RHYTHMS NETCONNECTIONS INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
MARCH 12, 1998
TABLE OF CONTENTS
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1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale and Issuance of Preferred Stock . . . . . . . . . . . . . 1
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Subsequent Sale of Series B Preferred Stock. . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification. . . . . . . . . 2
2.2 Capitalization and Voting Rights . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Valid Issuance of Preferred and Common Stock . . . . . . . . . 3
2.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . 3
2.7 Returns and Complaints . . . . . . . . . . . . . . . . . . . . 4
2.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 Proprietary Information Agreements . . . . . . . . . . . . . . 4
2.10 Patents and Trademarks . . . . . . . . . . . . . . . . . . . . 4
2.11 Compliance with Other Instruments. . . . . . . . . . . . . . . 5
2.12 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . 5
2.13 Related-Party Transactions . . . . . . . . . . . . . . . . . . 6
2.14 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.15 Environmental and Safety Laws. . . . . . . . . . . . . . . . . 6
2.16 Manufacturing and Marketing Rights . . . . . . . . . . . . . . 6
2.17 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.18 Registration Rights. . . . . . . . . . . . . . . . . . . . . . 7
2.19 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . 7
2.20 Title to Property and Assets . . . . . . . . . . . . . . . . . 7
2.21 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 7
2.22 Financial Statements . . . . . . . . . . . . . . . . . . . . . 7
2.23 Tax Returns, Payments and Elections. . . . . . . . . . . . . . 7
2.24 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.25 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.26 Labor Agreements and Actions . . . . . . . . . . . . . . . . . 8
3. Representations and Warranties of the Investor. . . . . . . . . . . . 8
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . 8
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . 9
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . 9
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . 9
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . 9
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4. Covenants of the Investor . . . . . . . . . . . . . . . . . . . . . . 9
4.1 Further Limitations on Disposition . . . . . . . . . . . . . . 9
4.2 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 Corporate Securities Law . . . . . . . . . . . . . . . . . . . 10
5. Conditions of Investor's Obligations at the Closing . . . . . . . . . 11
5.1 Representations and Warranties . . . . . . . . . . . . . . . . 11
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . 11
5.4 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Proceedings and Documents. . . . . . . . . . . . . . . . . . . 11
5.6 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . 11
5.7 Board of Directors . . . . . . . . . . . . . . . . . . . . . . 11
5.8 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . 11
5.9 Voting Agreement . . . . . . . . . . . . . . . . . . . . . . . 12
6. Conditions of the Company's Obligations at the Closing. . . . . . . . 12
6.1 Representations and Warranties . . . . . . . . . . . . . . . . 12
6.2 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . 12
6.5 Voting Trust Agreement . . . . . . . . . . . . . . . . . . . . 12
7. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . 12
7.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 12
7.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . 13
7.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7 Finder's Fee . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.8 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 13
7.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.11 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . 14
7.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 14
SCHEDULE A -- Schedule of Investors
SCHEDULE B -- Schedule of Series A Preferred Holders
SCHEDULE C -- Schedule of Common Holders
EXHIBIT A -- Restated Certificate of Incorporation
EXHIBIT B -- Amended and Restated Investors' Rights Agreement
EXHIBIT C -- Voting Trust Agreement
EXHIBIT D -- Amended and Restated Voting Agreement
(ii)
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT is made as of the 12th day
of March 1998, by and between Rhythms NetConnections Inc., a Delaware
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF PREFERRED STOCK.
(a) RESTATED CERTIFICATE. The Company shall adopt and file with
the Secretary of State of Delaware before the Closing (as defined below) the
Restated Certificate of Incorporation in the form attached hereto as EXHIBIT A
(the "Restated Certificate").
(b) PURCHASE OF PREFERRED STOCK. Subject to the terms and
conditions of this Agreement, each Investor agrees, severally, to purchase at
the Closing (defined below) (or pursuant to Section 1.3) and the Company agrees
to sell and issue to each such Investor at the Closing (or pursuant to Section
1.3) that number of shares of the Company's Series B Preferred Stock set forth
opposite each such Investor's name on Schedule A hereto for the purchase price
set forth thereon.
