations relating thereto with, any
Person, so as to bring the issuance and sale of the Shares under the
registration provisions of the Securities Act, and applicable state securities
laws.
3.13 Disclosure. Neither this Agreement nor any other agreement,
document, certificate or written statement furnished to the Purchaser by or on
behalf of the Company in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact relating directly to the Company necessary in order to make the statements
contained herein or therein not misleading. There is no fact within the
knowledge of the Company which has not been disclosed herein or in writing to
the Purchasers and which taken by itself would constitute a circumstance having
a Material Adverse Effect. Without limiting the generality of the foregoing, the
Company does not have any knowledge that there exists, or there is pending or
planned, any statute, rule, law, regulation, standard or code which would have a
Material Adverse Effect on the Company's business.
3.14 Brokers or Finders. No Person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or valid claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Company or any of their
respective agents.
3.15 Capitalization; Status of Capital Stock. The Company has a total
authorized capitalization consisting of (i) 65,000,000 shares of Common Stock,
par value $.01 per share, of which 21,542,655 shares are issued and outstanding
and (ii) 5,000,000 shares of Preferred Stock, par value $.01 per share, of which
(A) 1,100,000 shares are designated as Series A Convertible Preferred Stock, all
of which shares are issued and outstanding on the date hereof, (B) 1,327,500
shares are designated as Series B Convertible Preferred Stock, all of which
shares are issued and outstanding on the date hereof, (C) 145,195 shares are
designated as Series C Convertible Preferred Stock, of which no shares are
issued and outstanding on the date hereof, and (D) 685,194 shares are designated
as Series D Convertible Preferred Stock, of which no shares are issued and
outstanding on the date hereof, prior to giving effect to the transactions
contemplated hereby. Set forth on Exhibit 3.15 is the number of issued and
outstanding shares of the capital stock of the Company. All the outstanding
shares of capital stock of the Company have been duly authorized, and are
validly issued, fully paid and non-assessable. The Preferred Shares,
11
16
when issued and delivered in accordance with the terms hereof and after payment
of the purchase price therefor and the Converted Shares, when issued and
delivered upon conversion of the Preferred Shares, will be duly authorized,
validly issued, fully-paid and non-assessable. Except as otherwise set forth in
Exhibit 3.15, no options, warrants, subscriptions or purchase rights of any
nature to acquire from the Company shares of capital stock or other securities
are authorized, issued or outstanding, nor is the Company obligated in any other
manner to issue shares of its capital stock or other securities except as
contemplated by this Agreement. Except as set forth in Exhibit 3.15, there are
no restrictions on the transfer of shares of capital stock of the Company other
than those imposed by relevant federal and state securities laws and as
otherwise contemplated by this Agreement, the Amended and Restated Stockholders
Agreement, the Amended and Restated Registration Rights Agreement, the
Certificate of Incorporation, the Series D Certificate of Designation and stock
restriction and right of first refusal agreements between the Company and
certain of its employees. Other than as provided in this Section and in the
Amended and Restated Stockholders Agreement, there are no agreements,
understandings, trusts or other collaborative arrangements or understandings
concerning the voting of the capital stock of the Company. The offer and sale of
all capital stock and other securities of the Company issued before the Closing
complied with or were exempt from all applicable federal and state securities
laws and no stockholder has a right of rescission with respect thereto.
3.16 Registration Rights. Except as set forth in Exhibit 3.16 and
except for the rights granted to the Purchaser and certain other parties
pursuant to the Amended and Restated Registration Rights Agreement, no Person
has demand or other rights to cause the Company to file any registration
statement under the Securities Act relating to any securities of the Company or
any right to participate in any such registration statement.
3.17 Books and Records. The books of account, ledgers, order books,
records and documents of the Company accurately and completely reflect all
material information relating to the business of the Company, the location and
collection of its assets, and the nature of all transactions giving rise to the
obligations or accounts receivable of the Company.
3.18 Title to Assets; Patents.
(a) The Company has good and marketable title in fee to such
of its fixed assets, if any, as are real property, and good and marketable title
to all of its other assets and properties, free of any mortgages, pledges,
charges, liens, security interests or other encumbrances, except those occurring
in the ordinary course of business and those indicated on Exhibit 3.18(a). The
Company enjoys peaceful and undisturbed possession under all leases under which
it is operating, and all said leases are valid and subsisting and in full force
and effect.
