-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CB+IuGKR+XP/1CMjmtLLL2R8b2zaZI0R5KRAH/iwu5zR5XVkiReQJ6dItHb9AO5x 7DO9VcDvO5TlKPjPii09gw== 0000891618-00-001762.txt : 20000329 0000891618-00-001762.hdr.sgml : 20000329 ACCESSION NUMBER: 0000891618-00-001762 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20000328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW FOCUS INC CENTRAL INDEX KEY: 0001090215 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 330404910 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-31396 FILM NUMBER: 580929 BUSINESS ADDRESS: STREET 1: 2630 WALSH AVENUE CITY: SANTA CLARA STATE: CA ZIP: 95051-0905 BUSINESS PHONE: 4089808088 MAIL ADDRESS: STREET 1: 2630 WALSH AVENUE CITY: SANTA CLARA STATE: CA ZIP: 95051 S-1/A 1 AMENDMENT NO. 2 TO FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2000 REGISTRATION NO. 333-31396 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 NEW FOCUS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA (PRIOR TO REINCORPORATION) DELAWARE 3674 33-0404910 (AFTER REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER (STATE OR OTHER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION)
2630 WALSH AVENUE SANTA CLARA, CALIFORNIA 95051-0905 (408) 980-8088 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) KENNETH E. WESTRICK PRESIDENT AND CHIEF EXECUTIVE OFFICER 2630 WALSH AVENUE SANTA CLARA, CALIFORNIA 95051-0905 (408) 980-8088 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPIES TO: JUDITH M. O'BRIEN, ESQ. NORA L. GIBSON, ESQ. ALISANDE M. ROZYNKO, ESQ. LAURA M. DE PETRA, ESQ. MARGO M. EAKIN, ESQ. LORA D. BLUM, ESQ. EDWARD F. VERMEER, ESQ. BROBECK PHLEGER & HARRISON LLP WILSON SONSINI GOODRICH & ROSATI ONE MARKET, SPEAR STREET TOWER PROFESSIONAL CORPORATION SAN FRANCISCO, CALIFORNIA 94105 650 PAGE MILL ROAD (415) 442-0900 PALO ALTO, CA 94304 (650) 493-9300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. [ ] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------ PROPOSED MAXIMUM TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE(3) - ------------------------------------------------------------------------------------------------------------ Common Stock, $0.001 par value.............................. $86,250,000 $22,770 - ------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------
(1) Includes shares which the underwriters have the option to purchase to cover over-allotments, if any. (2) Estimated solely for the purpose of Rule 457(o) of the Securities Act of 1933 solely for the purpose of computing the amount of the registration fee. (3) A registration fee of $22,770 was paid in connection with the initial filing on March 1, 2000. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL HEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE The purpose of this Amendment No. 2 to the Registration Statement is solely to file certain exhibits to the Registration Statement, as set forth below in Item 16(a) of Part II. 3 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by New Focus, Inc. in connection with the sale of Common Stock being registered. All amounts are estimates except the SEC registration fee and the NASD filing fee. SEC registration fee........................................ $22,770 NASD filing fee............................................. 9,125 Nasdaq National Market listing fee.......................... * Printing and engraving costs................................ * Legal fees and expenses..................................... * Accounting fees and expenses................................ * Blue Sky fees and expenses.................................. 3,000 Transfer Agent and Registrar fees........................... * Miscellaneous expenses...................................... * ------- Total....................................................... $ * =======
- ------------------------- * To be filed by amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law permits a corporation to include in its charter documents, and in agreements between the corporation and its directors and officers, provisions expanding the scope of indemnification beyond that specifically provided by the current law. The Registrant's Certificate of Incorporation provides for the indemnification of directors to the fullest extent permissible under Delaware law. The Registrant's Bylaws provides for the indemnification of officers, directors and third parties acting on behalf of the Registrant if such person acted in good faith and in a manner reasonably believed to be in and not opposed to the best interest of the Registrant, and, with respect to any criminal action or proceeding, the indemnified party had no reason to believe his or her conduct was unlawful. The Registrant has entered into indemnification agreements with its directors and executive officers, in addition to indemnification provided for in the Registrant's Bylaws, and intends to enter into indemnification agreements with any new directors and executive officers in the future. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES Since inception, we have issued unregistered securities to a limited number of persons as described below: None of these transactions involved any underwriters, underwriting discounts or commissions, or any public offering, and we believe that each transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were affixed to the share certificates and instruments issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us. - ------------------------- (1) On April 18, 1990, we sold 400,000 shares of common stock to Milton Chang at a purchase price of $.005 per share. On April 18, 1990, the Board of Directors granted Milton Chang an option outside II-1 4 of our Stock Option Plan for 800,000 shares of our Common Stock at an exercise price of $.0025. Mr. Chang exercised this option on January 19, 2000. (2) From February 28, 1997 through January 31, 2000, (the most recent practicable date) we granted stock options to acquire an aggregate of 5,826,000, 422,000 and 1,989,200 shares of our common stock at prices ranging from $.46 to $1.25, $.62 to $.62 and from $.62 to $1.25 to employees, consultants and directors pursuant to our 1990 Incentive Stock Option Plan, 1998 Stock Plan and 1999 Stock Plan, respectively. (3) From April, 1991 through February, 1992, we issued 8,640,000 shares of Series A preferred stock to Milton Chang pursuant to a series of put-option agreements at a price of $.1250. (4) From May, 1990 through January 1991 we sold 15,160,000 shares of Series A Preferred Stock for $.125 per share to a group of private investors for an aggregate purchase price of $1,895,000. (5) On December 10, 1993, we sold 1,000,000 shares of Series B Preferred Stock for $0.25 per share to a group of private investors for an aggregate purchase price of $250,000. (6) On July 24, 1998, we sold 600,000 shares of Series C Preferred Stock for $.85 per share to a group of private investors for an aggregate purchase price of $510,000. (7) On July 31, 1998, and August 6, 1998, we sold 3,977,000 shares of Series D Preferred Stock for $1.00 per share to a group of private investors for an aggregate purchase price of $3,977,000. (8) On February 9, 1999, in connection with a Loan and Security Agreement, we issued a warrant to purchase 140,000 shares of Series D Preferred Stock at an exercise price of $1.00 to Venture Lending and Leasing II, Inc. (9) On June 14, 1999, we sold 10,857,616 shares of Series E Preferred Stock for $1.20 per share to a group of private investors for an aggregate purchase price of $13,029,139.20. (10) We entered into a Technology Transfer Agreement dated June 24, 1999, with Peter Chen pursuant to which we purchased certain technology from Mr. Chen in consideration for options to purchase 230,000 shares of our common stock at the fair market value and the sum of $220,000. Additional terms and conditions are set forth in such Technology Transfer Agreement. (11) On October 15, 1999, we sold 1,113,800 shares of Series F Preferred for $1.20 per share to a group of private investors for an aggregate purchase price of $1,336,560. (12) On November 23, 1999, we sold 9,350,728 shares of Series G Preferred for $3.25 per share to a group of private investors for an aggregate purchase price of $30,389,866. (13) On March 3, 1999 and November 1, 1999, we entered into consulting agreements with John Dexheimer, one of our directors, for services rendered in connection with the Series E, Series F and Series G Preferred Stock financings. Pursuant to these agreements, Mr. Dexheimer received warrants to purchase 111,792 shares of Series E Preferred Stock at a price per share of $1.20. (14) On February 28, 2000, we issued rights to 116,000 shares of our stock in connection with a business acquisition. For additional information concerning these equity investment transactions, reference is made to the information contained under the caption "Certain Transactions" in the form of prospectus included herein. The sales of the above securities were deemed to be exempt from registration in reliance on Rule 701 promulgated under Section 3(b) under the Securities Act as transactions pursuant to a compensatory benefit plan or a written contract relating to compensation, or in reliance on Section 4(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving any public offering. The recipients of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and other instruments issued in such transactions. II-2 5 All recipients either received adequate information about New Focus, Inc. or had access, through employment or other relationships, to such information. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1* Form of Underwriting Agreement 3.1** Amended and Restated Certificate of Incorporation of the Registrant 3.2** Bylaws of the Registrant 4.1* Form of stock certificates 4.2 Warrant to Purchase Series D Preferred Stock dated February 1999, between Registrant and Venture Lending and Leasing, see Exhibit 10.15. 4.3** Warrant to Purchase Series E Preferred Stock dated February 9, 2000, between Registrant and John Dexheimer. 4.4** Warrant to Purchase Series E Preferred stock dated February 9, 2000, between Registrant and Pamela York. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation 10.1** Form of Indemnification Agreement between the Registrant and each of its directors and officers 10.2** 2000 Stock Plan 10.3** 2000 Employee Stock Purchase Plan 10.4** 2000 Director Option Plan and form of agreement thereunder 10.5** Form of Amendment to New Focus, Inc. Non Statutory Stock Option Agreement, Restated Stock Purchase Agreement, including Security Agreement and Promissory Note between Registrant and Kenneth E. Westrick, Paul Smith, Bao-Tong Ma, George Yule, Robert Marsland, Timothy Day, dated January 12, 2000. 10.6** Premises Lease Contract between Registrant and Shenzhen New and High-tech Village Development Company dated September 23, 1999. 10.7** Lease Agreement between Registrant and Silicon Valley Properties dated December 23, 1999. 10.8+ Agreement on Terms and Conditions of Purchase and Sale of Optical Components between Registrant and Corning, Incorporated dated January 1, 2000. 10.9** Lease Agreement between Focused Research Inc. and University Science Center Partnership, dated May 22, 1996, as amended, June 19, 1997. 10.10** Fifth Amended and Restated Registration Rights Agreement 10.11+ Development Agreement between Registrant and Hewlett-Packard GmbH dated December 23, 1996. 10.12+ Addendum to the Development Agreement between Registrant and Hewlett-Packard GmbH dated November 6, 1997. 10.13+ Addendum No. 2 to the Development Agreement of December 23, 1996 between Registrant and Agilent Technologies Deutschland GmbH dated December 10, 1999. 10.14+ Memorandum of Agreement between Registrant and Alcatel USA Sourcing, L.P. dated January 7, 2000. 10.15 Loan and Security Financing Agreement between Registrant and Venture Lending and Leasing II, Inc. 21.1** List of Subsidiaries 23.1** Consent of Ernst & Young LLP, Independent Auditors 23.2* Consent of Counsel (see Exhibit 5.1) 24.1** Power of Attorney 27.1* Financial Data Schedules
- ------------------------- + The Registrant will request confidential treatment with respect to certain portions of this Exhibit. The omitted portions will be separately filed with the Commission. * To be filed by amendment. ** Previously filed. II-3 6 (b) FINANCIAL STATEMENT SCHEDULES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS ALLOWANCE FOR DOUBTFUL ACCOUNTS:
ADDITIONS- BALANCES AT CHARGED TO BALANCES BEGINNING COSTS AND DEDUCTIONS- AT END OF OF PERIOD EXPENSES WRITE-OFFS PERIOD ----------- ---------- ----------- --------- Year ended March 31, 1998...................... $ 70 $ 63 -- $$133 Year ended March 31, 1999...................... $133 $ 40 $(38) $135 Nine months ended December 31, 1999............ $135 $ 39 $(14) $160
Schedules other than that listed above have been omitted since they are not required or are not applicable or the required information is shown in the financial statements or related notes. ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser. Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this Amendment No. 2 to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on the 28th day of March, 2000. NEW FOCUS, INC. By: /s/ KENNETH E. WESTRICK ------------------------------------ Kenneth E. Westrick President and Chief Executive Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment No. 2 to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE --------- ----- ---- /s/ KENNETH E. WESTRICK President, Chief Executive March 28, 2000 - -------------------------------------------------------- Officer and Director Kenneth E. Westrick (Principal Executive Officer) WILLIAM L. POTTS, JR.* Chief Financial Officer March 28, 2000 - -------------------------------------------------------- (Principal Financial and William L. Potts, Jr. Accounting Officer) CHARLES BOPPELL* Director March 28, 2000 - -------------------------------------------------------- Charles Boppell DR. MILTON CHANG* Director March 28, 2000 - -------------------------------------------------------- Dr. Milton Chang JOHN DEXHEIMER* Director March 28, 2000 - -------------------------------------------------------- John Dexheimer DR. WINSTON FU* Director March 28, 2000 - -------------------------------------------------------- Dr. Winston Fu R. CLARK HARRIS* Director March 28, 2000 - -------------------------------------------------------- R. Clark Harris ROBERT D. PAVEY* Director March 28, 2000 - -------------------------------------------------------- Robert D. Pavey *By: /s/ KENNETH E. WESTRICK ------------------------------------------------ Kenneth E. Westrick Attorney-in-fact