1.2 CLOSING. The purchase and sale of the Series B Preferred Stock
shall take place at the offices of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ "▇"
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇ California, at 10:00 a.m., on March 12, 1998, or
at such other time and place as the Company and Investors acquiring in the
aggregate more than half the shares of Series B Preferred Stock sold pursuant
hereto mutually agree upon orally or in writing (which time and place are
designated as the "Closing"). At the Closing the Company shall deliver to each
Investor a certificate representing the Series B Preferred Stock which such
Investor is purchasing at the Closing (as set forth on Schedule A) against
delivery to the Company by such Investor of a check or wire transfer in the
amount of the purchase price therefor payable to the Company's order.
1.3 SUBSEQUENT SALE OF SERIES B PREFERRED STOCK. In the event that
any Investor does not purchase all of the shares of Series B Preferred Stock set
forth opposite such Investor's name on Schedule A hereto at the Closing, the
Company may sell up to the balance of such authorized number of shares of Series
B Preferred Stock (not sold to such Investor at the Closing) to such Investor at
the purchase price set forth on Schedule A, provided the sale is executed not
later than two business days following the Closing. Any such Investor shall be
treated as an Investor for purposes of this Agreement, and the shares so
acquired shall be deemed to be sold hereunder.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions furnished each Investor, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted and as proposed to be conducted. The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK.
16,944,943 shares of Preferred Stock (the "Preferred Stock"), of which
12,900,000 have been designated Series A Preferred Stock of which 12,855,094 are
issued and outstanding (as set forth on Schedule B) and 4,044,943 shares of
which have been designated Series B Preferred Stock, all of which will be sold
pursuant to this Agreement. The rights, privileges and preferences of the
Series B Preferred Stock as of the Closing will be as stated in the Company's
Restated Certificate attached hereto as EXHIBIT A.
(ii) COMMON STOCK. 22,909,650 shares of common stock
("Common Stock"), of which 900,735 shares are issued and outstanding and are
owned by the persons, and in the numbers specified in Schedule C hereto. The
outstanding shares of common stock are all duly and validly authorized and
issued, fully paid and nonassessable, and were issued in accordance with the
registration or qualification provisions of the Securities Act of 1933, as
amended and any relevant state securities laws, or pursuant to valid exceptions
therefrom.
(iii) Except for (A) the conversion privileges of each of the
Series A Preferred Stock and the Series B Preferred Stock to be issued under
this Agreement and (B) the rights provided in paragraph 2.4 of the Amended and
Restated Investors' Rights Agreement (the "Investors' Rights Agreement") of even
date herewith in the form attached hereto as EXHIBIT B and (C) the Company's
reservation of 4,863,971 shares of Common Stock for issuance to employees,
directors and consultants pursuant to options granted, and to be granted in the
future, under a stock option plan, there are not outstanding any options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock.
The Company is not a party or subject to any agreement or understanding, and, to
the Company's knowledge, there is no agreement or understanding between any
persons and/or entities, which affects or relates to the voting or giving of
written consents with respect to any security or by a director of the Company.
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2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 AUTHORIZATION. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement and the Investors' Rights Agreement,
the performance of all obligations of the Company hereunder and thereunder and
the authorization, issuance (or reservation for issuance), sale and delivery of
the Series B Preferred Stock being sold hereunder and the Common Stock issuable
upon conversion of the Series B Preferred Stock has been taken or will be taken
prior to the Closing, and this Agreement and the Investors' Rights Agreement
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions contained in the Investors' Rights Agreement may be limited by
applicable federal or state securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series B Preferred Stock which is being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the representations
of the Investors in this Agreement, will be issued in compliance with all
applicable federal and state securities laws and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
law. The Common Stock issuable upon conversion of the Series B Preferred Stock
purchased under this Agreement has been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Restated Certificate,
shall be duly and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws and will be free of restrictions
on transfer other than restrictions on transfer under this Agreement and the
Investors' Rights Agreement and under applicable state and federal securities
law, as presently in effect, of the United States and each of the states whose
securities laws govern the issuance of any of the Securities (as defined in
Section 3.2) hereunder.