(b) The Company does not know of any claim, previously
asserted, pending, threatened or which may otherwise be asserted ("Claim") that
would interfere with, or adversely impact upon, the Company's unencumbered right
to use, make, sell, license, distribute, promote, apply, develop and make
derivative works of ("Use"), the patents, patent rights, permits, licenses,
trade secrets, trademarks (registered or unregistered), trademark rights, trade
names, trade name rights, franchises, copyrights (registered or unregistered),
inventions (regardless of whether patentable or not), software, confidential
information, innovations and other intellectual property rights being used to
conduct its business as now operated and as now proposed to be
12
17
operated, or in the development, manufacture, use, distribution or licensing of
the Company's proprietary technology, information, products, processes, or
services (collectively, the "Intellectual Property Rights") (a list of all
patents, trademarks, trade names, permits, and licenses Used by the Company is
attached hereto as Exhibit 3.18(b)); and the Company does not have any reason to
believe that the Use of the Intellectual Property Rights infringes, conflicts or
will conflict with valid rights of any other Person. No claim is known by the
Company to be pending or threatened to the effect that, and the Company has no
reason to believe that, any such Intellectual Property Right is invalid or
unenforceable by the Company or its licensor. Except as set forth in Exhibit
3.18(c), the Company has no obligation known by the Company to compensate any
Person for the use of any such Intellectual Property Rights, and the Company has
not granted any Person any license or other rights to use in any manner any of
the Intellectual Property Rights of the Company, whether requiring the payment
of royalties or not.
3.19 The Year 2000. Each item of hardware, software, or processor based
system and/or any combination thereof, developed, manufactured, distributed,
licensed or delivered, by the Company (collectively, the "System"), shall in all
material respects be able to correctly function, operate, process data or
perform date related calculations, including, but not limited to, calculating,
comparing and sequencing, from, into and between the years 1999 and 2000,
accurately process, provide and/or receive date data, including leap year
calculations, into and between the years 1999, 2000 and beyond, shall otherwise
function as per the specifications thereof both before, during and following
January 1, 2000. Neither performance nor functionality of the System shall be
affected by dates prior to, during and after January 1, 2000. A System
containing or calling on a calendar function including, without limitation, any
function indexed to the CPU clock, and any function providing specific dates or
days, or calculating spans of dates or days shall record, store, process,
provide and, where appropriate, insert, true and accurate dates and calculations
for dates and spans, before, during and following January 1, 2000. The System
shall have no lesser functionality or operability with respect to records
containing dates, before, during or after January 1, 2000 than heretofore with
respect to dates prior to January 1, 2000.
3.20 Financial Statements. Attached hereto as Exhibit 3.20 are copies
of the unaudited balance sheet of the Company as of December 31, 1998, the
statements of income and retained earnings of the Company for the period ended
December 31, 1998, and the statements of cash flows of the Company for the
period ended December 31, 1998 (the "Financial Statements"). Each of the
Financial Statements was prepared in good faith, is complete and correct in all
material respects, has been prepared in accordance with generally accepted
accounting principles and in conformity with the practices consistently applied
by the Company and presents fairly the financial position, results of operations
and cash flows of the Company as of the dates and for the periods indicated.
3.21 No Undisclosed Liabilities. Except as set forth on Exhibit 3.21,
the Company has no liabilities (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or unasserted), except
(a) obligations under contracts described in Exhibit 3.07 or under contracts
that are not required to be disclosed thereon as a result of dollar thresholds
therein; (b) liabilities provided for in the Financial Statements (other than
liabilities which, in accordance with generally accepted accounting principles,
need not be disclosed); (c) liabilities (other than accounts payable) incurred
since the Financial Statements, in the ordinary course of business consistent
with past practice, the sum of which is, in the aggregate, no greater than
13
18
$300,000; and (d) accounts payable in excess of those shown on the Financial
Statements, incurred in the ordinary course of business consistent with past
practice, the sum of which is, in the aggregate, not greater than $300,000.
3.22 Technology. Except as set forth in Exhibit 3.22 and other than the
Intellectual Property Rights licensed to the Company pursuant to the License
Agreement, the proprietary technology, information, products, processes and
services and other proprietary know-how owned or used by the Company were
completely developed by the Company's full-time employees only; the concepts,
inventions and original works of authorship owned or used by the Company were
developed or conceived by employees within the scope of their employment by the
Company and are connected with Company's underlying proprietary products,
processes and technology. No independent contractors or consultants were used or
employed by the Company in the development of proprietary technology and other
proprietary know-how owned or used by the Company.