II-5 8 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 1.1* Form of Underwriting Agreement 3.1** Amended and Restated Certificate of Incorporation of the Registrant 3.2** Bylaws of the Registrant 4.1* Form of stock certificates 4.2 Warrant to Purchase Series D Preferred Stock dated February 1999, between Registrant and Venture Lending and Leasing, see Exhibit 10.15. 4.3** Warrant to Purchase Series E Preferred Stock dated February 9, 2000, between Registrant and John Dexheimer. 4.4** Warrant to Purchase Series E Preferred stock dated February 9, 2000, between Registrant and Pamela York. 5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation 10.1** Form of Indemnification Agreement between the Registrant and each of its directors and officers 10.2** 2000 Stock Plan 10.3** 2000 Employee Stock Purchase Plan 10.4** 2000 Director Option Plan and form of agreement thereunder 10.5** Form of Amendment to New Focus, Inc. Non Statutory Stock Option Agreement, Restated Stock Purchase Agreement, including Security Agreement and Promissory Note between Registrant and Kenneth E. Westrick, Paul Smith, Bao-Tong Ma, George Yule, Robert Marsland, Timothy Day, dated January 12, 2000. 10.6** Premises Lease Contract between Registrant and Shenzhen New and High-tech Village Development Company dated September 23, 1999. 10.7** Lease Agreement between Registrant and Silicon Valley Properties dated December 23, 1999. 10.8+ Agreement on Terms and Conditions of Purchase and Sale of Optical Components between Registrant and Corning, Incorporated dated January 1, 2000. 10.9** Lease Agreement between Focused Research Inc. and University Science Center Partnership, dated May 22, 1996, as amended, June 19, 1997. 10.10** Fifth Amended and Restated Registration Rights Agreement 10.11+ Development Agreement between Registrant and Hewlett-Packard GmbH dated December 23, 1996. 10.12+ Addendum to the Development Agreement between Registrant and Hewlett-Packard GmbH dated November 6, 1997. 10.13+ Addendum No. 2 to the Development Agreement of December 23, 1996 between Registrant and Agilent Technologies Deutschland GmbH dated December 10, 1999. 10.14+ Memorandum of Agreement between Registrant and Alcatel USA Sourcing, L.P. dated January 7, 2000. 10.15 Loan and Security Financing Agreement between Registrant and Venture Lending and Leasing II, Inc. 21.1** List of Subsidiaries 23.1** Consent of Ernst & Young LLP, Independent Auditors 23.2* Consent of Counsel (see Exhibit 5.1) 24.1** Power of Attorney 27.1* Financial Data Schedules
- ------------------------- + The Registrant will request confidential treatment with respect to certain portions of this Exhibit. The omitted portions will be separately filed with the Commission. * To be filed by amendment. ** Previously filed. EX-10.8 2 EXHIBIT 10.8 1 EXHIBIT 10.8 CONFIDENTIAL AGREEMENT ON TERMS AND CONDITIONS OF PURCHASE AND SALE OF OPTICAL COMPONENTS This Agreement ("Agreement") is made as of this 1st day of January, 2000 by and between Corning Incorporated, a New York Corporation, with an address at Houghton Park, Corning, NY 14831 ("Corning") and New Focus, Inc. with an address at 2630 Walsh Avenue, Santa Clara, CA 95051 ("Seller"). WHEREAS, Corning and certain of its affiliated companies plan to place with Seller from time to time during the terms of this Agreement specific orders for the purchase of certain Optical Components ("Materials"); and WHEREAS, the parties wish to provide for the general terms and conditions upon which such Materials purchase transactions shall be made; and WHEREAS, the parties may wish to subsequently provide for certain services for processing or additional goods and services related to the Materials; NOW THEREFORE, in consideration of the mutual covenants herein, Corning and Seller hereby agree as follows: 1. Term. The Term of this Agreement shall be from January 1, 2000 through December 31, 2000 If the parties are not in breach at the expiration of the Term, then they may mutually agree in writing to continue this Agreement, upon thirty (30) days' notice prior to the term expiration date, for an additional one (1) year term. 2. Scope. During the Term of this Agreement, the terms and conditions specified by this Agreement shall apply to all purchases of the Materials by Corning from Seller. This Agreement is based upon an anticipated procurement of Materials described in Appendix 1. The estimated quantity of each item of Materials to be purchased hereunder is described in the same Appendix. That estimated quantity for each item is based on an allocation to Seller of a share (expressed as a percentage) of Corning's purchases from unaffiliated companies of that item. Corning anticipates that this share allocation to the Seller will not change during the term of this Agreement provided the Seller can meet its delivery and other obligations under this Agreement, and can continuously keep Corning competitive in the market place. Corning may conduct business reviews with the Seller on a periodic basis (monthly, quarterly, semi-annually) to review the overall market situation and discuss changes needed to maintain a competitive position in the communications industry. 3. Releases. When Corning wishes to purchase Materials pursuant to this Agreement, it shall submit a written release form for a specific quantity to Seller. Seller shall ship Materials in accordance with the Corning release. Release forms may be delivered to Seller via fax, email, EDI, or U.S. mail. 4. Schedule and Safety Stock. Corning's schedules depend upon timely delivery of Materials and therefore, time is of the essence in Corning's release forms issued to Seller hereunder. Seller agrees to make timely delivery in accordance with agreed 2 upon delivery dates. In order to assure Corning of continuity of supply, Seller will keep as a safety stock a four-week supply of finished goods of each Material exclusively for Corning for which Corning shall be responsible to purchase upon termination or Material discontinuance. Corning will authorize and update, on a quarterly basis, the safety stock level required by product that the Seller will have available to ship. If this level exceeds four (4) weeks of the demand, Corning shall only be obligated to purchase the authorized four (4) weeks supply upon termination or material discontinuance. 5. Price(s) and Quantity. During the Term, the guaranteed prices, and estimated quantities of the Materials sold by Seller to Corning shall be as specified in Appendix I hereto. 6. Delivery. Unless otherwise agreed, all price and delivery terms shall be on a delivered basis, broken out specifying price, insurance, and freight separately. 7. Performance. Corning will provide a minimum of 3 weeks lead time on new purchase orders and 2 weeks lead time on schedule changes on forecasts. Corning will provide at least a three (3) month or greater rolling Forecast reflecting, by time period, shipping quantities required for each part number to support Corning's manufacturing schedules. Seller agrees to make timely deliveries in accordance with agreed upon delivery dates. 8. Title. Title to and possession of all Materials shipped by Seller to Corning shall pass to Corning upon delivery of materials at the Corning location. 9. Warranty/Specifications. At the time of delivery, Seller warrants that title to the Materials shall pass to Corning, free and clear of claims or liens of third parties. Seller also warrants that the Materials supplied by Seller to Corning hereunder shall meet the quality levels and specification levels defined in Appendix II. Materials shall be free of objects or other substances which, in the opinion of Corning, could render them until for intended use. If quality levels are not defined in Appendix II for a particular item, then Seller warrants that such Materials shall be merchantable, of best quality and free from defects in materials, processing or workmanship. This warranty shall survive any inspection by Corning. Any attempt by Seller to limit, disclaim, or restrict any such warranties or any remedies of Corning, by acknowledgment or otherwise, in accepting or performing this order, shall be null, void and ineffective without Corning's written consent. The initial warranty period of Materials shipped under the terms and conditions of this Agreement will be [*] from the date of shipment by Supplier. Any purchased device which is rejected for non-conformance to Corning's specification will be returned to Seller. Seller will, at Corning's option and without limiting any other rights of Corning, either: (1) credit Corning the value of device, (2) replace the device at no expense to Corning, or (3) repair the device at no cost to Corning. 10. Software & Systems Warranty. Seller warrants that the quality and delivery of the Material will not be affected by any computer system and/or software related [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 3 malfunction including, but not limited to, changes in dates, the passing of the calendar years 1999 or 2000, the next millennium and/or leap years. Should Seller fail to meet the requirements of this Agreement due to such computer system and/or software related malfunctions, Corning may (without prejudice to any other available remedy or cause of action) terminate this Agreement on five (5) days advance written notice to Seller. Additionally, Corning may terminate this Agreement if Seller, when requested, fails to give adequate assurance that it or any of its suppliers are Year 2000 compliant. 11. Inspection. Corning shall be entitled to inspect Materials upon delivery. Any prior inspection of Materials or sampling at the Seller's facility by Corning personnel will imply neither delivery or acceptance of such Materials by Corning. 12. Plant Access. Seller will allow representatives of Corning and Corning's customers access to the facilities involved in performing this order for purposes of reviewing the status and progress of production and witnessing any test and inspections. Such access will not relieve Seller of any of its obligations. 13. Inspection Reports. Seller shall furnish Corning with Inspection Reports for each shipment of Materials hereunder. Seller shall collect all relevant data for each Material prior to shipment. Such Certificates of Analysis shall be specific by traceable notations and Corning may reject items that do not meet the specifications in Appendix II. Inspection reports shall accompany all Materials shipped to Corning. Duplicate copies shall be filed and stored by Seller for a period of seven (7) years in case future reference is required by Corning. 14. Invoicing and Payment. Seller shall invoice Corning in duplicate for Materials ordered by and delivered to Corning. Corning shall pay such invoices within forty-five (45) days after their receipt. Corning shall not be required to pay invoices for any Materials which do not meet applicable specifications or for quantities other than those it ordered. 15. Process Changes. Seller shall notify Corning in writing and at least 30 days in advance of any change in its manufacturing, assurance of supply, refining, feedstock, process or equipment that might affect Corning's results, its access to, or its use of the Materials purchased from Seller hereunder. 16. Design Changes. In the event that Corning's requirements for Materials change, Corning and Seller shall meet in good faith to discuss possible changes in the design of Materials and may amend the specifications to comply with Corning's new requirements. If Seller has the technical capability to meet Corning's new requirements, Seller shall do so. Any price adjustments resulting from proposed design changes will be negotiated in godd faith by Seller and Corning. 17. Patents. Seller agrees to indemnify, hold harmless and protect Corning against any costs (including reasonable attorneys' fees), liabilities, and judgments arising from any claim made by a third party against Corning that the materials supplied by Seller under this Agreement infringe patent or copyrights of such third party. Corning shall promptly notify Seller of any such claim, agrees to provide information and reasonable assistance, and give Seller sole authority to defend or settle such claim. Upon notice of an alleged infringement, Seller may, at its option and expense, (i) obtain for Coming the right to continue using the Materials, (ii) replace or modify the product so that is 4 becomes non-infringing or non-violating, (iii) substitute an equivalent non-infringing version of the Materials. In the event that none of the above options is reasonably available, either party may terminate this Agreement and Corning may return any and all Materials paid for and in Corning's inventory and obtain a refund from Seller of the price paid by Corning for such inventory. Termination hereunder does not discharge the obligations of Seller to defend Corning and pay costs or judgments. Notwithstanding the above provisions, Seller assumes no liability for any infringement claims based upon the use of the Materials either (i) in connection or in combination with equipment, devices, products or software not provided by Seller if such claims would not have resulted but for some combination or use, or (ii) for other than normal purposes. THE FOREGOING STATES EACH PARTY'S SOLE AND EXCLUSIVE REMEDY WITH RESPECT TO CLAIMS OF INFRINGEMENT OR VIOLATION OF THIRD PARTY PROPRIETARY RIGHTS OF ANY KIND. 18. Excusable Failure or Delay (Force Majeure). Neither party shall be held responsible for the failure or delay in performance hereunder where such failure or delay is due to any act of God or of the public enemy, war, compliance with laws, governmental acts or regulations, fire, flood, epidemic, accident, unusually severe weather or other causes similar to the foregoing beyond their reasonable control. Any party whose performance is affected by such force majeure shall promptly give notice to the other party of the occurrence or circumstance upon which it intends to rely to excuse its performance. If the circumstances of force majeure affecting either party's performance hereunder delays performance for more than seven (7) days, then the other party may terminate this Agreement upon seven (7) days' advance written notice. In no event shall a failure or delay in performance attributable to the "Year 2000" or other computer system and/or software related malfunction be excusable under this paragraph or any other paragraph of this Agreement. 19. [*] 20. Price Protection. If Corning submits substantial evidence in writing that another producer of goods has lawfully offered Corning goods of similar quality, in similar quantities and under like terms and conditions, at a delivered cost at least [*] lower than the delivered cost hereunder, then Corning will give Seller written notice of such lower offer. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 5 If Seller does not agree, in writing and within thirty (30) days of such notice, to reduce its price immediately to meet that lower offer, then, at the expiration of that thirty (30) day period, Corning's only purchase obligation hereunder will be to purchase Materials for which releases have already been issued by Corning and accepted by Seller. Upon the purchase by Corning of the Materials under those prior releases, Corning will be deemed to have satisfied any and all purchase commitments and obligations hereunder, and will not be subject to any penalty, price adjustment or other liability for failure to purchase any additional Materials from Seller. 21. No Assignment. This Agreement shall not be assigned and is not assignable or delegable by either party without the written consent of the other, which shall not be unreasonably withheld. 22. Compliance with Laws. Seller shall comply with all applicable federal, state and local laws and regulations in the manufacture, processing, sale and transport of the Materials to be delivered hereunder. In the event that Seller's work does not comply with any such laws, codes, and regulations, Seller shall correct any such noncompliance at its sole expense and indemnify and hold Corning harmless from any claims, costs, fines, penalties, expenses, liabilities or losses on account of any such noncompliance. 