(b) The outstanding shares of Common Stock and Series A
Preferred Stock are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws, with the Certificate of Incorporation and Bylaws of the
Company, and with all instruments, judgments, orders, writs, decrees, and
contracts to which the Company is a party or by which it is bound.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority on
the part of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the
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filing pursuant to Section 25102(f) of the California Corporate Securities
Law of 1968, as amended, and the rules thereunder, which filing will be
effected within 15 days of the sale of the Series B Preferred Stock hereunder.
2.7 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning its products and/or services, nor has it had any of its
products returned by a purchaser thereof.
2.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or, to its knowledge, currently threatened against the
Company. The foregoing includes, without limitation, actions pending or
threatened involving the prior employment of any of the Company's employees,
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers, or their
obligations under any agreements with prior employers. The Company is not a
party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality. There is no
action, suit, proceeding or investigation by the Company currently pending or
which the Company intends to initiate.
2.9 PROPRIETARY INFORMATION AGREEMENTS. Each employee, officer and
consultant of the Company has executed a Proprietary Information and Inventions
Agreement in the form provided to the Investors. The Company, after reasonable
investigation, is not aware that any of its employees, officers or consultants
are in violation thereof, and the Company will use its best efforts to prevent
any such violation.
2.10 PATENTS AND TRADEMARKS. (i) 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. 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 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 after due inquiry of its employees
that any of its employees 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, that would
interfere with the use of his best efforts 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 and the
Investors' Rights Agreement, nor the carrying on of the Company's business by
the employees of the Company, nor the conduct of the Company's business as
proposed, will, to the Company's knowledge after due inquiry of its employees,
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 is now obligated. The Company does not believe it is or
will
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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.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. (i) The Company is not in
violation or default of any provisions of its Certificate of Incorporation or
Bylaws or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or, to its knowledge, of any provision of
federal or state statute, rule or regulation applicable to the Company. The
execution, delivery and performance of this Agreement, the Investors' Rights
Agreement or any ancillary agreements and the consummation of the transactions
contemplated hereby and thereby, and the issuance and sale of Securities (as
defined in Section 3.2), will not result in any such violation or be in conflict
with or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument, judgment, order, writ,
decree or contract or an event which results in the creation of any lien, charge
or encumbrance upon any assets of the Company or the Securities or the
suspension, revocation, impairment, forfeiture, or nonrenewal of any material
permit, license, authorization, or approval applicable to the Company, its
business or operations or any of its assets or properties; and (ii) there is no
judgment, order, writ or decree issued by a court of law that specifically names
the Company.
2.12 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations
of the Company (contingent or otherwise) of, or payments to the Company of,
$10,000 or more, or (ii) the license of any patent, copyright, trade secret or
other proprietary right to or from the Company or (iii) provisions restricting
or affecting the development, manufacture or distribution of the Company's
products or services, or (iv) indemnification by the Company.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $10,000 or, in the case of
indebtedness and/or liabilities individually less than $10,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances to employees for travel expenses, or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
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(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate or Bylaws, which could adversely affect its business as
now conducted or as proposed to be conducted, its properties or its financial
condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company in a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
(g) As of the Closing, the Company has not incurred any expenses
and has no liabilities individually in excess of $10,000 or, in the case of
expenses and/or liabilities individually less than $10,000, in excess of $25,000
in the aggregate.
2.13 RELATED-PARTY TRANSACTIONS. No employee, officer, or director of
the Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the best of the Company's knowledge, none of such
persons has any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in publicly traded companies that may compete
with the Company. No member of the immediate family of any officer or director
of the Company is directly or indirectly interested in any material contract
with the Company.
2.14 PERMITS. The Company has all franchises, permits, licenses, and
other similar authorities necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.15 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in violation
of any applicable statute, law, or regulation relating to the environment or
occupational health and safety, and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law, or regulation.
2.16 MANUFACTURING AND MARKETING RIGHTS. The Company has not granted
rights to manufacture, produce, assemble, license, market, or sell its products
to any other person and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market, or sell
its products.
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2.17 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series B Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement, nor any other
statements or certificates made or delivered in connection herewith or therewith
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements herein or therein not misleading.