ARTICLE IV
COVENANTS OF THE COMPANY
4.01 Affirmative Covenants of the Company Other Than Reporting
Requirements. Without limiting any other covenants and provisions hereof, the
Company covenants and agrees that until the consummation of a Qualified Public
Offering, it will perform and observe the following covenants and provisions,
and will cause each Subsidiary, if and when such Subsidiary exists, to perform
and observe such of the following covenants and provisions as are applicable to
such Subsidiary:
(a) Payment of Taxes and Trade Debt. Pay and discharge, and
cause each Subsidiary to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income, profits or
business, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims which, if unpaid, might become a
lien or charge upon any properties of the Company or any Subsidiary, provided
that neither the Company nor any Subsidiary shall be required to pay any such
tax, assessment, charge, levy or claim which is being contested in good faith
and by appropriate proceedings if the Company or any Subsidiary shall have set
aside on its books sufficient reserves, if any, with respect thereto. Pay and
cause each Subsidiary to pay, when due, or in conformity with customary trade
terms, all lease obligations, all trade debt, and all other Indebtedness
incident to the operations of the Company or its Subsidiaries, except such as
are being contested in good faith and by proper proceedings if the Company or
Subsidiary concerned shall have set aside on its books sufficient reserves, if
any, with respect thereto.
(b) Maintenance of Insurance. Obtain and maintain from
reputable insurance companies or associations a term life insurance policy on
the lives of each of ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ the face amount equal
to $2,000,000 each (so long as each remains an employee of the Company), which
proceeds will be payable to the order of the Company, and maintain insurance
with a reputable insurance company or association in such amount and covering
such risks as is customary coverage covering its properties and businesses
customarily carried by companies engaged in similar businesses and owning
similar properties in the same general areas in which the Company or any
Subsidiary operates for the type and scope of its properties and businesses and
maintain, and cause each Subsidiary to maintain, such insurance. The Company
will not cause or permit any assignment of the proceeds of the life insurance
policies specified in the first sentence of this paragraph and will not borrow
against such policies.
14
19
(c) Preservation of Corporate Existence. Preserve and
maintain, and, unless the Company deems it not to be in its best interests,
cause each Subsidiary to preserve and maintain, its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified,
as a foreign corporation in each jurisdiction in which such qualification is
necessary or desirable in view of its business and operations or the ownership
or lease of its properties. Use commercially reasonable best efforts to secure,
preserve and maintain, and cause each Subsidiary to use commercially reasonable
best efforts to secure, preserve and maintain, all licenses and other rights to
use patents, processes, licenses, permits, trademarks, trade names, inventions,
intellectual property rights or copyrights owned or possessed by it and deemed
by the Company to be material to the conduct of its business or the business of
any Subsidiary.
(d) Compliance with Laws. Comply, and cause each Subsidiary to
comply, with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority, where noncompliance would have a Material
Adverse Effect.
(e) Inspection. Permit, upon reasonable request and notice to
the President of the Company, the Purchaser (provided the Purchaser holds at
least 35,000 shares of the outstanding Preferred Shares (as equitably adjusted
for stock splits, stock dividends and the like)) or any authorized agents or
representatives thereof to examine and make copies of and extracts from the
financial and employment records and books of the Company, to visit and inspect
the properties of the Company and any Subsidiary, to discuss the finances and
other matters of the Company and any Subsidiary not related to the Company's
customers, licensees, licensors, strategic partners and suppliers with any of
its officers, directors or Key Employees and independent accountants, and to
consult with and advise the management of the Company and any Subsidiary as to
their finances and other matters not related to the Company's customers,
licensees, licensors, strategic partners and suppliers, all at reasonable times
and upon reasonable notice to the President of the Company. The Purchaser agrees
that it will maintain the confidentiality of any information so obtained by it
which is not otherwise available from other sources.
(f) Keeping of Records and Books of Account. Keep, and cause
each Subsidiary to keep, adequate records and books of account in which complete
entries will be made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions of the Company and
any Subsidiary, and in which, for each fiscal year, all proper reserves for
depreciation, depletion, returns of merchandise, obsolescence, amortization,
taxes, bad debts and other purposes in connection with its business shall be
made.
(g) Maintenance of Properties; Material Assets. Use
commercially reasonable best efforts to maintain and preserve, and cause each
Subsidiary to use commercially reasonable best efforts to maintain and preserve,
all of its properties and assets, necessary for the proper conduct of its
business, in good repair, working order and condition, ordinary wear and tear
excepted, including, without limitation, the maintenance and preservation of any
material patents, licenses, permits or agreements being used by the Company in
its business as now operated and as now proposed to be operated, including that
certain patent and license agreement dated October 26, 1998 by and between the
Massachusetts Institute of Technology ("MIT") and the Company.