23. Default and Termination. This Agreement and all rights granted hereunder may be terminated by either party: (a) in the event of a continuing default by the other party of any obligation hereunder, effective seven Corning business (7) days after written notice of such default is given to the defaulting party; or (b) immediately in the event that either a delivery that is more than fifteen (15) Corning business days late, or if any three (3) deliveries are more than seven (7) Corning business days late in any six-month period; or (c) immediately upon written notice in the event of bankruptcy, insolvency or any other financial condition creating reasonable doubt as to that party's ability to perform hereunder. If any instance under (a) or (b) occur, Corning must notify Seller in writing within (30) days of each event. In the event that Corning does not notify Seller, termination rights for that event lapse. No such termination shall affect or discharge any obligations of either party which arose prior to the effective date of termination with respect to warranties, indemnification, moneys owed or confidential information. 24. Cancellation for Buyer's Convenience. Corning may cancel a firm Purchase Order at any time prior to delivery. In the event of such cancellation, Seller shall immediately cease to incur expense against the affected Purchase Order. If the purchase order covered standard product which is easily sellable to Seller's other customers, the Corning will have no liability to Seller for cancellation of the Purchase Order. For Purchase Orders for nonstandard products, Corning's liability in the event of cancellation shall be limited to the following for deliveries cancelled under such Purchase Order: 6 a. Actual cost incurred by Seller, up to and including the date of cancellation for material costs and direct labor costs; and b. Reasonable costs that Seller has reasonably committed to pay to its suppliers; and for the materials for undelivered quantities. Seller shall use reasonable endeavors to mitigate the amount of such charges. Seller will provide Corning with clear documentation of all costs and charges which Corning is liable under this provision. In no event will Corning be liable for cancellation charges in excess of the contract value of the Materials cancelled. Upon payment of such cancellation charges by Corning, Seller shall deliver to Corning, in accordance with the delivery terms of this Agreement, all work in progress and inventory for which Corning has made payment. 25. Obsolescent. Corning reserves the right to reduce estimated quantities (but maintaining share percentage) or substitute new products for those referenced in Appendix I, in the event that new products offering a superior technological or economic advantage become available during the term of this Agreement. Seller shall be given a reasonable amount of time to match such new products. 26. Waiver. The failure of Corning to insist in any one or more instances upon the full performance of any of the terms, covenants or conditions of this order or to exercise any rights it may have hereunder shall not be construed as a waiver of any legal rights it may have with respect to such nonperformance or be construed as Corning's condoning further nonperformance of such terms, covenants or conditions. 27. Confidential Information. The nondisclosure agreement entered into by the Parties on March 15, 1999 will govern the use of confidential information by Seller. The term of the nondisclosure agreement will be the term of this Agreement. This Agreement and its terms are subject to that nondisclosure agreement. 28. Promotion Limitation: Seller agrees that it will not use Corning's name whether by including reference to Corning in any list of customers advertising that its services or products are used by Corning or otherwise, without written authorization by Corning's authorized representative. 29. Liability. To the fullest extent permitted by law, Seller hereby indemnifies and agrees to hold harmless Corning, its affiliates, subsidiaries, agents, employees, directors, or representatives from and against all claims, damages, losses and expenses, including but not limited to attorneys' fees, arising out of or resulting from Seller's supply of Materials or performance of these services. 30. Insurance. If Seller performs any services for Corning on Corning's premises, Seller shall, at any time(s) upon request, furnish Corning with an insurance certificate(s) from its insurance carrier(s) naming Corning as an additional insured, evidencing the existence of insurance coverage of the following kinds in at least the following amounts: A. Workers' compensation insurance as required by law and Employer's liability insurance with limits not less than One Million Dollars ($1,000,000). 7 B. Comprehensive public liability insurance for personal injury (including death) and property damage with limits of not less than Five Million Dollars ($5,000,000) for personal injury and property damage, including coverage for owned and nonowned automobiles and Seller's contractual obligations. C. Umbrella liability insurance with limits not less than Five Million Dollars ($5,000,000). 31. Choice of Law and Forum. This Agreement shall be governed by, interpreted and construed and performance hereunder shall be determined in accordance with the law of the State of New York, without regard to its conflicts of law principles. In the event of disputes or claims relating to this Agreement, both parties agree to seek an amicable settlement prior to commencing any litigation. In the event of litigation, any action shall be venued in either the Supreme Court of the State of New York, Steuben County, or in the United States District Court, Western District of New York. 32. Conflict of Terms. The terms and conditions of Corning stated on this Agreement shall govern in the event of any conflict with any terms proposed by Seller, and are not subject to change by reason of any written or oral statements by Seller or by any terms stated in Seller's acknowledgement of this order, unless such conflicting or additional terms are accepted in a writing making reference to this Agreement and signed by Corning. Shipment of goods or materials, or performance of services pursuant to this order shall be deemed to be an unqualified acceptance of the terms and conditions contained herein. 33. Counterparts. This Agreement may be executed simultaneously 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. 34. Notices, Entire Agreement and Change Orders. All notices delivered or demands given by either party under this Agreement shall be delivered in person, or forwarded by U.S. Mail, postage prepaid, or they may be faxed properly addressed to the authorized representatives of the party. This Agreement constitutes the entire agreement between Corning and Seller with respect to the Work, and supersedes all prior and contemporaneous negotiations, agreements, representations, understandings and commitments. No change, modification or extension of this Agreement shall be effective unless it is made in writing, makes specific reference to this Agreement and signed by duly authorized representatives of Corning and Seller. Such approval shall not be unreasonably withheld. For the purposes of this Agreement, the following persons are the authorized representatives of Buyer and Corning: For Corning: Kathryn M. Murphy, Division Vice President, Materials Management For Seller: Paul G. Smith, Vice President and General Manager 35. Ownership of Tools and Intellectual Property. Corning shall have title to and the right of immediate possession of any tools, equipment or prototypes furnished or paid for by Corning, and if and when any such Corning property is in the possession of Seller, 8 Seller shall not use such property for any work other than that of Corning and shall maintain such property in good and usable condition at no further cost to Corning. Pursuant to the terms of the confidentiality agreement between Corning and Seller, Seller will not use any confidential information of Coming (as defined in that agreement) for any purpose other than the supply of Materials to Corning. Accordingly, if Seller uses any such confidential information of Corning to design or make any Materials, then those Materials will be sold only to Corning and Seller will not sell or offer to sell those Materials to any third party without the prior written consent of Corning. IN WITNESS WHEREOF, Seller and Corning have executed this Agreement by their respective duly authorized representatives as of the date first above written. SUPPLIER NAME CORNING INCORPORATED By: /s/ PAUL SMITH By: /s/ KATHRYN M. MURPHY -------------------------------- -------------------------------- Kathryn M. Murphy Title: VP/GM Telecom Division Title: Division Vice President, Materials Management Date: 2/18/00 Date: 2/14/00 9 APPENDIX I Quantity and Pricing 1. Quantity. Corning will purchase from New Focus a percentage (listed below in Share) of its external requirements of the Materials during the term of this Agreement. The forecasted volumes below are an estimate to be used for the Seller's information purposes only, and is not intended to bind or obligate Corning to purchase said amount. 2. Pricing.
Product Share Est Volume Price (1/1-6/30)* Price (7/1-12/31)* ----------------- ----- ---------- ----------------- ------------------ [*]
All pricing takes effect 1/1/00. Any current purchase orders will cancelled 12/30/99 and new purchase orders placed at the new pricing. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 10 APPENDIX II PURCHASE SPECIFICATION
CORNING SPEC CORNING PART NUMBER DESCRIPTION NUMBER/DATE - ------------------- ----------- ------------ [*]
This product shall be free from all other material or objects which, in the opinion of Corning Incorporated, could render it unfit for its intended use. All measurements made to determine compliance with this specification shall be done in accordance with analytical procedures approved by Corning Incorporated. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. EX-10.11 3 EXHIBIT 10.11 1 EXHIBIT 10.11 Agreement No. ....... DEVELOPMENT AGREEMENT by and between HEWLETT-PACKARD GmbH HERRENBERGER STRASSE 130 71034 BOEBLINGEN GERMANY - hereinafter referred to as "HP" - and NEW FOCUS INC. 2630 WALSH AVE. SANTA CLARA CA USA - hereinafter referred to as "New Focus" - REGARDING THE DEVELOPMENT OF A TUNABLE LASER SOURCE MODULE 1 2 1. SUBJECT-MATTER OF THE AGREEMENT This agreement pertains to and covers the development of a Tunable Laser Source Module (including hard- and software) which is described in greater detail in the specifications in Schedule 1 hereto, as well as to the manufacture of prototypes and production units by New Focus whilst adhering to the project schedule as set forth in Schedule 3 hereof. 2. BREAK-DOWN OF COSTS / REMUNERATION 2.1 In return for the services outlined in Article 1 above, HP shall effect payment in installments as laid out in A.) 5. of Schedule 1 according to the development phases described in A.) 4. of Schedule 1 hereto. The payments shall become due and payable in accordance with the terms and conditions outlined in A.) 5. of Schedule 1. All prices quoted are FOB Santa Clara, CA, USA. HP is responsible for all taxes, customs, and freight. 2.2 Should the parties agree upon payment by installments which are due prior to final and complete performance of the entire development service, New Focus undertakes, prior to payment of the respective installment, to provide HP with an irrevocable, unconditional and absolute guarantee from a bank recognized as guarantor in the amount of the respective installment. HP shall return such guarantee to the supplier upon written confirmation of acceptance of the prototypes or the software. Installments by HP shall not include any acceptance of the prototypes, developed software or the production units. With payment of the installment all performances and expenses of New Focus in regard of the respective development phase shall be covered. 2.3 All obligations regarding payment of costs and expenses incurred by New Focus in connection with the performance of services to be provided shall be deemed discharged upon payment of the agreed remuneration. 3. DEVELOPMENT 3.1 The prototypes as well as the software shall be manufactured by New Focus in accordance with the project schedule (Schedule 3) and the development phases contained therein as well as in Schedule 1. 3.2 Prior to the commencement of development, New Focus shall ensure that the specifications are complete and that implementation of the contents thereof is feasible. Should New Focus detect any defects or omissions upon examination of the specifications, it shall inform HP hereof in writing without any undue delay. 2 3 3.3 The deadlines outlined in the agreed project schedule (Schedule 3) shall be binding upon both parties. 3.3 In order to ensure successful and timely performance of the Development agreement for both parties, the parties hereto agree that New Focus shall submit to HP a written report detailing key aspects of the project at regular monthly intervals. Both parties shall have the option of requesting that the other party engage in discussions regarding the current stage of development, problems arising in connection therewith, matters pertaining to coordination etc. New Focus shall, in particular, advise HP of the following in this regard: 3.4.1 PROJECT STATUS Classification of the system components on which work was performed during the period under review. The stage of work carried out and of the semi-finished work, as well as a comparison of the target and actual situation if the project schedule and/or the specification requirements have not (yet) been complied with. Any deviations or postponement of deadlines must be justified and the supplier is further required to indicate the measures planned for re-establishing the target situation. 3.4.2 FORECAST New Focus shall advise HP of the work scheduled for the next period under review, also with a view to enabling HP to arrange, in good time, for any support which it may be required to provide. On HP's request, New Focus shall, during the course of discussions, provide HP with copies of HP-specific documentation regarding the development of prototypes and software available at the time of such discussions. Minutes, to be duly countersigned by both parties, shall be kept of all such discussions. 3.5 New Focus shall document the development result and the individual development steps and make such material available to HP in machine-readable form. 4. RESOURCES 4.1 New Focus avails of a development center which is suitably equipped to develop the developed software defined under the subject-matter hereof. In the event HP employees are assigned to the development project New Focus shall provide appropriate support to these employees. 4.2 HP shall support New Focus as described in Schedule 5. 3 4 5. MODIFICATIONS/AMENDMENTS TO THE SYSTEM DESCRIPTION/SPECIFICATIONS 5.1 Modifications to the specifications are subject to HP's prior written approval. HP may request that New Focus incorporate modifications or amendments. New Focus may also request that HP incorporate modifications or amendments. Any such request must be submitted in writing. New Focus shall perform the modified services if and to the extent that New Focus can be reasonably expected to do so and New Focus has not provided HP with written justification as to why it cannot be reasonably expected to do so within 1 week of receipt for the modification request. 