2.18 REGISTRATION RIGHTS. Except as provided in the Investors' Rights
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.19 CORPORATE DOCUMENTS. Except for amendments after the date of
this Agreement pursuant to the Restated Certificate and other amendments that
have been approved by the Investors, the Certificate of Incorporation and Bylaws
of the Company as currently in effect are in the form previously provided to the
Investors.
2.20 TITLE TO PROPERTY AND ASSETS. The Company owns its property and
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arose in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
2.21 EMPLOYEE BENEFIT PLANS. The Company does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
2.22 FINANCIAL STATEMENTS. The Company has provided to the Investors
copies of its unaudited balance sheet and statement of operations at December
31, 1997 and for the period then ended (the "Financial Statements"). The
Financial Statements are true, complete and correct, present fairly the
financial condition of the Company and the results of operations as of the date
of such statements and have been prepared in accordance with generally accepted
accounting principles ("GAAP"), except that the unaudited Financial Statements
do not contain the footnotes required by GAAP. The Financial Statements
accurately set forth and describe the financial condition and operating results
of the Company as of the date, and for the period, indicated therein, subject to
normal year-end audit adjustments.
2.23 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed all
tax returns and reports required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith which are listed in
the Schedule of Exceptions. The provision for taxes of the Company as shown in
the Financial Statements is adequate for taxes due or accrued as of the date
thereof. The Company has not elected pursuant to the Internal Revenue Code of
1986, as amended ("Code"), to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 341(f) or Section 1362(a) of the
Code, nor has it
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made any other elections pursuant to the Code (other than elections which relate
solely to methods of accounting, depreciation or amortization) which would have
a material effect on the Company, its financial condition, its business as
presently conducted or proposed to be conducted or any of its properties or
material assets.
2.24 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. The Company has general liability insurance
with a limit of liability of no less than $2,000,000.
2.25 MINUTE BOOKS. The minute books of the Company provided to the
Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.26 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Each Investor hereby
represents and warrants to the Company that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms except (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies, and (iii) to the
extent the indemnification provisions contained in the Investors' Rights
Agreement may be limited by applicable Federal or state securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with
each Investor in reliance upon such Investor's representation to the Company
that the Series B Preferred Stock to be received by such Investor and the Common
Stock issuable upon
-8-
conversion thereof (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. Such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. Such Investor has full power and authority to enter into this
Agreement.
3.3 DISCLOSURE OF INFORMATION. It believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Series B Preferred Stock. Such Investor has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions of the offering of the Series B Preferred Stock. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of the Investors to rely
thereon.
3.4 INVESTMENT EXPERIENCE. Such Investor acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series B
Preferred Stock. If other than an individual, it has not been organized for the
purpose of acquiring the Series B Preferred Stock.
3.5 ACCREDITED INVESTOR. Such Investor is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. It understands that the shares of Series
B Preferred Stock it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering and that under such
laws and applicable regulations such securities may be resold without
registration under the Securities Act of 1933, as amended (the "Act"), only in
certain limited circumstances. In this connection, such Investor is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
4. COVENANTS OF THE INVESTOR.
4.1 FURTHER LIMITATIONS ON DISPOSITION.
(a) Without in any way limiting the representations set forth
above, each Investor further agrees not to make any disposition of all or any
portion of the Securities unless and until the transferee has agreed in writing
for the benefit of the Company to be bound by this Section 4.1, provided and to
the extent such sections are then applicable, and the Investors' Rights
Agreement and:
(i) There is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
-9-
(ii) (A) Such Investor shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of paragraph (a) above, (i)
no such Registration Statement or opinion of counsel shall be necessary for a
transfer by an Investor which is a partnership to a partner of such partnership
or a retired partner of such partnership who retires after the date hereof, or
to the estate of any such partner or retired partner or to the transfer by gift,
will or intestate succession of any partner to his spouse or to the siblings,
lineal descendants or ancestors of such partner or his spouse, if the transferee
agrees in writing to be subject to the terms hereof to the same extent as if he
were an original Investor hereunder, and (ii) no transferee shall be required,
as a condition to any transfer of Securities by an Investor, to agree to be
bound by this Section 4.1, if the transferee is acquiring such Securities
pursuant to a Registration Statement under the Act or in a transaction made
pursuant to Rule 144.