(h) Compliance with ERISA. Comply, and cause each Subsidiary
to comply, with all minimum funding requirements applicable to any pension,
employee benefit plans or employee contribution plans which are subject to ERISA
or to the Internal Revenue Code of 1986, as amended (the "Code"), and comply,
and cause each Subsidiary to comply, in all other material respects with the
provisions of ERISA and the Code, and the rules and regulations thereunder,
which are applicable to any such plan. Neither the Company nor any Subsidiary
will permit any event or condition to exist which could permit any such plan to
be terminated under circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to the assets of the Company or any Subsidiary.
15
20
4.02 Negative Covenants of the Company. Without limiting any other
covenants and provisions hereof, the Company covenants and agrees that, for so
long as at least 50% of the shares of Series D Preferred Stock which were issued
pursuant to this Agreement remain outstanding, it will comply with and observe
the following covenants and provisions, and will cause each Subsidiary, if and
when such Subsidiary exists, to comply with and observe such of the following
covenants and provisions as are applicable to such Subsidiary, and will not,
without the consent of at least 50% in interest of the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock, voting together as a single class on a Common Stock equivalent
basis:
(a) Restrictions on Indebtedness. Create, incur, assume or
suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to
exist, any liability with respect to any Indebtedness for money borrowed except
the following:
(i) Indebtedness for money borrowed by the Company,
not to exceed, in the aggregate, $25,000,000; and
(ii) Indebtedness of the Company in respect of
Capital Expenditures subject to Section 4.02(i) herein.
(b) Merger or Sale. Merge with or into any other entity
(except a merger with a Subsidiary or a consolidation or merger in which the
Company is the surviving Company and the holders of Company voting stock
outstanding immediately prior to the transaction constitute a majority of the
holders of voting stock outstanding immediately following the transaction or a
consolidation or merger pursuant to which the aggregate consideration
definitively and unconditionally payable to all of the stockholders of the
Company is greater than $400 million), sell to any person or entity any assets
constituting all or substantially all of the assets of the Company, or agree to
do or permit any Subsidiary to do any of the foregoing (unless the aggregate
consideration definitively and unconditionally payable to the Company or all of
the stockholders as a result of any such transaction is greater than $400
million).
(c) Assumptions or Guaranties of Indebtedness of Other
Persons. Assume, guarantee, endorse or otherwise become directly or contingently
liable on, or permit any Subsidiary to assume, guarantee, endorse or otherwise
become directly or contingently liable on (including, without limitation,
liability by way of agreement, contingent or otherwise, to purchase, to provide
funds for payment, to supply funds to or otherwise invest in the debtor or
otherwise to assure the creditor against loss) any Indebtedness of any other
Person, except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business, and except for the
guaranties of the permitted obligations of any wholly-owned Subsidiary.
(d) Distributions. Declare or pay any dividends, purchase,
redeem, retire, or otherwise acquire for value any of its capital stock (or
rights, options or warrants to purchase such shares) now or hereafter
outstanding, return any capital to its stockholders as such, or make any
distribution of assets to its stockholders as such, or permit any Subsidiary to
do any of the foregoing (such transactions being hereinafter referred to as
"Distributions"), except that any such Subsidiary may declare and make payment
of cash and stock dividends, return capital and make distributions of assets to
the Company, and except as specifically provided for in the Company's
Certificate of Incorporation or the Series D Certificate of Designation;
provided, however, that nothing herein contained shall prevent the Company from:
(i) effecting a stock split (except for a reverse
stock split) or declaring or paying any dividend consisting of shares of any
class of capital stock to the holders of shares of such class of capital stock,
or
16
21
(ii) redeeming any stock of a deceased stockholder
out of insurance held by the Company on that stockholder's life, or
(iii) repurchasing the shares of Common Stock at the
original cost thereof (in accordance with stock restriction and right of first
refusal agreements or similar agreements) held by officers, employees, directors
or consultants of the Company which are subject to restrictive stock purchase
agreements under which the Company has the option to repurchase such shares upon
the occurrence of certain events, including the termination of employment, if in
the case of any such transaction the payment can be made in compliance with the
other terms of this Agreement, or
(iv) repurchasing securities pursuant to Section
1.04(b) of this Agreement.
(e) Change in Nature of Business. Make or permit any
Subsidiary to make any material change in the nature of its business as
contemplated in written materials delivered to the Purchaser prior to the date
hereof.
(f) Ownership of Subsidiaries. Purchase or hold beneficially
any stock, other securities or evidences of Indebtedness in, or make any
investment in any other Person, excluding a wholly-owned subsidiary of the
Company.