5.2 Should such modifications affect contractual agreements (relating to costs or performance deadlines for example), the parties hereto shall accordingly revise such agreements taking the increase/decrease in time/expenditure required into consideration. The modifications shall be performed within the framework of existing contractual agreements if no such demand for review is submitted to the other party to the agreement in writing within 2 weeks of receipt of the modification request by New Focus. HP undertakes to advise New Focus of the significance of its actions prior to commencement of the period in question. 5.3 In the event of a dispute regarding the scope of any increase/decrease in time/expenditure required on the basis of modifications, both parties hereto shall be entitled to request that an independent, publicly-appointed and certified expert decide the issue with binding effect for both parties. 5.4 New Focus shall inform HP immediately upon receipt of a modification request if work already carried out by New Focus would become unusable as a result of this modification. 6. FAILURE TO ADHERE TO THE PROJECT SCHEDULE 6.1 If, during the development phases, it already becomes apparent that the completion date agreed upon in the project schedule (schedule 3) cannot be adhered to, New Focus shall advise HP hereof without delay indicating the reasons therefor. New Focus shall simultaneously advise HP of the period of delay by which the completion date is to be postponed vis-a-vis the deadline agreed upon in the project schedule. 6.2 If a deadline agreed upon in the project schedule is already or will apparently be exceeded by more than 2 weeks, HP may extend the deadline by a reasonable period of time. If this extended period expires to no avail, HP shall be entitled to rescind the agreement. This shall not apply if New Focus bears no responsibility for the existing or foreseeable failure to adhere to the project schedule or for the expiry to no avail of the period of grace. 6.3 Irrespective of the right to rescind the agreement pursuant to Article 6.2 above, the following contractual penalty shall apply: 4 5 Should New Focus be unable to adhere to the delivery deadlines agreed upon in the project schedule (Schedule 3) for the prototypes or the software during the respective development phases, HP shall be entitled, without providing any further evidence, to demand a contractual penalty in the amount of [*] of the net value of each development phase according to Schedule 1 for each working day beginning two weeks after the delivery deadlines of Schedule 3 or part thereof up to an amount not exceeding [*] of the total value of each development phase according to Schedule 1 however. This shall not apply if New Focus does not bear responsibility for the delay. 7. EXAMINATION AND DELIVERY BY NEW FOCUS 7.1 Upon completion of development and manufacture of the prototypes together with the developed software in accordance with the specifications (Schedule 1), New Focus shall subject the prototypes and the software to a functional check pursuant to HP specifications in regard of the respective development phase according to Schedule 1 with a view to establishing conformity with the specifications. A test report shall be submitted. 7.2 New Focus shall deliver the tested prototypes and the developed software to HP on or before the deadline defined in the project schedule (Schedule 3). Tested means that no deviations from the specification requirements in regard of the respective development phase according to Schedule 1 and no other defects were detected during testing at New Focus. New Focus shall provide HP with all the necessary documentation/data sheets, source codes etc. upon delivery of the prototypes as described in Schedule 1. 7.3 New Focus shall produce further prototypes and production units in accordance with the terms and provisions hereof according to Schedule 1. 8. EXAMINATION AND ACCEPTANCE BY HP 8.1 HP shall examine the design of the prototypes. HP shall accept the design provided that the prototypes to be manufactured in accordance with this design will ensure the fulfillment of the product specifications as described in Schedule 1. 8.2 HP shall subject any prototype as well as the developed software to a separate functional check within eight weeks of delivery, according to Schedule 1. HP shall provide weekly updates/reports on the progress and results of the testing. A test report shall be submitted. 8.3 HP shall submit a written acceptance certificate of the prototypes and the developed software to New Focus if the prototypes and the developed software conform to all of the specification requirements of Schedule 1 and if no other defects can be detected. 5 [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 6 8.4 Should HP detect deviations from the specifications or defects during the course of the functional check, HP shall inform New Focus thereof in writing. In this event, New Focus shall provide HP with repaired or newly manufactured prototypes or developed software which is/are free of the respective defect(s) within five working days. New Focus shall ensure that the defects are remedied and rectified according to Schedule 4 by employees who were already involved in the development of the developed software defined under the subject-matter hereof. Subject to mutual agreement between the parties, such rectification of defects may be carried out by HP. In the case that New focus can not rectify such defects within short term New Focus shall provide HP a temporary solution. 8.5 Following delivery of the repaired / newly manufactured prototypes or developed software, HP shall conduct another functional test. If deviations from the specifications (Schedule 1) or defects are still detected in the repaired / newly manufactured prototypes or developed software and these are not remedied and rectified within 15 working days of receipt of appropriate notice thereof from HP, HP may, at its discretion, rescind the Agreement, rectify the defect itself or have it rectified by a third party at New Focus's expense. Any further claims shall remain unaffected thereby. 8.6 In the case that HP does not accept the manufactured prototypes or the developed software within a reasonable period of time after delivery, New Focus may set forth a deadline in order to declare the acceptance. The manufactured prototypes or the developed software shall deemed to be accepted if HP does neither declare the acceptance nor informs about defects. HP shall not refuse the acceptance because of insignificant defects. If HP accepts the manufactured prototypes or the developed software without regard of defects, these defects shall be written down within the minutes of the acceptance. 8.7 According to Schedule 1 HP shall release the prototypes for production and delivery of 30 production units to HP upon acceptance of the prototypes. In this case, the New Focus prices for these production units as set forth in Schedule 1 shall apply. HP shall be entitled to purchase additional production units and building blocks thereof (for additional use in other future developed products) after completion of the development according to this Agreement. The scope of delivery/supply shall form the subject matter of a separate agreement (standard purchase Agreement). The parties hereto will enter into good faith negotiations in order to conclude such an agreement, in which New Focus shall guarantee the same warranty as described in clause 10 as well as a product support for a period of five years after delivery of the last production unit. 9. CONTACT PERSONS 9.1 Both parties shall appoint contact persons in Schedule 2 to facilitate close cooperative links in an atmosphere of mutual trust. The contact persons shall be entitled to issue 6 7 and receive legally binding statements on behalf of the respective party, always provided that this Agreement is not modified thereby. 9.2 New Focus assures that the employees listed in Schedule 2 designated by New Focus for support and development for the entire duration of the project avail of the requisite knowledge and necessary experience in this field. 9.3 During the phase of development the parties hereto shall schedule regular meetings every 3 to 4 months in order to discuss any problems regarding the fulfillment of this Agreement and for any other purpose as described in this clause 9. Such meeting shall be attended by the contact persons designated according to 9.1 and/or any other persons as deemed appropriate in mutual agreement by the parties hereto. The meetings shall alternately take place at the respective business sites of the parties hereto. 10. WARRANTIES (a) PRODUCTS AND SERVICES New Focus warrants that for twelve (12) months following the acceptance of the manufactured prototypes, the developed software and associated documentation in accordance with section 8 the manufactured prototypes, the developed software and associated documentation shall be free from defects in workmanship and materials; the developed software shall be free from significant programming errors; the manufactured prototypes and the developed software shall conform to the performance capabilities, characteristics, specifications, functions and other descriptions and standards applicable thereto as set forth in Schedule 1 hereto; and that, in general, the services to be performed by New Focus shall be performed in a timely and professional manner by qualified technicians totally familiar with the manufactured prototypes and the developed software. In the event that defects are discovered during the warranty period, New Focus shall promptly remedy such defects at no additional expense to HP, according to Schedule 4. This section 10(a) shall in no way limit any of HP's rights under the applicable law. (b) COMPLIANCE WITH APPLICABLE LAWS New Focus warrants that the manufactured prototypes and the developed software and all other products, documentation and other materials required to be delivered to HP hereunder, the development and use by HP thereof, and the performance by New Focus of its obligations hereunder shall be in compliance with all applicable laws, rules and regulations as of the date of delivery thereof. 7 8 11. RIGHTS OF USE 11.1 HP is hereby vested with an irrevocable, exclusive, transferable production and distribution right regarding the Tunable Laser Source Module (including software, the respective prototypes, the production units and any and all parts, such parts including, but not limited to, any building blocks) in its respective state of processing, such right being unlimited with respect to time, contents and geographical scope. HP may grant third parties sub-licensing rights and the above mentioned rights of use, subject to the agreement of the respective third parties to enter into an agreement on the payment of royalty fees with respect to the two patents on the design of external cavity diode lasers (US Patent No.: [*] and US Patent No.: [*]) held by New Focus. With respect to the manufacturing and the supply of the Tunable Laser Source Module, HP agrees to exclusively enter into negotiations with New Focus on the terms and conditions of a respective agreement, provided that HP shall have total discretion as to whether or not entering into such agreement. 11.2 New Focus shall grant HP a non-exclusive, international license to all industrial property rights, copyrights included, at no extra cost provided New Focus is entitled to grant such a license, if and to the extent that this is necessary to exercise the rights of use granted to HP as set forth under sub-clause 11.1 above. 11.3 With regard to HP's exclusive production and distribution right to the subject-matter hereof, New Focus shall not process or otherwise use the subject-matter either for its own purposes or for those of third parties. 12. INDUSTRIAL PROPERTY RIGHTS 12.1 New Focus hereby represents and covenants that it is the unlimited and undisputed holder of all copyrights and other intellectual property rights (business and trade secrets included) to the development system, thus enabling New Focus to grant HP the rights of use pursuant to Article 11 hereof. 12.2 In the event of any violation of a third party's industrial property right, New Focus shall establish HP's right to continued use of the development system without payment of any additional remuneration, or, if this should not be possible, alter or replace the subject-matter hereof in such a way as to circumvent violation of industrial property rights whilst, however, conforming to the specification requirements. HP shall be entitled, pending the above, to withhold any payments due. 12.3 In the event of any such violation of an industrial property right, New Focus shall [*], if and to the extent that [*]. Should third parties [*] HP on account of the [*], New Focus shall [*] and shall further [*] by HP in connection with such [*]. This shall apply analogously in [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 8 9 favor of those persons who, up to such time, have been [*] the subject-matter hereof in accordance with Article 11 above. 13. AUDIT RIGHTS At any time HP is entitled to make or cause to be made a special audit regarding the production processes and the quality ensurance systems established by New Focus, on reasonable request made in writing no less than 15 days in advance. New Focus shall make all relevant matters available for examination during regular business hours. A written summary of the results of any such special audit shall be provided by HP to New Focus. 14. CONFIDENTIALITY 14.1 The parties to this Agreement undertake to treat as confidential all of the other party's information identified as such in writing and not to disclose or divulge such information to third parties, unless such information was released by the other party or became public knowledge without any breach of obligations under this Agreement. This shall apply in particular to facts and information on operational procedures, operating results, production figures, products, business policies, duties, claims, organizational and social services or business management measures as well as data on purchasing/procurement functions. The confidential information provided by HP shall solely be used by New Focus for the purpose of this Agreement. In doing so, the parties hereto shall apply the same level of care and diligence as they would exercise in their own affairs. 14.2 This obligation shall expire for each party hereto four years subsequent to receipt of the last confidential fact or item of information from the other party. 14.3 New Focus shall take the necessary measures to ensure that the results of development are not inadmissibly used, disclosed or copied. 15. TERMINATION 15.1 This Agreement may be terminated in writing by either party only in the event of good cause. Good cause shall be deemed to exist, in particular, if one of the parties hereto fails to perform its contractual obligations, despite a reminder to this effect. Good cause shall also be deemed to exist for HP if composition or bankruptcy proceedings are instigated or initiated against New Focus's assets or in the event of a lasting modi- [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 9 10 fication to the ownership rights within New Focus (for example, if New Focus will be taken over by competitors). Furthermore, HP shall be entitled to terminate the Agreement on extraordinary grounds if HP comes to the conclusion that continued implementation of the general project which incorporates the developed system is no longer feasible in view of the economic and/or technical situation. 