4.2 LEGENDS. It is understood that the certificates evidencing the
Securities (and the Common Stock issuable upon conversion thereof) may bear one
or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4.3 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH ARE
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR
THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.
-10-
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT THE CLOSING. With respect to
the Closing, the obligations of each Investor under subsections 1.1 and 1.2 of
this Agreement are subject to the fulfillment on or before the Closing of each
of the following conditions, the waiver of which shall not be effective against
any Investor who does not consent thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
date of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of Closing.
5.2 PERFORMANCE. The Company and each other Investor shall have
performed and complied with all agreements, obligations and conditions contained
in this Agreement that are required to be performed or complied with by it on or
before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall have
delivered to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there has been no adverse change in the business, affairs, operations,
properties, assets or condition of the Company since the date of this Agreement.
5.4 QUALIFICATIONS. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale of the
Series B Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
Any other authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the Series B
Preferred Stock pursuant to this Agreement, shall be duly obtained and effective
as of the Closing.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Investor, and each Investor shall have received all such
counterpart original and certified or other copies of such documents as such
Investor may reasonably request.
5.6 OPINION OF COMPANY COUNSEL. Each Investor shall have received
from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, counsel for the Company, an opinion, dated
the date of the Closing, in form and substance satisfactory to the Investors.
5.7 BOARD OF DIRECTORS. The Board of Directors of the Company as of
the Closing shall consist of ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇.
5.8 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Investors' Rights Agreement in the form attached as
EXHIBIT B.
-11-
5.9 VOTING AGREEMENT. The Company and each Investor shall have
entered into the Voting Agreement in the form attached as EXHIBIT C.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE CLOSING. The
obligations of the Company to each Investor under this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions by
that Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of the
date of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 QUALIFICATIONS. The Commissioner of Corporations of the State of
California shall have issued a permit qualifying the offer and sale to the
Investor of the Series B Preferred Stock and the Common Stock issuable upon the
conversion thereof or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as amended.
Any other authorizations, approvals, or permits, if any, of any governmental
authority or regulatory body of the United States or of any state that are
required in connection with the lawful issuance and sale of the securities
pursuant to this Agreement shall be duly obtained and effective as of the
Closing.
6.3 PERFORMANCE. Each Investor shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
6.4 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor shall
have entered into the Investors' Rights Agreement in the form attached as
EXHIBIT B.
6.5 VOTING TRUST AGREEMENT. The Company and each Investor shall have
entered into the Voting Trust Agreement in the form attached as EXHIBIT C.
7. MISCELLANEOUS.
7.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Securities sold hereunder or any Common Stock
issued upon conversion thereof). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
-12-
7.3 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware without regard to choice of law
principles.
7.4 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon receipt, and shall be addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
7.7 FINDER'S FEE. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each Investor
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible.
7.8 EXPENSES. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Restated Certificate, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.9 AMENDMENTS AND WAIVERS. Except for waivers of the Closing
Conditions in Section 5 any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the holders of 55% or more of the Common
Stock issued or issuable upon conversion of the Series B Preferred Stock issued
or issuable pursuant to this Agreement. Except for waivers of the closing
conditions in Section 5 (which waiver shall not be effective against any
individual Investor who does not consent thereto), any amendment or waiver
effected in accordance with this paragraph shall be binding upon each holder of
any Securities purchased under this
-13-
Agreement at the time outstanding (including securities into which such
Securities are convertible), each future holder of all such securities, and the
Company.
7.10 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 AGGREGATION OF STOCK. All shares of the Preferred Stock held or
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
7.12 ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-14-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
RHYTHMS NETCONNECTIONS INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
INVESTOR:
ENRON COMMUNICATIONS GROUP, INC.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Its:
-----------------------------------------
Address: ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ENTERPRISE PARTNERS III, L.P.
By: /S/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Its: General Partner
-----------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
Its: General Partner
-----------------------------------------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
BRENTWOOD ASSOCIATES VII, L.P.
By: BRENTWOOD VII VENTURES, L.P.
Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Its: General Partner
--------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇. ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
BRENTWOOD AFFILIATES FUND, L.P.
By: BRENTWOOD VII VENTURES, L.P.