(g) Issuance of Reserved Employee Shares. Grant to any of its
employees awards, options or other rights to purchase Reserved Employee Shares
unless authorized by vote of a majority of the Board of Directors which shall
include at least two members designated by holders of Preferred Stock of the
Company.
(h) Dealings with Affiliates and Others. Other than as
contemplated by this Agreement, and other than transactions in the ordinary
course of business involving less than $50,000, enter into any transaction,
including, without limitation, any loans or extensions of credit or royalty
agreements, with any officer or director of the Company or any Subsidiary or
holder of any class of capital stock of the Company, or any member of their
respective immediate families or any corporation or other entity directly or
indirectly affiliated with one or more of such officers, directors or
stockholders or members of their immediate families unless such transaction is
approved in advance by a majority of disinterested members of the Board of
Directors, or absent such Board of Directors approval, by the Purchaser.
(i) Capital Expenditures. Incur any Capital Expenditures in
any fiscal year in excess of the agreed upon budget therefor.
4.03 Reporting Requirements. For as long as at least 35,000 of the
Preferred Shares remain outstanding (as equitably adjusted for stock splits,
stock dividends and the like), the Company will furnish the Purchaser:
(a) Monthly Reports: as soon as available and in any event
within 30 days after the end of each calendar month, unaudited consolidated and
consolidating balance sheets of the Company and its Subsidiaries as of the end
of such month and consolidated and consolidating statements of income and
retained earnings of the Company and its Subsidiaries for such month and for the
period commencing at the end of the previous fiscal year and ending with the end
of such month, setting forth in each case in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, and including
comparisons to monthly budgets, a cash flow analysis for such month, a schedule
showing each expenditure of a capital nature during such month, and a summary
discussion of the Company's principal functional areas, all in reasonable detail
and duly certified (subject to year-end audit
17
22
adjustments) by the chief financial officer of the Company as having been
prepared in accordance with generally accepted accounting principles
consistently applied;
(b) Quarterly Reports: as soon as available and in any event
within 45 days after the end of each of the first three quarters of each fiscal
year of the Company, unaudited consolidated balance sheets of the Company and
its Subsidiaries as of the end of such quarter and consolidated statements of
income and cash flows of the Company and its Subsidiaries for such quarter and
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding period of the preceding fiscal year,
and including comparisons to quarterly budgets and a summary discussion of the
Company's principal functional areas, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief financial officer
of the Company as having been prepared in accordance with generally accepted
accounting principles consistently applied;
(c) Annual Reports: as soon as available and in any event
within 120 days after the end of each fiscal year of the Company, a copy of the
annual audit report for such year for the Company and its Subsidiaries,
including therein consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year and consolidated statements of
income of the Company and its Subsidiaries for such fiscal year, setting forth
in each case in comparative form the corresponding figures for the preceding
fiscal year, all such consolidated statements to be duly certified by the chief
financial officer of the Company and by such independent public accountants of
recognized national standing approved by a majority of the Board of Directors;
(d) Budgets for the forthcoming fiscal year: as soon as
available after approval by the Board of Directors;
(e) Notice of Adverse Changes: promptly after the occurrence
thereof and in any event within 10 days after each occurrence, notice of any
material adverse change in the operations or financial condition of the Company
or any material default in any other material agreement to which the Company is
a party;
(f) Written Reports: promptly upon receipt or publication
thereof, any written reports submitted to the Company by independent public
accountants in connection with an annual or interim audit of the books of the
Company and its Subsidiaries made by such accountants or by consultants or other
experts in connection with such consultant's or other expert's review of the
Company's operations or industry, and written reports prepared by the Company to
comply with other investment or loan agreements;
(g) Notice of Proceedings: promptly after the commencement
thereof, notice of all material actions, suits and proceedings of the type
described in Section 3.04 before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company or any Subsidiary; and
(h) Stockholders' and Commission Reports: promptly upon
sending, making available, or filing the same, such reports and financial
statements as the Company or any Subsidiary shall send or make available to the
stockholders of the Company or file with the Commission.
18
23
ARTICLE V
DEFINITIONS AND ACCOUNTING TERMS
5.01 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Agreement" means this Series D Convertible Preferred Stock Purchase
Agreement as from time to time amended and in effect between the parties,
including all Exhibits hereto.
"Board of Directors" means the board of directors of the Company as
constituted from time to time.
