EXHIBIT 10.11
August 26, 1998
Intel Corporation
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NorthPoint Communications, Inc. - Board Observer Rights and Other
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Matters
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Ladies and Gentlemen:
This letter will confirm our agreement that effective upon and subject
to the purchase by Intel Corporation ("Intel") of an aggregate of 300,000 shares
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of Series C Preferred Stock of NorthPoint Communications, Inc. (the "Company"),
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Intel will be entitled to the following contractual rights, in addition to any
rights granted pursuant to that certain Series C Preferred Stock Purchase
Agreement dated as of June 26, 1998 by and among the Company, Intel, ▇▇▇▇▇
▇▇▇▇▇▇ and the purchasers listed on Attachment 1 thereto (the "Purchase
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Agreement") and any of the agreements contemplated thereby:
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1. Board Observer Rights. Intel shall have the right to designate
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one representative reasonably acceptable to the Company (the "Intel
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Representative") to attend all meetings of the Company's Board of Directors and
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committees of the Board of Directors in a nonvoting observer capacity, and, in
this respect, the Company shall give the Intel Representative, concurrently with
the members of the Board, copies of all notices, agendas, minutes, consents and
other material that the Company provides to its directors; provided, however,
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that the Company reserves the right to exclude the Intel Representative from any
meeting or portion thereof, and deny the Intel Representative access to any
material, if (i) the Company believes upon advice of counsel that such exclusion
or denial of access is reasonably necessary to preserve the attorney-client
privilege or (ii) Intel's presence is reasonably likely to result in a material
conflict of interest in the good faith determination of the Board. Exchanges of
confidential and proprietary information between the company and the Intel
Representative shall be governed by the terms of the Corporate Non-Disclosure
Agreement No. 98801 dated July 6, 1998 executed by the Company and Intel (the
"CNDA"), and any Confidential Information Transmittal Records provided in
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connection therewith.
The Company acknowledges that Intel will likely have, from time to
time, information that may be of interest to the Company ("Information")
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regarding a wide variety of matters including, by way of example only, (i)
Intel's technologies, plans and services, and plans and strategies relating
thereto, (ii) current and future investments Intel has made, may make, may
consider or may become aware of with respect to other companies and other
technologies, products and services, including, without limitation,
technologies, products and services that may be competitive with the Company's,
and (iii) developments with respect to the technologies, products and services,
and plans and strategies relating thereto, of other companies, including,
without limitation, companies that may be competitive with the Company. The
Company
recognizes that a portion of such Information may be of interest to the Company.
Such Information may or may not be known by the Intel Representative. The
Company, as a material part of the consideration for Intel's investment, agrees
that Intel and the Intel Representative shall have no duty to disclose any
Information to the Company or permit the Company to participate in any projects
or investments based on any Information, or to otherwise take advantage of any
opportunity that may be of interest to the Company if it were aware of such
Information, and hereby waives, to the extent permitted by law, any claim based
on the corporate opportunity doctrine or otherwise that could limit Intel's
ability to pursue opportunities based on such Information or that would require
Intel or the Intel Representative to disclose any such Information to the
Company or offer any opportunity relating thereto to the Company.
2. Termination of Board Observer Rights. The foregoing Board
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observer rights shall terminate and be of no further force or effect upon the
consummation of the sale of the Company's securities pursuant to a registration
statement filed by the Company under the Securities Act of 1933, as amended, in
connection with the firm commitment underwritten offering of its securities to
the general public.
3. Confidentiality.
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(a) Disclosure of Terms. The terms and conditions of Intel's
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investment in the Company (the "Financing Terms"), including the existence of
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any of the agreements entered into by Intel in connection therewith, shall be
considered confidential information and shall not be disclosed by Intel or the
Company except in accordance with the provisions set forth below.