Its General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Its: General Partner
--------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇. ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
Its: General Partner
-------------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
KPCB VIII FOUNDERS FUND
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
Its: General Partner
-------------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
KPCB INFORMATION SCIENCES ZAIBATSU FUND II
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
Its: General Partner
-------------------------------------------
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Attorney-in-Fact
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
Its General Partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Attorney-in-Fact
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
DLJ CAPITAL CORPORATION
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Attorney-in-Fact
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /S/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇, Attorney-in-Fact
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
SCHEDULE A
Schedule of Investors
PURCHASE NUMBER OF SHARES
PRICE PAID TO BE ISSUED
AT CLOSING AT CLOSING
Enron Communications Group, Inc. $10,000,000.00 2,247,191
Enterprise Partners III, L.P. $ 1,839,999.35 413,483
Enterprise Partners III Associates, $ 159,999.75 35,955
▇.▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII $ 1,843,198.90 414,202
KPCB VIII Founders Fund $ 106,800.00 24,000
KPCB Information Sciences Zaibatsu $ 50,000.20 11,236
Fund II
Brentwood Associates VII, L.P. $ 1,920,001.45 431,461
Brentwood Affiliates Fund, L.P. $ 79,997.65 17,977
DLJ Capital Corporation $ 40,001.05 8,989
DLJ First ESC L.L.C. $ 200,000.80 44,944
Sprout Capital VII, L.P. 1,739,798.70 390,966
The Sprout CEO Fund, L.P. $ 20,198.55 4,539
TOTAL $17,999,996.40 4,044,943
------------- ----------
------------- ----------
SCHEDULE B
Schedule of Series A Preferred Holders
TOTAL SERIES
FIRST CLOSING (JULY 3, 1997) A STOCK
Enterprise Partners III, L.P. 1,380,000
Enterprise Partners III Associates, L.P. 120,000
Enterprise Partners IV, L.P. --
Brentwood Associates VII, L.P. 1,060,000
Brentwood Affiliates Fund, L.P. 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII 1,462,500
KPCB VIII Information Sciences Zaibatsu Fund II 37,500
DLJ Capital Corporation 30,000
DLJ First ESC L.L.C. 150,000
Sprout Capital VII, L.P. 1,304,843
The Sprout CEO Fund, L.P. 15,157
▇▇▇▇▇ Investors II, LLC 125,000
Stanford University 15,000
---------
FIRST CLOSING TOTAL 5,760,000
---------
---------
SECOND CLOSING (JULY 29, 1997)
Brentwood Associates VII, L.P. 380,000
SECOND CLOSING TOTAL 380,000
---------
---------
FIRST & SECOND CLOSING TOTAL 6,140,000
---------
---------
FRIENDS AND FAMILY CLOSING (DECEMBER 23, 1997)
Other Purchasers 210,000
TOTAL SERIES
THIRD CLOSING (DECEMBER 23, 1997) A STOCK
Enterprise Partners III, L.P. 1,380,000
Enterprise Partners III Associates, L.P. 120,000
Brentwood Associates VII, L.P. 1,440,000
Brentwood Affiliates Fund, L.P. 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII 1,462,500
KPCB VIII Information Sciences Zaibatsu Fund II 37,500
DLJ Capital Corporation 30,000
DLJ First ESC L.L.C. 150,000
Sprout Capital VII, L.P. 1,304,843
The Sprout CEO Fund, L.P. 15,157
▇▇▇▇▇ Investors II, LLC 125,000
Stanford University 15,000
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 365,094
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THIRD CLOSING TOTAL 6,505,094
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FIRST, SECOND & THIRD CLOSING TOTAL
12,855,094
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SCHEDULE C
Schedule of Common Holders
Number of Shares
Enterprise Partners III, L.P. 552,451
Enterprise Partners III Associates, L.P. 48,039
Enterprise Partners IV, L.P. 300,245
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900,735
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
[see Exhibit 3.1]
A-1
EXHIBIT B
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
[see Exhibit 10.4]
B-1
EXHIBIT C
VOTING TRUST AGREEMENT
[see Exhibit 9.2]
C-1
EXHIBIT D
AMENDED AND RESTATED VOTING AGREEMENT
[see Exhibit 9.3]
D-1