15.2 Should this Agreement be terminated for reasons in respect of which New Focus bears responsibility, New Focus shall only be remunerated for services commissioned and performed prior to termination. This is subject to the provision that HP is in a position to use the relevant services to further use the developed system. 15.3 In all other cases, New Focus shall be entitled to the agreed remuneration as determined by the date of termination, subject however, to the deduction of expenditure saved, estimated at 90% of the remuneration for services not yet performed by New Focus. HP reserves the right to prove that additional expenditure was saved. 15.4 In the event of termination of this Agreement, New Focus shall, without exception, deliver and surrender to HP without delay all documents which HP made available to New Focus within the framework of this Agreement, as well as all and any prototypes and/or parts of them already in existence at the time of termination and all and any documentation and other information including but not limited to the respective source code regarding the HP-specific development result available at the time of termination. HP shall be vested with the rights to this development result in accordance with Article 11 above (rights of use). 15.5 In the event of termination hereof, the obligations set forth under Article 14 (confidential information) shall prevail and continue for a period of four years subsequent to termination and those set forth under Article 10 (warranty) shall also prevail and continue. 16. SCHEDULES TO THIS AGREEMENT The Schedules listed in the following shall be deemed an integral part of this Agreement: Schedule 1 - Specifications, Development phases, Payment, Schedule 2 - Contact persons Schedule 3 - Project schedule Schedule 4 - Bugfixing Schedule 5 - Resources provided by HP 10 11 17. MISCELLANEOUS PROVISIONS 17.1 No ancillary verbal agreements have been made. Any alterations and amendments hereto must be made in writing in order to be valid and must expressly indicate that they constitute an alteration or amendment hereto. This shall similarly apply to any waiver of this written form requirement. 17.2 Unless otherwise expressly agreed upon herein, any transfer of the rights arising in connection herewith to third parties by one of the parties hereto shall be subject to the prior written approval of the other party. 17.3 Should one or more of the provisions hereof be or become void or invalid, the parties hereto undertake to replace such a provision with a valid provision which approximates the economic purpose or intent of the void or invalid provision as closely as possible. The validity of the remaining provisions shall remain unaffected thereby. 17.4 This Agreement shall be governed by and construed in accordance with the laws of the Federal Republic of Germany. The Uniform Laws of the UN Convention on Contracts for the International Sale of Goods shall not apply. The courts of Stuttgart, Germany, shall have jurisdiction and venue over any claims asserted under or in connection herewith. For HP: For New Focus: Boeblingen 23/12/96 Santa Clara 1/9/97 /s/ WERNER BERKEL /s/ TIMOTHY DAY - ------------------------------------- ----------------------------------- Name Name Business Manager Vice President, Engineering - ------------------------------------- ----------------------------------- Area of activity/title Area of activity/title 11 12 SCHEDULE 1 - SPECIFICATIONS, DEVELOPMENT PHASES, PAYMENT A.) PRODUCT TO BE DEVELOPED: 1. A 1550 nm tunable laser source module (entire plug-in module) which will be based on the patented (US Patent No. [*] and [*]) opto-mechanical design of the New Focus ECDL product family for integration into the HP optical component test platforms (or additional purposes). 2. This includes the development and production of the opto-mechanical sub-assemblies as well as the assembly and test of the chassis and interface electronics. Specifically, New Focus will reduce the cost and size of the opto-mechanical head associated with the current New Focus products, develop the low cost electronics needed to interface the multimeter platform, and refine the packaging of the isolated fiber launch. In addition, New Focus will develop an operations approach that allows for the production of up to [*] plug-in modules per year. In the event that [*] plug-in modules per year are desired an option, which requires additional funding and a [*] period to increase capacity to [*] per year, may be exercised by HP. The additional funding for this option will be part of a separate development contract. A focused team operating in a project management infrastructure and reporting directly to the New Focus management team will be employed for that purpose. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 12 13 3. New Focus will develop and deliver a final module that will meet all of the specifications described below. Condition: The Module is [*] (currently under development at HP) All Specifications apply over the Operating Temperature Range and under the Humidity Conditions. [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 13 14 MODULE KEY FUNCTIONS AND FEATURES 3.1.0 TUNABLE WAVELENGTH LASER SOURCE PARAMETERS From the customer point of view this source will have the following parameters. All these parameters must be accessible via the user interface. [*] 3.1.1 TUNABLE WAVELENGTH LASER SOURCE FUNCTIONALITY [*] 3.1.2 TUNABLE WAVELENGTH LASER SOURCE EXCEPTIONS/EVENTS [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 14 15 4. Development requirement and payment criteria: The Development will proceed in accordance with the development phases as described below. A: MODULE HARDWARE Start Contract o Final contract signed from both parties o Agreement on development schedule (see appendix "Development Schedule") o Agreement on all product specifications (see appendix "Module Specification") 1. Design Review a) Complete product documentation available, and documentation is supposed to be capable to fulfill the product requirements. [*] 2. Phase 1 Prototypes [*] 3. Phase 2 Prototype [*] 4. Release to Production [*] 5. Final Contact close [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 15 16 B: MODULE SOFTWARE 1. Design Review [*] 2. Prototype (alpha) [*] 3. Prototype (beta) [*] 4. Release to Production [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 16 17 5. The delivery dates are laid down within the project schedule (Schedule 3). The remuneration will be paid [*]. The respective installment will be due [*] provided that HP will not detect major deviations in regard of the requirements of the respective development phase. The installments are as follows. Start Contract $[*] Design Review $[*] Phase 1 Prototypes $[*] High Power diodes in cavities $[*] Phase 2 Prototypes $[*] Release to Production $[*] Final Contract close $[*] 30 Production Units $[*]
The development cost approach is to use non-recurring engineering funding from HP to develop the product and production line so that the per unit price in 3/98 will be $[*]. The per unit price will be $[*] and the development cost will be $[*] to get to [*] fully tested plug in modules per year. This $[*] non-recurring engineering effort will include delivery of [*] units but the [*] delivered at the end of the project will be $[*] each (FOB Santa Clara, CA). This $[*] per unit price is based on a cost for the coated diodes of $[*]. If a qualified source of AR coated diodes could be identified that would work in our cavity then the per unit price would be $[*] plus the cost (to NFI) of the diodes. An option to increase the capacity in a separate development contract has been offered, but not exercised by HP at this time, that will allow New Focus to tool up to the [*]/year numbers associated with the high end of the HP marketing numbers. This effort would be covered under a separate development project and New Focus would need [*] advance notice before the increased capacity could be realized. If this option is chosen the per unit price for a quantity of [*] units would be $[*] (FOB Santa Clara, CA) (New Focus are essentially only increasing capacity with this approach) and the per unit price at [*] units would be $[*] (FOB Santa Clara, CA). In these cases the assumed cost of the AR coated diode is $[*] and $[*], respectively. B.) TECHNICAL APPROACH (PROPOSED BY NEW FOCUS): 1. [*] 2. [*] 3. [*] 4. [*] 5. [*] 6. [*] 7. [*] 8. [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 17 18 The above Technical Approach is understood as a proposal by New Focus which may be amended, provided that the development requirements as set out in this Schedule 1 are fully met. New Focus will use the HP communications and interface design, which uses a [*], together with New Focus design for [*] to [*] a complete [*]. To do this New Focus will acquire the [*] development environment necessary to design with this processor, New Focus will use [*] and New Focus will work to ensure that there is complete overlap between the development effort at [*] and at [*]. C.) OPERATIONS APPROACH (PROPOSED BY NEW FOCUS): New Focus will develop a production line solely dedicated to the assembly and test of the [*] in Santa Clara CA using some of New Focus' available manufacturing space. The approach is summarized below: 1. [*] 2. [*] 3. [*] 4. [*] New Focus will expand and improve its present [*] production line (model [*]) for use in the production of up to [*] per year. D.) PROJECT MANAGEMENT BY NEW FOCUS: This development effort will require a focused team operating within a tight schedule. The scope of the project is well understood as are the resources necessary to accomplish the task. New Focus will create a development team that will report directly to the VP of Engineering. This team will be solely dedicated to this project. The team will consist of but not be limited to: 1. Project Manager: Extensive experience with ECDL's, project management, and e-o-engineering 2. Senior Electro-Optics Engineer: One of our senior laser designers with extensive control and AR coating experience 3. Senior Mechanical/Control Engineer: One of our engineers associated with the DC servo control of precision opto-mechanical hardware 4. Electrical Engineer: Engineer focusing on low cost analog/digital electronics and rapid prototyping 5. Electrical Engineer: Engineer focused on firmware and interface to HP platform 6. Mechanical Engineer: Engineer focused on tooling designs/documentation/incorporation of fiber launch designs [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 18 19 7. Manufacturing Engineer: Engineer focused on production line layout / manufacturing tooling / testing New Focus will commit additional resources to this project as it moves forward. SCHEDULE 2 - CONTACT PERSONS For a better fulfillment of this Agreement both parties name the following contact persons By HP: By New Focus Name: Edgar Leckel Name: Timothy Day Telephone-No.: (49) 7031-142691 Telephone-No.: 408-980-8088 FAX: (49) 7031-147023 FAX: 408-980-8883 Name: Emmerich Muller Name: Michael Brownell Telephone-No.: (49) 7031-144861 Telephone-No.: 408-980-8088 FAX: (49) 7031-147023 FAX: 408-980-8883 SCHEDULE 3 - PROJECT SCHEDULE 19 20 SCHEDULE 4 - BUGFIXING 1. Any bugs in the developed software shall be recorded and verified by HP. Following verification, HP shall forward the bug report to New Focus. Bugs shall be categorized as follows: A. Serious bugs Bugs that result in system crashes (hangs or halts), loss of data, destruction of data, corruption of data or cases of unreasonable handling effort for which no "workaround" is available (i.e. there is no method accepted by HP or by the customer for either avoiding the bug or using the developed software). Any medium bug as defined in B of this schedule 4 which causes a serious bug as defined above within the final optical component platforms shall additionally be categorized as a serious bug. B. Medium bugs Bugs as specified under A above, but for which a "workaround" is available for bug avoidance. C. Minor bugs Any bugs not included in categories A and B above. 2. Any serious bugs in the developed software shall be immediately fixed by New Focus. New Focus will begin to fix the bug 24 hours after the respective report by HP the latest. New Focus shall fix the bug during 3 days or during a longer period agreed by HP. If New Focus is unable to reproduce or to fix any bug immediately on its own computer system, it shall fix the bug - if decided by HP - on-site in customer's place. 3. Any medium bug in the developed software shall be fixed in a reasonable period of time. New Focus shall begin fixing the bug during 48 hours after the respective report by HP. New Focus shall fix the bug during two weeks or during a longer period agreed by HP. 4. Any other bugs shall be fixed as soon as possible within the scope of the maintenance of the developed software. 5. New Focus shall update the documentation in accordance with the bug fix. 20 21 6. New Focus shall ensure that any serious and medium bugs shall be fixed for both the current and the previous operating system release. 7. New Focus will maintain a telephone number with a designated knowledgeable contact to HP to call during normal business hours to report problems and receive assistance. 8. The Bugfixing according to this schedule 4 shall be free of charge during the warranty period. 21 22 SCHEDULE 5 - RESOURCES PROVIDE BY HP 1. HARDWARE RELATED DOCUMENTS (see separate Documentation Package) a) Drawings of all mechanical parts of the Module Chassis o Module Bottom Cover o Module Top Cover o Module Sub Panel o Plastic Front Panel o Module Extractor o Fiber Connector Bushing at Front Panel o Module Fiber Interface b) Description of Module Interface and digital Hardware o Printed Circuit Board Outline o Interface Connector to Module/Mainframe Positioning Dwg. c) Schematics of digital parts including part list d) Documentation and File of FPGA Communication Part 2. SOFTWARE RELATED DOCUMENTS (see separate Documentation Package) a) Description of Communication between Mainframe and Module b) HP Coding Standards c) Documentation and Source Code Template for Operating System, Start-up and Communication of Module 3. HARDWARE SUPPORT a) For first Phase of Development (December 96 - March 97 Time Frame) o HP8153 Mainframe o Dummy and Extendermodule --> Delivery January 1997 b) For the rest of the Development (April 97 - March 98) o New OCT Mainframe Prototype --> Delivery End of March 22 23 [GRAPH] [*] Page 1 [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 24 [GRAPH] [*] Page 2 [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. EX-10.12 4 EXHIBIT 10.12 1 EXHIBIT 10.12 ADDENDUM TO THE DEVELOPMENT AGREEMENT OF 23.12.1996 REGARDING THE DEVELOPMENT OF A TUNABLE LASER SOURCE MODULE by and between HEWLETT-PACKARD GmbH HERRENBERGER STRABE 130 71034 BOEBLINGEN GERMANY - hereinafter referred to as "HP" - and NEW FOCUS INC. 2630 WALSH AVE. SANTA CLARA CA 95051 USA - hereinafter referred to as "New Focus" - 1 2 1. If not expressly stated to the contrary herein, all provisions set forth in the Development Agreement of 23.12.1996 (the "Agreement") shall fully apply to this Addendum and shall remain in full force and effect. 2. Delivery by New Focus of the [*] units as described in the Agreement shall be due on July 31, 1998. The per unit price for these production units shall remain unchanged at $[*].--([*] U.S. Dollars). 