"Capital Expenditures" for any period shall mean all amounts debited or
required to be debited to the fixed asset accounts on the balance sheet of the
Company during such period in accordance with generally accepted accounting
principles in respect of (a) the acquisition, construction, improvement,
replacement or betterment of land, buildings, machinery, equipment or of any
other fixed assets or leaseholds, and (b) to the extent related to and not
included in (a) above, materials, contract labor and direct labor (excluding
expenditures properly chargeable to repairs or maintenance in accordance with
generally accepted accounting principles).
"Closing" shall have the meaning attributable to it in Section 1.04 of
this Agreement.
"Commission" means the Securities and Exchange Commission (or any other
federal agency administering the securities laws).
"Common Stock" includes (a) the Company's Common Stock, par value $.01
per share, as authorized on the date of this Agreement, (b) any other capital
stock of any class or classes (however designated) of the Company, authorized on
or after the date hereof, the holders of which shall have the right, without
limitation as to amount, either to all or to a share of the balance of current
dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and the holders of which
shall ordinarily, in the absence of contingencies or in the absence of any
provision to the contrary in the Company's Certificate of Incorporation, be
entitled to vote for the election of a majority of directors of the Company
(even though the right so to vote has been suspended by the happening of such a
contingency or provision), and (c) any other securities into which or for which
any of the securities described in (a) or (b) may be converted or exchanged
pursuant to a plan of recapitalization, reorganization, merger, sale of assets
or otherwise.
"Company" means and shall include Akamai Technologies, Inc., a Delaware
corporation, and its successors and assigns.
"Consolidated" and "consolidating" when used with reference to any term
defined herein mean that term as applied to the accounts of the Company and its
Subsidiaries consolidated in accordance with generally accepted accounting
principles.
"Converted Shares" shall have that meaning attributable to it in
Section 1.02 of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Founders" shall mean ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
19
24
"Indebtedness" means all obligations, contingent and otherwise, for
borrowed money which should, in accordance with generally accepted accounting
principles, be classified upon the obligor's balance sheet (or the notes
thereto) as liabilities, but in any event including liabilities secured by any
mortgage on property owned or acquired subject to such mortgage, whether or not
the liability secured thereby shall have been assumed, and also including (a)
all guaranties, endorsements and other contingent obligations, in respect of
Indebtedness of others, whether or not the same are or should be so reflected in
said balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and (b) the present value of any lease payments due
under leases required to be capitalized in accordance with applicable Statements
of Financial Accounting Standards, determined by discounting all such payments
at the interest rate determined in accordance with applicable Statements of
Financial Accounting Standards.
"Key Employee" means and includes any Founder, the President, chief
executive officer, chief financial officer, chief operating officer, vice
president of operations, research, development, sales or marketing, or any other
individual who performs a significant role in the operations of the Company or a
Subsidiary as may be reasonably designated by the Board of Directors.
"Person" means an individual, corporation, partnership, joint venture,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
"Preferred Shares" shall have the meaning attributable to it in Section
1.01 of this Agreement.
"Preferred Stock" means the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock.
"Purchaser" shall have that meaning attributable to it in Section 1.01
of this Agreement.
"Qualified Public Offering" means a fully underwritten, firm commitment
public offering pursuant to an effective registration under the Securities Act
covering the offer and sale by the Company of its Common Stock in which (i) the
aggregate gross proceeds from such offering to the Company shall be at least
$20,000,000; and (ii) the price paid by the public for such shares shall be at
least (x) 2.0 times the then Series B Conversion Price if the public offering
occurs prior to October 16, 2000, or (y) 3.0 times the then Series B Conversion
Price if the public offering occurs on or after October 16, 2000.
"Reserved Employee Shares" means shares of Common Stock, not to exceed
in the aggregate 11,377,800 shares (appropriately adjusted to reflect stock
splits, stock dividends, combinations of shares and the like with respect to the
Common Stock and subject to the provisions of the Section 4.02(g) hereof),
reserved by the Company for issuance pursuant to the Company's 1998 Stock
Incentive Plan, provided that such number may be increased by up to 7,559,226
additional shares of Common Stock (the "Founders' Shares") (appropriately
adjusted to reflect stock splits, stock dividends, combinations of shares and
the like with respect to the Common Stock and subject to the provisions of the
Section 4.02(g) hereof and including 2,132,100 shares previously issued or
subject to options prior to the date hereof) held by the Founders upon the
repurchase of such Founders Shares by the Company from the Founders pursuant to
contractual rights held by the Company. The foregoing numbers of Reserved
Employee Shares may be increased by the affirmative vote or written consent of a
majority of the directors elected solely by the holders of Series A Preferred
Stock and Series B Preferred Stock or the affirmative vote or written consent of
the holders of at least 50% of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock, voting together as a single class on a Common Stock equivalent basis.