(b) Press Releases, Etc. Within 60 days of the closing of Intel's
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investment in the Company (the "Closing"), the Company may issue a press release
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disclosing that Intel has invested in the Company; provided that the release
does not disclose any of the Financing Terms and is approved in advance in
writing by Intel. Intel, at its sole discretion, may provide an executive quote
or other material regarding its investment in the Company. No other
announcement regarding Intel in a press release, conference, advertisement,
announcement, professional or trade publication, mass marketing materials or
otherwise to the general public may be made without Intel's prior written
consent.
(c) Permitted Disclosures. Notwithstanding the foregoing, (i) Intel
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or the Company may disclose any of the Financing Terms to its current or bona
fide prospective investors, employees, investment bankers, lenders, accountants
and attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations; (ii) Intel or the Company may disclosure
(other than in a press release or other public announcement described in
subsection (b)) solely the fact that Intel is an investor in the Company to any
third parties without the requirement for the consent of Intel or the Company or
nondisclosure obligations; and (iii) Intel may disclose its investment in the
Company and the Financing Terms to third parties or to the public at its sole
discretion and, if it does so, the Company shall have the right to disclose to
third parties any such information disclosed in a press release or other public
announcement by Intel.
(d) Legally Compelled Disclosure. In the event that Intel or the
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Company is requested or becomes legally compelled (including without limitation,
pursuant to securities laws and regulations) to disclose the existence of
Intel's investment in the Company, the existence of any of the agreements
entered into by Intel in connection therewith or any of the Financing Terms in
contravention of the provisions of this Section 3, such party (the "Disclosing
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Party") shall provide the other party (the "Non-Disclosing Party") with prompt
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written notice of that fact so that the appropriate party may seek (with the
cooperation and reasonable efforts of the other party) a protective order,
confidential treatment or other appropriate remedy. In such event, the
Disclosing Party shall furnish only that portion of the information which it is
legally required and shall exercise reasonable efforts to obtain reliable
assurance that confidential treatment will be accorded such information to the
extent reasonably requested by the Non-Disclosing Party.
(e) Other Information. The provision of this Section 3 shall be in
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addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by Intel or the Company with respect to the
transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel (including, without
limitation, any exchanges of information with the Intel Representative) shall be
governed by the terms of the CNDA and any Confidential Information Transmittal
Records provided in connection therewith.
(f) Other Stockholders. The Company shall use its best efforts to
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ensure that its other stockholders abide by the terms of this Section 3.
4. Additional Representations and Warranties. Except as set forth on
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the updated Schedule of Exceptions attached as Exhibit A to the Compliance
Certificate of even date herewith, the Company hereby represents and warrants to
Intel as follows:
(a) Patents and Other Intangible Assets. To the Company's knowledge,
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the Company has sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes necessary for its business as now conducted and as proposed
to be conducted without any conflict with or infringement of the rights of
others. To the Company's knowledge, no third party has any ownership right,
title, interest, claim in or lien on any of the Company's patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes, and the Company has taken, and in the future the Company
will use commercially reasonable efforts to take, all steps reasonably necessary
to preserve its legal rights in, and the secrecy of, all its patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
proprietary rights and processes, except for those for which disclosure is
required for legitimate business or legal reasons. 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 patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. The Company is not obligated to pay
any royalties or other payments to third parties with respect to the marketing,
sale, distribution, manufacture, license or use of any patent, trademark,
service ▇▇▇▇, trade name, copyright, trade secret, information, proprietary
right or process or any other property or rights. To the Company's knowledge,
the Company has not
violated or infringed, and isn't currently violating or infringing, any of the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights or processes of any other person or entity. The
Company has not received any communications alleging that the Company has
violated or, by conducting its business as proposed, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity. The Company is not aware
that any of its employees or consultants is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, or any other restriction that would interfere with the use of his or her
best efforts to carry out his or her duties for the Company or to promote the
interests of the Company or that would conflict with the Company's business as
proposed to be conducted. Neither the execution nor delivery of this Agreement,
the Rights Agreement or the Co-Sale Agreement, nor the carrying on of the
Company's business by the employees or consultants of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees or consultants is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company. To the Company's knowledge, at no time during the
conception or reduction of any of the Company's patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
or process to practice was any developer, inventor or other contributor to such
patents operating under any grants from any governmental entity or agency or
private source, performing research sponsored by any governmental entity or
agency or private source or subject to any employment agreement or invention
assignment or nondisclosure agreement or other obligation with any third party
that could adversely affect the Company's rights in such patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes.