3. The parties hereto will agree on separate terms and conditions for a contract regarding the production and delivery of the Tunable Laser Source Modules as defined in Clause 11.1 of the Agreement. In amendment of Schedule 1 A.) 5. of the Agreement, the parties agree on an initial per unit price ("HP Purchase Price") of $[*]. -- ([*] U.S. Dollars) for the Module. This HP Purchase Price is based on the initial HP U.S. List Price for the Module of $[*]. -- ([*] U.S. Dollars). To the extent HP decreases or increases the HP U.S. List Price for the Module, New Focus will decrease or increase the HP Purchase Price by half of the percentage the HP List Price decreased or increased. If and to the extent the HP Purchase Price falls below $[*],-- ([*] U.S. Dollars), New Focus shall have the right to terminate the contract regarding the production and delivery of the Tunable Laser Source Modules. If and to the extent the HP List Price falls below $[*] -- ([*] U.S. dollars), HP shall have the right to terminate such contract. These rights of termination shall be specified in detail in such contract. It is understood between the parties hereto that, in this case, HP shall be absolutely free to manufacture the Modules itself or have the Modules manufactured and delivered by a third party provided licensing agreements as outlined in Clause 7 of this Addendum are strictly adhered to. In addition, HP shall not be responsible for any additional development costs associated with supplying HP with the PMF Option of the Module due to the fact that such additional development costs were already covered by the NRE payments documented in the Development Contract of December 23, 1996. 4. HP agrees to pay to New Focus an amount of $[*].--([*] U.S. Dollars) within 30 days of the execution of this Addendum in order to ensure timely manufacturing and delivery of the Modules by New Focus. Payment shall be subject to New Focus providing HP a guarantee for [*]% ($[*].--[*] U.S. Dollars) of the above amount from an internationally recognized Bank substantially in the form as laid out in Schedule 1 hereto. 5. New Focus shall repay up to [*]% ($[*].--[*] U.S. Dollars) of the above amount to the extent that one or more of the following applies: (i) New Focus being in delay with any deadline set forth in the Agreement, this Addendum or the production and delivery contract; provided that a delay with respect to the delivery of the production units according to Clause 2 above shall [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 2 3 only trigger repayment if such delay exceeds one month and New Focus does not provide HP with reasonably sufficient justification for such delay and/or HP may not be reasonably expected to accept such delay and/or the delay has not been primarily caused by HP. (ii) New Focus being in default of any other material provision of the Agreement, this Addendum or the production and delivery contract. The following repayment schedule shall be binding: $[*].--([*] U.S. Dollars) on [*], 1998 $[*].--([*] U.S. Dollars) on [*], 1998 $[*].--([*] U.S. Dollars) on [*], 1998 $[*].--([*] U.S. Dollars) on [*], 1998 $[*].--([*] U.S. Dollars) on [*], 1998 Clauses 5 (i) and 5(ii) of this Addendum shall not apply for any failure or delay in the performance of New Focus due to causes including, but not limited to, an act of God, an act of civil or military authority, fire, epidemic, flood, earthquake, riot, war, sabotage, and governmental action which are beyond its reasonable control; provided that New Focus: (i) promptly gives HP written notice of such cause and, in any event, within fifteen (15) calendar days of discovery thereof; and (ii) uses diligent efforts to correct such failure or delay in its performance. 6. In view of HP's exclusive rights of use as described in Clause 11 of the Agreement, the Parties agree upon the following: (i) New Focus may solely sell Modules in their completely assembled form (as defined by form factor, HW and SW interface) to HP. (ii) Until HP officially informs New Focus of the obsolescence of the Module, New Focus shall not in any way manufacture and/or sell the Module and/or the building blocks (defined as the complete assembled opto-mechanical sub-assembly including but not limited to, the diode laser, external cavity, cavity optics, and drive train, in the exact configuration) thereof either under its own brand name in a way that direct competition to the HP Module is created or to direct HP Module competitors (including but not limited to corporations such as Anritsu, Photonetics, EXFO, Tektronix, Santec etc.) without the expressed written consent of HP. Subject to the foregoing, none of HP's rights according to Clause 11 of the Agreement and Clause 7 of this Addendum nor any other of HP's rights under the Agreement shall be in any way affected hereby. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 3 4 7. With respect to HP's rights of use pursuant to 11.1 of the Agreement, and to the extent HP decides to manufacture the Modules itself or decides to have the Modules manufactured and delivered by a third party, the Parties shall enter into negotiations regarding the amount of the license fee for the New Focus patent in question (U.S. Patent No.: [*]). This license fee shall not exceed $[*]. -- ([*] U.S. Dollars) per manufactured Module. New Focus warrants that it is the sole owner of U.S. patent No. [*] and the therewith related applications [*] and [*] and any other patent or patent application claiming the priority of this patent or patent application. Furthermore, it is the understanding of the parties: (i) that no further royalty or license fees shall in any way be payable by HP to New Focus for the Module. (ii) that HP's use of the patent in question is limited to the Module in its completely assembled form (as defined by form factor, HW and SW interface). 8. No ancillary verbal agreements have been made. Any alterations and amendments hereto must be made in writing in order to be valid and must expressly indicate that they constitute an alteration or amendment hereto. This shall similarly apply to any waiver of this written form requirement. Should one or more of the provisions hereof be or become void or invalid, the parties hereto undertake to replace such a provision with a valid provision which approximates the economic purpose or intent of the void or invalid provision as closely as possible. The validity of the remaining provisions shall remain unaffected thereby. For HP: For New Focus: Boeblingen, 10/30/97 Santa Clara, 11/6/97 /s/ WERNER BERKEL /s/ TIMOTHY DAY - ----------------------------- ----------------------------- Werner Berkel Timothy Day Fiber Optic Test/Business Manager Engineering/Vice President [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 4 5 MID-PENINSULA BANK October 23, 1997 Hewlett-Packard GmbH Herrenberger Str. 130 71034 Boeblingen Germany Dear Sirs: Mid-Peninsula Bank (the "Bank") herewith confirms that it has knowledge that Hewlett-Packard GmbH (hereinafter referred to as HP), Herrenberger Str. 130, 71034 Boeblingen, Germany has granted to New Focus, Inc. a payment in the amount of $USD[*] ([*] US Dollars). The payment to New Focus, Inc. is specified within the terms and conditions of the Addendum dated October 28, 1997 to the Development Agreement (the "Agreement") dated December 23, 1996 by and between HP and New Focus, Inc. The Bank herewith provides assurance to HP as follows. The Bank, acting as a principal obligor, guarantees to HP prompt payment by New Focus, Inc. of all of its (repayment) obligations under the terms specified in that certain Addendum to the Agreement, in an amount not to exceed $USD[*] ([*] US Dollars), such amount to exclude accrued interest and/or costs. In the event that New Focus, Inc. does not make payment to HP in accordance with Clause 5 of the Addendum to the Agreement, the Bank shall forthwith upon the first demand of HP, make payment to HP in such amount(s) (not to exceed $USD[*] - [*] US Dollars) as was not paid by New Focus, Inc. (as if the Bank instead of New Focus, Inc. were expressed to be the principal obligor). This guaranty shall remain in effect as long as New Focus, Inc. has a potential payment obligation towards HP under Clause 5 of the Addendum to the Agreement. Mid-Peninsula Bank By: /s/ MURRAY B DEY --------------------------------- Murray B. Dey Executive Vice President [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 5 6 Schedule 1 GUARANTEE Whereas We, the undersigned, Bank, herewith confirm that we have knowledge that Hewlett-Packard GmbH, Herrenberger Str. 130, 71034 Boblingen, Germany has granted to New Focus payment of an amount of $[*] -- ([*] U.S. Dollars). Therefore We guarantee, as principal obligor, to HP prompt performance by New Focus of all its (repayment) obligations under the Addendum. We undertake with HP up to a maximum amount of $[*] -- ([*] U.S. Dollars), such maximum amount not including accrued interest and/or costs, that whenever New Focus does not pay amount when due in accordance with Clause 5 of the Addendum, we shall forthwith on first demand pay that amount as if we instead of New Focus were expressed to be the principal obligor. This guarantee shall be valid until final performance of New Focus of all its obligations under the Agreement, the Addendum or the production and delivery contract. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 6 EX-10.13 5 EXHIBIT 10.13 1 EXHIBIT 10.13 ADDENDUM NO 2 to the Development Agreement of 23.12.1996 regarding the development of a Tunable Laser Source Module, amended by an Addendum of 30.10.1997 by and between AGILENT TECHNOLOGIES DEUTSCHLAND GMBH Herrenberger Str. 130 71034 Boblingen Germany hereinafter referred to as "AGILENT" and NEW FOCUS INC. 2630 Walsh Ave. Santa Clara CA U.S.A. hereinafter referred to as "New Focus" Page 1 2 WHEREAS, New Focus developed a tunable laser module for AGILENT known as the "Happy module" under the Development Agreement of 23.12.1996, amended of 30.10.1997 (hereinafter "the Development Agreement"). WHEREAS, the parties wish to develop a version of this module that provides more power, referred to hereinafter as the "TL1502 Module" as well as an L-band version, referred to hereinafter as the "TL1601 Module" (together hereinafter called "Monet Module"). NOW THEREFORE, the parties agree as follows: 1. DEVELOPMENT AGREEMENT AND THIS ADDENDUM If not expressly stated to the contrary herein, all provisions set forth in the Development Agreement of 23.12.1996 and the Addendum of 30.10.1997 shall fully apply to this Addendum No 2 and shall remain in full force and effect. With respect to the penalty clause set forth in section 5.2 of the Addendum 1 to the Development Agreement regarding the Happy Module, AGILENT agrees not to enforce such clause with respect to any delays having occurred before the date of this Addendum (altogether $[*]; [*] Dollars). 2. AMENDMENTS REGARDING THE DEVELOPMENT AGREEMENT 2.1 PRICES AND RAMP-UP In amendment of Schedule 1 A.) 5. Of the Development Agreement of 23.12.1996, the parties agree on an initial per unit price ("AGILENT Purchase Price") of $[*]-([*] U.S. Dollars) for the Happy Module. The parties agree that this price shall not be increased in case the initial AGILENT U.S. List Price increases or decreases. AGILENT agrees to purchase [*] "Modules" from New Focus prior to March 2000. A "Module" is defined as a Happy Module or a Monet Module. 2.2 DELIVERY MILESTONES 2.2.i New Focus shall deliver the Happy Module according to the following delivery milestones. [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 2 3 It is hereby agreed that the deliveries of the Happy Module as of the date of signing of this Addendum are in full compliance with the delivery milestones listed above. From December 1999 on, the parties take into account a rolling three months window (further delivery milestones after March 2000 will be agreed to in a separate purchase agreement). The numbers of units delivered by New Focus will be reviewed on a monthly basis. If the total number for one month is below the numbers agreed to this respective month, New Focus will have a two months period to bring the total number of units back to the number agreed to for the respective three months period. 2.2.ii In the event that New Focus fails to deliver the number of units agreed to for a three months period, AGILENT may terminate this Agreement upon 90 days notice. AGILENT may also terminate this Addendum without notice if New Focus fails to deliver the first PM beta unit by February 29, 2000 or fails to deliver the first PM production unit by March 31st, 2000. AGILENT must inform New Focus that AGILENT wishes to terminate the agreement in writing within 60 days of failure by New Focus to deliver. If AGILENT fails to do so, then AGILENT's right to terminate will lapse until the next trigger event occurs. 2.3 QUALITY TRIGGER (HAPPY MODULE) Regarding the Annualized Failure Rate (AFR) as defined in schedule 7, the parties will monitor a 6 months rolling average starting in June 2000. The parties will notify each other in writing every month of the six month rolling average of the AFR. Regarding the rate of Defect on Arrival (DOA) as defined in schedule 7, the parties will measure a rolling three months average starting in December 1999. The parties will notify each other in writing every month of the three month rolling average of the DOA. In the event that the following trigger events apply, AGILENT may terminate this Addendum to the Development Agreement upon 90 days prior notice: - the six month rolling average of the AFR is above [*]% - the three month rolling average of the DOA exceeds [*]% AGILENT must inform New Focus in writing within 60 days of the occurrence of the above trigger events that AGILENT wishes to terminate the agreement. If AGILENT fails to do so, then AGILENT's right to terminate will lapse until the next trigger event occurs. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 3 4 2.4 TRANSITION In the event that this Addendum will be terminated according to Article 2.2, 2.3,5,6,7 or according to any provision regarding the Monet Module herein, New Focus agrees to provide the following documents and transition services to AGILENT: i. [*] ii. [*] iii. [*] iv. [*] v. [*] vi. [*] vii. [*] viii. [*] ix. [*] 3. DEVELOPMENT OF THE MONET MODULE New Focus agrees to develop a Tunable Laser Source Module (including hard- and software), hereinafter "Monet Module", which is described in greater detail in the specifications in Schedule 1 hereto, as well as to manufacture prototypes and produce units whilst adhering to the project schedule as set forth in Schedule 2 hereof. 4. BREAK-DOWN OF COSTS / REMUNERATION FOR THE MONET MODULE 4.1 In return for the services outlined in Article 3 above, AGILENT shall effect payment in installments as laid out in Section3. "Payment Criteria" of Schedule 1 according to the development phases for hardware and software described in 2 Sections 2. A-B of Schedule 1 hereto. The payments shall become due and payable in accordance with the terms and conditions outlined in Section3. "Payment Criteria" of Schedule 1. 