"Securities Act" means the Securities Act of 1933, or any similar
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
20
25
"Series B Conversion Price" shall have the meaning attributable to it
in the Series B Certificate of Designation.
"Series A Preferred Stock" means the Series A Convertible Preferred
Stock of the Company, par value $.01 per share.
"Series B Preferred Stock" means the Series B Convertible Preferred
Stock of the Company, par value $.01 per share.
"Series C Preferred Stock" means the Series C Convertible Preferred
Stock of the Company, par value $.01 per share.
"Series D Preferred Stock" means the Series D Convertible Preferred
Stock of the Company, par value $.01 per share, having the rights, powers,
privileges and preferences set forth in Exhibit 1.01 hereto.
"Shares" shall have that meaning attributable to it in Section 1.03 of
this Agreement.
"Subsidiary" or "Subsidiaries" means any corporation, partnership,
trust or other entity of which the Company and/or any of its other Subsidiaries
(as herein defined) directly or indirectly owns at the time a majority of the
outstanding shares of every class of equity securities of such corporation,
partnership, trust or other entity.
5.02 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with generally accepted accounting
principles consistently applied, and all financial data submitted pursuant to
this Agreement shall be prepared in accordance with such principles.
5.03 Knowledge. All references to the knowledge or awareness of the
Company shall mean the knowledge of any director or Key Employee of the Company.
ARTICLE VI
MISCELLANEOUS
6.01 No Waiver; Cumulative Remedies. No failure or delay on the part of
any party to this Agreement in exercising any right, power or remedy hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy hereunder. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
6.02 Amendments, Waivers and Consents. Any provision in this Agreement
to the contrary notwithstanding, and except as hereinafter provided changes in
or additions to this Agreement may be made, and compliance with any covenant or
provision set forth herein may be omitted or waived, if the Company (i) shall
obtain consent thereto in writing from the holder or holders of at least 60% of
the then outstanding shares of Series D Preferred Stock, and (ii) shall deliver
copies of such consent in writing to any holders who did not execute such
consent; provided, however, that any provision set forth in Section 4.02 of this
Agreement may be amended or waived with the written consent of more than 50% in
interest of the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, voting together as a
single class on a Common Stock equivalent basis. Notwithstanding the foregoing
proviso, no amendment or waiver approved in accordance herewith shall be
effective if and to the extent such amendment or waiver treats the holders of
any series of preferred stock of the Company differently than the holders of any
other series of preferred stock of the Company,
21
26
unless the written consent of a majority of such series shall have been
obtained. Any waiver or consent may be given subject to satisfaction of
conditions stated therein and any waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
6.03 Addresses for Notices. All notices, requests, demands and other
communications provided for hereunder shall be in writing and mailed, faxed or
delivered to each applicable party at the address set forth below or at such
other address as to which such party may inform the other parties in writing in
compliance with the terms of this Section.
If to the Purchaser: at ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or
at such other address as shall be designated by the Purchaser in a written
notice to the Company complying as to delivery with the terms of this Section
6.03.
If to the Company: at the address set forth on page 1 hereof, or at
such other address as shall be designated by the Company in a written notice to
the Purchaser complying as to delivery with the terms of this Section, with a
copy to: ▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇. ▇▇▇▇▇, Esq.
All such notices, requests, demands and other communications shall,
when mailed (which mailing must be accomplished by first class mail, postage
prepaid; express overnight courier service; or registered mail, return receipt
requested) or transmitted by facsimile, be effective three days after deposited
in the mails or upon transmission by facsimile, respectively, addressed as
aforesaid, unless otherwise provided herein.
6.04 Costs, Expenses and Taxes. The Company agrees to pay in connection
with the preparation, execution and delivery of this Agreement and the issuance
of the Preferred Shares, the reasonable out-of-pocket expenses of the Purchaser,
including legal (both in-house and outside counsel), accounting and other
expenses, up to a maximum of $10,000. In addition, the Company shall pay any and
all stamp and other taxes payable or determined to be payable in connection with
the execution and delivery of this Agreement, the issuance of the Preferred
Shares and the other instruments and documents to be delivered hereunder or
thereunder, and agrees to save the Purchaser harmless from and against any and
all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
6.05 Binding Effect; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Company and the Purchaser and their respective
heirs, successors and assigns, except that the Company shall not have the right
to delegate any of its respective obligations hereunder or to assign its
respective rights hereunder or any interest herein without the prior written
consent of the holders of at least a majority in interest of the Shares. Any
transfer of Shares by the Purchaser shall be in accordance with Section 1.05(a)
and shall be subject to the concurrent assumption by the transferee of all the
rights and obligations of the Purchaser hereunder (including without limitation
the obligations of the Purchaser set forth in Section 1.04(b)). The rights and
obligations of the parties hereunder (including without limitation the rights
and obligations under Sections 1.04(b) and 1.05) shall remain in effect
indefinitely unless terminated in accordance with their terms or upon written
agreement of the Company and the Purchaser.