(b) Tax Matters. The provisions for taxes in the Financial Statements
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are sufficient for the payment of all accrued and unpaid federal, state, county
and local taxes of the Company, whether or not assessed or disputed as of the
date of each such balance sheet. There have been no examinations or audits of
any tax returns or reports by any applicable federal, state or local
governmental agency. The Company has duly filed all federal, state, county and
local tax returns required to have been filed by it and paid all taxes shown to
be due on such returns. There are in effect no waivers of applicable statues of
limitations with respect to taxes for any year.
5. Expenses. At the closing of Intel's investment in the Company,
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the Company shall pay the reasonable fees and expenses of one special counsel to
Intel incurred with respect to this letter agreement, the Purchase Agreement,
the documents referred to therein and the transactions contemplated thereby and
hereby, provided the Company shall not be obligated to pay any such fees and
expense to the extent they exceed $10,000.
6. Inspection Rights. The Company hereby agrees that Intel shall
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have standard inspection rights.
7. Protective Rights. If, after the closing date of Intel's
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investment in the Company, the Company grants to any purchaser of the Company's
Preferred Stock terms more favorable than the terms under which Intel has made
its investment (including, but not limited to, liquidation preference
provisions, price-based anti-dilution protection, superior voting rights and
superior registration rights), then the Company shall take such action as may be
necessary to grant Intel such equivalent rights. This Section 7 shall terminate
and have no further force or effect after such time following July 1, 1998 as
the Company shall have sold shares of its Preferred Stock having a value, in the
aggregate (including all Shares sold under the Purchase Agreement), of $14
million.
8. Common Stock Purchase Agreement. The Company hereby agrees that
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the terms contained in Section 3(d) beginning with the phrase, "provided,
however" until the end of such section of those certain Common Stock Purchase
Agreements dated as of June 4, 1997 between the Company and each Founder (as
defined in the Co-Sale Agreement), will not apply to or be enforced against
Intel in connection with any right of first refusal granted to Intel in the Co-
Sale Agreement.
9. Indemnification Pursuant to Rights Agreement.
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(a) Limitation on Indemnification to the Company. The Company hereby
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agrees that, notwithstanding Section 1.12 of that certain Third Amended and
Restated Rights Agreement dated as of June 26, 1998 among the Company, a
majority of the holders of the Registrable Securities (as defined therein) and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Bridge Fund L.L.C. (the "Rights Agreement"), Intel's obligation
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to indemnify or contribute any amounts to the Company, any Holder (as defined in
the Rights Agreement), any director, officer or control person of the Company,
any underwriter or any other person under Section 1.12 of the Rights Agreement
shall be limited to the net proceeds received by Intel in the registered
offering in which the indemnification or contribution obligation arose.
(b) Amendment to the Rights Agreement. The Company hereby agrees that
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it will use its best efforts to amend the Rights Agreement by September 30, 1998
so that the indemnification or contribution obligations of all Holders
(including Intel) pursuant to Section 1.12 of the Rights Agreement are limited
to the net proceeds received by any such Holder in the registered offering in
which the indemnification or contribution obligation arose.
10. Definitions. Capitalized terms used herein but not otherwise
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defined shall have the meanings assigned to such terms in the Purchase
Agreement.
[Signature Pages Follow]
Very truly yours,
NORTHPOINT COMMUNICATIONS, INC.
By: /S/ NORTHPOINT COMMUNICATIONS, INC.
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Title: ___________________________
Accepted and agreed:
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INTEL CORPORATION
By: /S/ INTEL CORPORATION
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Title: ___________________________
SIGNATURE PAGE TO NORTHPOINT SIDE LETTER