4.2 A) AGILENT agrees to an initial payment to New Focus of [*] U.S. Dollars ($[*]) within 30 days of the execution of this Addendum in order to ensure timely manufacturing and delivery of the Monet Module by New Focus. This sum represents [*]% of the total developmental amount of [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 4 5 U.S. dollars ($[*]) which Agilent is hereby obligated to pay according to the terms and of this Addendum and the schedules attached hereto for the development of the Monet Module. This sum is in addition to any contract amounts which Agilent has previously agreed to pay New Focus (See for Example: Section 4 of the Addendum No. 1 of 30.10.1997 to the Development Agreement.) B) The initial and subsequent payments for the Monet Module set forth above in Section 4.2A and which are detailed in the attached schedules 1-2 shall be subject to New Focus providing AGILENT a performance guarantee of [*] U.S. Dollars ($[*]) from an internationally recognized Bank. This subsection shall, for the Monet Module, supercede and replace the guarantees set forth in Section 5 of Addendum No 1 of 30.10.1997 to the Development Agreement. C) The parties agree on an initial per unit price for the Monet Module (either for the TL1502 or the TL1601 single mode fiber version) of $[*] for the first [*] units and for any further unit $[*], as well as for the [*] of these Modules $[*]. The parties agree that this price shall not be increased within the [*] after delivery of the first production unit. The parties to this Addendum will renegotiate the per unit price one year after acceptance by AGILENT of the first units of Monet Modules produced under this Addendum. New Focus shall work continuously on reducing the cost of the products. Any share of cost advantages will be part of a future procurement agreement. 4.3 The production and delivery of the Monet Modules shall be subject to a separate Framework Purchase Agreement. The parties shall negotiate such terms and conditions and have an agreement in place 2 months before the first product shipment. This agreement shall contain the ramp up quantities for the first six months of production. The target capacity, without any commitment herein, is intended to be in total (for SMF/PC, SMF/APC, PMF/PC; PMF/APC) [*] units up to [*] per year. 5. DEVELOPMENT 5.1 The prototypes as well as the software of the Monet Modules shall be manufactured and developed by New Focus in accordance with the project schedule (Schedule 2 to this Addendum No 2) and the development phases contained therein as well as in Schedule 1. 5.2 AGILENT may terminate this Addendum upon 90 days notice if New Focus fails to deliver the TL1502 prototype and production unit as well as the TL1601 prototype and production unit as defined in section 2 of schedule 1 of this Addendum, until 3 months after the milestones as defined in Schedule 2 of this Addendum. Article 2.4 ("Transition") shall apply accordingly. Agilent must inform New Focus in writing of Agilent's intention to terminate the agreement within 60 days of the occurrence of the failure by New Focus to deliver the TL1502 and TL1601 prototype and production units. If AGILENT fails to do so, then AGILENT's right to terminate [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 5 6 will lapse until the next trigger event occurs. 6. QUALITY TRIGGER (MONET MODULE) Regarding the Annualized Failure Rate (AFR) as defined in schedule 7, the parties will monitor a 6 months rolling average starting 6 months after the first production unit is delivered. The parties will notify each other in writing every month of the six month rolling average of the AFR. Regarding the rate of Defect on Arrival (DOA) as defined in schedule 7 the parties will measure a rolling three months average starting three months after the first production unit is delivered. The parties will notify each other in writing every month of the six month rolling average of the AFR. In the event that the following trigger events apply, AGILENT may terminate this Addendum upon 90 days notice: - the six month rolling average of the AFR is above [*]% - the three month rolling average of the DOA exceeds [*]% - the absolute number of DOA is higher than 3 during the first three months after the delivery of the first production unit. AGILENT must inform New Focus in writing within 60 days of the occurrence of a trigger event that AGILENT wishes to terminate the agreement. If AGILENT fails to do so, then AGILENT's right to terminate will lapse until the next trigger event occurs. 7. RIGHTS OF USE 7.1 All rights of use set forth in Section 11 of the Development Agreement of 23.12.1996 granted to AGILENT regarding the Happy Modules under the Development Agreement shall remain in full force and effect and shall not be amended in any way by this Addendum. Only with respect to the Monet Modules being subject of this Addendum, section 11.1 shall be amended as follows. 7.2 AGILENT is hereby vested with an irrevocable, exclusive, transferable distribution right regarding the Monet Modules (including software, the respective prototypes, the production units and any and all parts including, but not limited to any building blocks) in their respective state of process, such right being unlimited with respect to time, contents and geographical scope. 7.3 It is the intent of the parties that the manufacturing and supply of the Monet Module be performed for AGILENT exclusively by New Focus provided that the quality, timeliness [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 6 7 of delivery of the Monet Modules as supplied by New Focus meet the commitments made herein. The parties will establish an escrow account to protect AGILENT in the event that New Focus is unable to meet its commitments under this Addendum, or in the event that the agreement is terminated under section 2, 5 or 6. The terms of the escrow account are set forth below in subsections 7.3 i to v. 7.3.i As soon as available, New Focus shall deposit any prototypes and/or parts of them as well as any documentation with the latest version of the source code regarding the AGILENT-specific development result and update such deposits in escrow with a mutually agreeable escrow trustee. AGILENT shall bear the costs of the escrow trust. The provisions applicable to the deposit of source code by New Focus shall be as follows: In the event that one or more of the following trigger events apply AGILENT is automatically vested with an irrevocable, transferable, non-exclusive production right regarding the Products under this Addendum.: New Focus a. is no longer able to meet its maintenance and support contract obligations to AGILENT, provided that the cessation of maintenance services is not solely attributable to the failure of the licensee to make timely payment of any charges under such maintenance contract; b. has ceased to do business; c. has ceased to produce the Products specified in Schedule 1 hereto; d. has significantly changed its quality management in such a way that it becomes unacceptable to AGILENT (e.g. audit reasons, administrative or governmental regulations) or if the Modules will not reach an acceptable level and if after AGILENT informs New Focus in writing New Focus fails to remedy such quality deficiency within 90 days; e. has increased prices of the Products specified in Schedule 1 hereto by more than [*]%; f. has become insolvent, suffers or permits the appointment of a receiver for its business or assets or becomes subject to, any bankruptcy proceedings or any statute relating to insolvency or the protection of rights of creditors. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 7 8 7.3.ii The escrow trustee shall follow the procedures set forth herein below: - Escrow trustee shall promptly notify New Focus of the occurrence of the Release Condition and shall provide to New Focus a copy of AGILENT's notice to escrow trustee. "Release Condition" for the purposes of this Agreement shall mean all of the trigger events described above. - If the escrow trustee does not receive Contrary Instructions, as defined below, from New Focus within thirty (30) days following escrow trustee's delivery of a copy of such notice to New Focus, Escrow trustee shall deliver a copy of the source code to AGILENT. "Contrary Instructions" for the purposes of this subclause shall mean the filing of written notice with escrow trustee by New Focus, with a copy to AGILENT demanding delivery, stating that the Release Condition has not occurred or has been cured. - If Escrow trustee receives Contrary Instructions from New Focus within thirty (30) days of the giving of such notice to New Focus, Escrow trustee shall not deliver a copy of the Source Material to AGILENT, but shall continue to store the source code until: a) otherwise directed by New Focus and AGILENT jointly; b) Escrow trustee has received a copy of an order of a court of competent jurisdiction directing Escrow trustee as to the disposition of the Source Material; or c) Escrow trustee has deposited the source code with a court of competent jurisdiction or a Trustee or receiver. 7.3.iii Upon receipt of Contrary Instructions from New Focus, escrow trustee shall have the absolute right, at escrow trustee's election to file an action in interpleader requiring the New Focus and AGILENT to answer and litigate their several claims and rights amongst themselves. 7.3.iv Upon execution of this Addendum, AGILENT shall be granted, at no charge, a non-exclusive, non-transferable, irrevocable and perpetual right of utilization to the deposited source codes. AGILENT may only exercise Page 8 9 its rights under this license and use the source code in the event that the requirements of subclause 7.3.ii are met. 7.3.v Prior to depositing the source codes, AGILENT may inspect the source material to assure itself of the quality thereof and of the fact that they are complete. 7.4 New Focus grants to AGILENT a non-exclusive, worldwide, transferable and irrevocable license to all international property rights in the Monet Module which are owned by New Focus, copyrights included, Said grant will be provided royalty free for the Monet Modules sold to AGILENT by New Focus. Said grant will be provided under the royalty provisions set forth in subsection 7.7 hereof for Monet Modules not sold by New Focus to AGILENT.. 7.5 AGILENT grants to New Focus a non-exclusive, transferable, irrevocable production and distribution right regarding the optoblock as defined in Schedule 3. New Focus will pay to AGILENT a royalty of $[*] for the first [*] and $[*] for any further sold optoblock. In the event of an acquisition of New Focus, New Focus will be allowed to produce the optoblock under the same agreement. AGILENT grants to New Focus a non-exclusive, non-transferable, irrevocable production and distribution right regarding the Digital/analog part as defined in Schedule 3. The rights granted shall be revocable if New Focus will be taken over by competitors as defined in Article 8.2 of this Addendum. 7.6 AGILENT grants to New Focus a non-exclusive, non-transferable, irrevocable production and distribution right regarding the Computing/interface part as defined in Schedule 3. New Focus will pay to AGILENT a royalty of $[*] for each sold Computing/interface part. The rights granted shall be revocable if New Focus will be taken over by competitors as defined in Article 8.2 of this Addendum. 7.7 In the event of termination of this Addendum by AGILENT, AGILENT will pay to New Focus a royalty for the Monet Module based on AGILENT's net revenues for Monet or other modules which are based on the optoblock as defined in schedule 3 of this Addendum or other modules which are based on the optoblock as defined in schedule 3 of this Addendum per calendar year as follows: - 2000: [*]% - 2001: [*]% - 2002: [*]% - 2003 and onward: [*]% The above royalty payments will not be due in case that one or more of the trigger events mentioned in Article 7.3i a-f apply. In case that this Addendum will be terminated by AGILENT because of Article 7.3.i.a-f, AGILENT agrees to pay a royalty of $[*] for each unit of the Monet Modules built after [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 9 10 termination. AGILENT agrees to keep records showing the sales or other disposition of Monet Modules or other modules based on the optoblock defined in schedule 3 of this Addendum in sufficient detail to enable the royalties payable hereunder by AGILENT to be determined, and further agrees to permit its books and records to be examined to the extent necessary to verify the Royalties payable. Such examination to be made at the expense of New Focus by an independent auditor acceptable to AGILENT. Costs shall be born by AGILENT if discrepancies occur. 8. MISCELLANEOUS 8.1 With respect to section 8.5 of the Development Agreement of 23.12.1996, the liability for New Focus under this section, regarding AGILENT's right to rectify the defect itself or have it rectified by a third party at New Focus's expense, shall be limited to [*] U.S. dollars ($[*].) 8.2 Article 15.1 second paragraph of the Development Agreement of 23.12.1996 shall be modified as follows: Good cause shall be deemed to exist, in particular, if one of the parties hereto fails to perform its contractual obligations, despite a reminder to this effect. Good cause shall also be deemed to exist for AGILENT if bankruptcy proceedings are instigated or initiated against New Focus's assets or in the event of a lasting modification to the ownership rights within New Focus (for example, if New Focus will be taken over by competitors within the market of telecommunication, test and measurement). 8.3 Article 15.1 third paragraph of the Development Agreement of 23.12.1996 shall not apply to this Addendum. 8.4 No ancillary verbal agreements have been made. Any alterations and amendments hereto must be made in writing in order to be valid and must expressly indicate that they constitute an alteration or amendment hereto. This shall similarly apply to any waiver of this written form requirement. 8.5 Should one or more of the provisions hereof be or become void or invalid, the parties hereto undertake to replace such a provision with a valid provision which approximates the economic purpose or intent of the void or invalid provision as closely as possible. The validity of the remaining provisions shall remain unaffected thereby. 8.6 In the case that AGILENT transfers all or part of its assets to a new legal entity and therefore has to assign and/or transfer the rights and obligations under the agreement and this Addendum No 2 to such new legal entity, New Focus declares its agreement to such assignment or transfer and AGILENT accepts such agreement. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. Page 10 11 9. SCHEDULES TO THIS ADDENDUM The Schedules listed in the following shall form an integral part of this Addendum: Schedule 1 Specifications, Development Phases, Payment Schedule 2 Project schedule Schedule 3 Definition of the "Tunable Laser Module" and Parts thereof Schedule 4 Contact persons Schedule 5 Bugfixing Schedule 6 Resources provided by AGILENT Schedule 7 Definition of Annualized Failure Rate (AFR) and Defect on Arrval(DOA) For AGILENT: For New Focus: Boeblingen, 12/16/1999 Boeblingen, Dec 10, 1999 /s/ JORGE SCHULTZ /s/ PAUL SMITH - ----------------------------------- ------------------------------------ Name Name CONTROLLER, OCMD VP/GM Telecom Division - ---------------------------- --------------------------------- Area of activity/title Area of activity/title Page 11 12 Page 12 13 Final Version - 10.12.1999 SCHEDULE 1 SPECIFICATIONS, DEVELOPMENT PHASES, PAYMENT Complete specification should be according to specification control drawings! 1. MODULE KEY FUNCTIONS AND FEATURES 1.0 TUNABLE WAVELENGTH LASER SOURCE PARAMETERS From the customer point of view this source will have the following parameters. All these parameters must be accessible via the user interface.