6.06 Survival of Representations and Warranties. All representations
and warranties made in this Agreement, the Shares, or any other instrument or
document delivered in connection herewith or therewith, shall survive the
execution and delivery hereof or thereof.
6.07 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the purchase and sale of the Shares.
22
27
6.08 Severability. The provisions of this Agreement and the terms of
the Series D Preferred Stock are severable and, in the event that any court of
competent jurisdiction shall determine that any one or more of the provisions or
part of a provision contained in this Agreement or the Series D Preferred Stock
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement or the terms of the
Series D Preferred Stock; but this Agreement and the terms of the Series D
Preferred Stock, shall be reformed and construed as if such invalid or illegal
or unenforceable provision, or part of a provision, had never been contained
herein, and such provisions or part reformed so that it would be valid, legal
and enforceable to the maximum extent possible.
6.09 Governing Law. This Agreement shall be construed and enforced in
accordance with and governed by the General Corporation Law of the State of
Delaware as to matters within the scope thereof, and as to all other matters
shall be governed by and construed in accordance with the internal laws of the
Commonwealth of Massachusetts.
6.10 Headings. Article, Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
6.12 Further Assurances. From and after the date of this Agreement,
upon the request of the Purchaser or the Company, the Company and the Purchaser
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement and the Shares.
6.13 Indemnification.
(a) The Company shall, with respect to the representations,
warranties and agreements made by it herein, indemnify, defend and hold the
Purchaser harmless against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including legal and accounting
fees and expenses (collectively, "Losses" and individually, a "Loss")), arising
from the untruth, inaccuracy or breach of any such representations, warranties
or agreements of the Company. Without limiting the generality of the foregoing,
the Purchaser shall be deemed to have suffered a Loss as a result of the
untruth, inaccuracy or breach of any such representations or warranties if a
Loss shall be suffered by the Company as a result of, or in connection with,
such untruth, inaccuracy or breach of any facts or circumstances constituting
such untruth, inaccuracy or breach. To claim a Loss, the Purchaser shall deliver
to the Company a notice (the "Loss Notice") specifying in reasonable detail the
nature and estimated amount of the Loss. A determination as to the existence and
amount of the Loss claimed in the Loss Notice shall be made in accordance with
Section 6.13(c) below. Any dispute regarding a Loss shall be determined as set
forth in Section 6.13(c) herein.
(b) The representations and warranties of the Company set
forth in this Agreement shall survive the Closing until June 21, 2001 and be of
no further force or effect as of such date, except that (i) the representations
and warranties set forth in Sections 3.13 and 3.18 shall survive the Closing
until June 21, 2000, and (ii) the representations and warranties set forth in
Section 3.15 shall survive the Closing forever and shall not terminate.
(c) Beginning 10 days after delivery of the Loss Notice, the
Company and the Purchaser shall attempt in good faith for 30 days to agree upon
the amount of the Loss claimed in the Loss Notice (the "Loss Amount") and the
then fair market value of one share of Series D Preferred Stock
23
28
after giving effect to the Loss (the "Current Series D Value"). If no such
agreement can be reached, the Company and the Purchaser shall each promptly
select an arbitrator and thereafter the two arbitrators shall select a third
arbitrator. The three arbitrators shall thereafter determine, by majority vote
and pursuant to the then rules of the American Arbitration Association, the Loss
Amount and the Current Series D Value. Each of the arbitrators shall be a member
in good standing of the American Arbitration Association. The Company and the
Purchaser shall each be permitted to submit written positions and arguments to
the arbitrators concerning the matters at issue before the arbitrators. The fees
and expenses of the arbitrators shall be borne (i) 100% by the Company, if the
Loss Amount as determined by the arbitrators is greater than or equal to 50% of
the estimated amount of the Loss as set forth in the Loss Notice, or (ii) 100%
by the Purchaser submitting the Loss Notice, if the Loss Amount as determined by
the arbitrators is less than 50% of the estimated amount of the Loss as set
forth in the Loss Notice.
24
29
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
THE COMPANY: AKAMAI TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
----------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: President and CEO
PURCHASER: APPLE COMPUTER INC. LTD.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
25