Parameter Limits Preset Remarks - --------- ------ ------ ------- [*]
1.1 TUNABLE WAVELENGTH LASER SOURCE FUNCTIONALITY [*] 1.2 TUNABLE WAVELENGTH LASER SOURCE EXCEPTIONS / EVENTS [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 1 14 [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 2 15 2. Development requirement: The Development will proceed in accordance with the development phases as described below. ("of each" herein means of [*] and of [*] modules) A: MODULE HARDWARE Start Contract [*] 1. Design Review [*] 2. Phase 1 Prototypes [*] 3. Phase 2 Prototypes [*] 4. Release to Production [*] 5. Final Contact close [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 3 16 Final Version - 10.12.1999 B: MODULE SOFTWARE 1. Design Review [*] 2. Phase 1 Prototypes (alpha units) [*] 3. Phase 2 Prototypes (beta units) [*] 4. Release to Production [*] 3. Payment criteria: [*]% ($[*]) will be due at contract start (payment criteria; contract signing by AGILENT and NFI). [*]% ($[*]) will be due after shipment of [*] with waiver spec and [*] (payment criteria is an [*] module successfully tested by AGILENT in Germany meeting specifications according to specification control drawing [*]). Estimated completion date [*]. [*]% due [*] modules with coherence control and with the original environmental spec. (payment criteria both Alpha Modules pass environmental testing by AGILENT in Germany according to specification control drawing [*] and specification control drawing [*]. Estimated completion date [*]. [*]% ($[*]) due after the first shipment of the [*] with coherence control (payment criteria: units meet the same specification control drawing limits as the [*] according to [*]). Estimated Completion date [*]. [*]% ($[*]) due at final contract close (payment criteria: final contract close which shall occur after 30 production units of both the [*] modules have been accepted by AGILENT in Germany). Estimated completion date [*]. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 4 17 Final Version - 10.12.1999 SCHEDULE 2 - PROJECT SCHEDULE 5 18 Agilent Technologies [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 19 Agilent Technologies [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 20 Agilent Technologies [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 21 Agilent Technologies [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 22 Final Version - 10.12.1999 SCHEDULE 3: DEFINITION OF THE "TUNABLE LASER MODULE" AND PARTS THEREOF Digital/analog part Comprising the [*] and the Analog board as well as the related Low Level Software drivers. Computing/interface part Comprising the Computing Platform and the Bus interface as well as the adaptation to the Wind River OS and the High Level Software Functions. The optoblock as the complete assembled opto-mechanical sub-assembly, including but not limited to the diode laser, external cavity, cavity optics and drive train, in the exact configuration, as subject of the Addendum to the Development Agreement, last signed on Oct. 30, 1997. [*] [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. 6 23 Final Version - 10.12.1999 SCHEDULE 4 - CONTACT PERSONS For a better fulfillment of this Agreement both parties name the following contact persons By AGILENT: By New Focus Name: Edgar Leckel Name: Bruce Pittman Telephone-No.: (49) 7031-142691 Telephone-No.: (01) 408 919-2741 FAX: (49) 7031-143387 Name: Emmerich Muller Name: Dave Arnone Telephone-No.: (49) 7031-144861 Telephone-No.: (01) 408-919-1528 FAX: (49) 7031-143387 7 24 Final Version - 10.12.1999 SCHEDULE 5 - BUGFIXING 1. Any bugs in the developed software shall be recorded and verified by AGILENT. Following verification, AGILENT shall forward the bug report to New Focus. Bugs shall be categorized as follows: A. Serious bugs Bugs that result in system crashes (hangs or halts), loss of data, destruction of data, corruption of data or cases of unreasonable handling effort for which no "workaround" is available (i.e. there is no method accepted by AGILENT or by the customer for either avoiding the bug or using the developed software). Any medium bug as defined in B. of this schedule 4 which causes a serious bug as defined above within the final optical component platforms shall additionally be categorized as a serious bug. B. Medium bugs Bugs as specified under A above, but for which a "workaround" is available for bug avoidance. C. Minor bugs Any bugs not included in categories A and B above. 2. Any serious bugs in the developed software shall be immediately fixed by New Focus. New Focus will begin to fix the bug 24 hours after the respective report by AGILENT the latest. New Focus shall fix the bug during 3 days or during a longer period agreed by AGILENT. If New Focus is unable to reproduce or to fix any bug immediately on its own computer system, it shall fix the bug - if decided by AGILENT - on-site in customer's place. 3. Any medium bug in the developed software shall be fixed in a reasonable period of time. New Focus shall begin fixing the bug during 48 hours after the respective report by AGILENT. New Focus shall fix the bug during two weeks or during a longer period agreed by AGILENT. 4. Any other bugs shall be fixed as soon as possible within the scope of the maintenance of the developed software. 5. New Focus shall update the documentation in accordance with the bug fix. 8 25 Final Version - 10.12.1999 6. New Focus shall ensure that any serious and medium bugs shall be fixed for both the current and the previous operating system release. 7. New Focus will maintain a telephone number with a designated knowledgeable contact to AGILENT to call during normal business hours to report problems and receive assistance. 8. The Bugfixing according to this schedule 5 shall be free of charge during the warranty period. 9 26 Final Version - 10.12.1999 SCHEDULE 6 - RESOURCES PROVIDED BY AGILENT 1. HARDWARE RELATED DOCUMENTS (see separate Documentation Package) a) Drawings of all mechanical parts of the Module Chassis - Module Bottom Cover - Module Top Cover - Module Sub Panel - Plastic Front Panel - Module Extractor - Fiber Connector Bushing at Front Panel - Module Fiber Interface b) Description of Module Interface and digital Hardware - Printed Circuit Board Outline - Interface Connector to Module/Mainframe Positioning Dwg. c) Schematics of digital parts including part list d) Documentation and File of FPGA Communication Part 2. SOFTWARE RELATED DOCUMENTS (see separate Documentation Package) a) Description of Communication between Mainframe and Module b) AGILENT Coding Standards c) Documentation and Source Code Template for Operating System, Start-up and Communication of Module 10 27 Final Version - 10.12.1999 SCHEDULE 7 - DEFINITION OF ANNUALIZED FAILURE RATE(AFR) AND DEFECT ON ARRIVAL(DOA) AFR(% YR), PER MONTH: =(SUM OF 'ONE YEAR' WARRANTY FAILS IN THIS MONTH)/(SUM OF UNITS IN WARRANTY THIS MONTH) *12 * 100 DOA = MODULE IS EITHER INCOMPLETE, DEFECT, OR DOES NOT MEET SPECIFICATIONS. 11 EX-10.14 6 EXHIBIT 10.14 1 EXHIBIT 10.14 [ALCATEL LOGO] MEMORANDUM OF AGREEMENT This Agreement is dated and effective as of January 7, 2000, by and between Alcatel USA Sourcing, L.P. ("Buyer"), having a place of business at 1000 Coit Road, Plano, Texas 75075 and New Focus, Inc. ("Seller"), having its principle place of business at 2630 Walsh Avenue, Santa Clara, California 95051-0905. Whereas, Seller commits to support and manufacture the optoelectronic component ("Product") as noted below for purchase by Customer. Whereas, Buyer commits to purchase at least [*] of Buyer's total demand, equating to approximately [*] units, based on acceptable levels of service and quality from Seller, of the Product noted below from Seller for deliveries during calendar year 2000 based on Buyer's current usage projections. Product and Commercial Issues ----------------------------- - [*] - Establishment of safety stock for lead time reduction program as mutually agreed upon by both Buyer and Seller. This Memorandum of Agreement supersedes all previous understandings or representations made prior to or simultaneous with the execution of this document, by any party, with respect to the subject matter contained herein. It is understood that issuance of a purchase order(s) is subject to receipt of final approval by internal management of Alcatel USA Sourcing, L.P. and mutually agreed to terms and conditions. It is further understood that should the-required management approval be withheld, Alcatel USA will not place a purchase order(s) and will not be subject to penalties, costs or other liability of any nature. /s/ DAVE STARK /s/ BOB MACDONALD - ----------------------------------- ------------------------------------ Dave Stark Bob MacDonald Purchasing Team Leader Product Marketing Manager Alcatel USA Sourcing, L.P. New Focus, Inc. /s/ GREG BROCKMANN /s/ PAUL SMITH - ----------------------------------- ------------------------------------ Greg Brockmann Paul Smith Manager - Advanced Purchasing Vice President, GM of Alcatel USA Sourcing, L.P. Telecommunications New Focus, Inc. [*] Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions. EX-10.15 7 EXHIBIT 10.15 1 EXHIBIT 10.15 LOAN AND SECURITY AGREEMENT (EQUIPMENT) DATED AS OF FEBRUARY 9, 1999 BETWEEN NEW FOCUS, INC., A CALIFORNIA CORPORATION AS "BORROWER", AND VENTURE LENDING & LEASING II, INC., A MARYLAND CORPORATION AS "LENDER" 2 LOAN AND SECURITY AGREEMENT (EQUIPMENT) The Borrower and Lender identified on the cover page of this document have entered or anticipate entering into one or more transactions pursuant to which Lender agrees to make available to Borrower an equipment loan facility governed by the terms and conditions set forth in this document and one or more Supplements executed by Borrower and Lender which incorporate this document by reference. Each Supplement constitutes a supplement to and forms part of this document, and will be read and construed as one with this document, so that this document and the Supplement constitute a single agreement between the parties (collectively referred to as this "Agreement"). Accordingly, the parties agree as follows: ARTICLE 1 - INTERPRETATION 1.1 DEFINITIONS. The terms defined in Article 10 and in the Supplement will have the meanings therein specified for purposes of this Agreement. 1.2 INCONSISTENCY. In the event of any inconsistency between the provisions of any Supplement and this document, the provisions of the Supplement will be controlling for the purpose of all relevant transactions. ARTICLE 2 - THE COMMITMENT AND LOANS 2.1 THE COMMITMENT. Subject to the terms and conditions of this Agreement, Lender agrees to make term loans to Borrower from time to time from the Closing Date and to, but not including, the Termination Date in an aggregate principal amount not exceeding the Commitment, for the purpose of financing the acquisition or carrying of certain Equipment. The Commitment is not a revolving credit commitment, and Borrower does not have the right to repay and reborrow hereunder. Each Loan requested by Borrower to be made on a single Business Day shall be for a minimum principal amount set forth in the Supplement, except to the extent the remaining Commitment is a lesser amount. 2.2 NOTES EVIDENCING LOANS; REPAYMENT. Each Loan shall be evidenced by a separate Note payable to the order of Lender, in the total principal amount of the Loan. Principal and interest of each Loan shall be payable at the times and in the manner set forth in the Note. 2.3 PROCEDURES FOR BORROWING. (a) Borrower shall give Lender, at least five (5) Business Days' prior to a proposed Borrowing Date, written notice of any request for borrowing hereunder (a "Borrowing Request"). Each Borrowing Request shall be in substantially the form of Exhibit "B" to the Supplement, shall be executed by a responsible executive or financial officer of Borrower, and shall state how much is requested, and shall be accompanied by such other information and documentation as Lender may reasonably request. (b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing Date, if Borrower has satisfied the conditions precedent in Article 4, Lender shall make the Loan available to Borrower in immediately available funds. 2.4 INTEREST. Basic Interest on the outstanding principal balance of the each Loan shall accrue daily at the Designated Rate from the Borrowing Date until the Maturity Date. 2.5 TERMINAL PAYMENT. Borrower shall pay the Terminal Payment with respect to each Loan on the Maturity Date of such Loan. 2.6 INTEREST RATE CALCULATION. Basic Interest, along with charges and fees under this Agreement and any Loan Document, shall be calculated for actual days elapsed on the basis of a 360-day year, which results in higher interest, charge or fee payments than if a 365-day year were used. In no event shall Borrower be obligated to pay Lender interest, charges or fees at a rate in excess of the highest rate permitted by applicable law from time to time in effect. 2.7 DEFAULT INTEREST. Any unpaid payments of principal or interest or the Terminal Payment with respect to any Loan shall bear interest from their respective maturities, whether scheduled or accelerated, at the Designated Rate for such Loan plus five percent (5.00%) per annum, until paid in full, whether before or 1 3 after judgment (the "Default Rate"), Borrower shall pay such interest on demand. 2.8 LATE CHARGES. If Borrower is late in making any payment of principal or interest or Terminal Payment under this Agreement by more than five (5) days, Borrower agrees to pay a late charge of five percent (5%) OF the installment due, but not less than fifty dollars ($50.00) for any one such delinquent payment. This late charge may be charged by Lender for the purpose of defraying the expenses incidental to the handling of such delinquent amounts. Borrower acknowledges that such late charge represents a reasonable sum considering all of the circumstances existing on the date of this Agreement and represents a fair and reasonable estimate of the costs that will be sustained by Lender due to the failure of Borrower to make timely payments. Borrower further agrees that proof of actual damages would be costly and inconvenient. Such late charge shall be paid without prejudice to the right of Lender to collect any other amounts provided to be paid or to declare a default under this Agreement or any of the other Loan Documents or from exercising any other rights and remedies of Lender. 2.9 LENDER'S RECORDS. Principal, Basic interest, Terminal Payments and all other sums owed under any Loan Document shall be evidenced by entries in records maintained by Lender for such purpose. Each payment on and any other credits with respect to principal, Basic Interest, Terminal Payments and all other sums outstanding under any Loan Document shall be evidenced by entries in such records. Absent manifest error, Lender's records shall be conclusive evidence thereof. 2.10 GRANT OF SECURITY INTERESTS. To secure the timely payment and performance of all of Borrower's Obligations to Lender, Borrower hereby grants to Lender continuing security interests in all of the Collateral. ARTICLE 3 - REPRESENTATIONS AND WARRANTIES Borrower represents and warrants that, except as set forth in the Supplement or any schedule of exceptions executed by the parties, as the Closing Date and each Borrowing Date: 3.1 DUE ORGANIZATION. Borrower is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation, and is duly qualified to conduct business and is in good sanding in each other jurisdiction in which its business is conducted or its properties are located, except where the failure to be so qualified would not reasonably be expected to have a Material Adverse Effect. 3.2 AUTHORIZATION, VALIDITY AND ENFORCEABILITY. The execution, delivery and performance of all Loan Documents executed by Borrower are within Borrower's powers, have been duly authorized, and are not in conflict with Borrower's articles or certificate of incorporation or by-laws, or the terms of any charter or other organizational document of Borrower, as amended from time to time; and all such Loan Documents constitute valid and binding Obligations of Borrower, enforceable in accordance with their terms (except as may be limited by bankruptcy, insolvency and similar laws affecting the enforcement of creditors' rights in general, and subject to general principles of equity). 3.3 COMPLIANCE WITH APPLICABLE LAWS. Borrower has complied with all licensing, permit and fictitious name requirements necessary to lawfully conduct the business in which it is engaged, and to any sales, leases or the furnishing of services by Borrower, including without limitation those requiring consumer or other disclosures, the noncompliance with which would have a material Adverse Effect. 3.4 NO CONFLICT. To its knowledge the execution, delivery, and performance by Borrower of all Loan Documents are not in conflict with any law, rule, regulation, order or directive, or any indenture, agreement, or undertaking to which Borrower is a party or by which Borrower may be bound or affected. 3.5 NO LITIGATION, CLAIMS OR PROCEEDINGS. There is no litigation, tax claim, proceeding or dispute pending, or, to the knowledge of Borrower, threatened against or affecting Borrower or its property, which may have a Material Adverse Effect. 3.6 CORRECTNESS OF FINANCIAL STATEMENTS. Borrower's financial statements which have been delivered to Lender fairly and accurately reflect Borrower's financial condition as of the latest date of such financial statements; and, since that date there has been no Material Adverse Change. 2 4 3.7 SUBSIDIARIES. Borrower has one wholly-owned subsidiary, Focused Research, a California corporation, engaged in advanced research and development, but otherwise is not a majority owner of or in a control relationship with any other business entity. 3.8 ENVIRONMENTAL MATTERS. Borrower has reviewed, or caused to be reviewed on its behalf, all Environmental Laws applicable to its business operations and materials handled therein, and as a result thereof has reasonably concluded that Borrower is in compliance with such Environmental Laws, except to the extent a failure to be in such compliance could not reasonably be expected to have a Material Adverse Effect on Borrower's operations, properties or financial condition. 3.9 NO EVENT OF DEFAULT. No Default or Event of Default currently exists. 3.10 FULL DISCLOSURE. None of the representations or warranties made by Borrower in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of Borrower in connection with the Loan Documents (including disclosure materials delivered by or on behalf of Borrower to Lender prior to the Closing date), contains any untrue statement of a material fact or omits any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. 3.11 SPECIFIC REPRESENTATIONS REGARDING COLLATERAL. (a) TITLE. Except for the security interests created by this Agreement and Permitted Liens, (i) Borrower is and will be the unconditional legal and beneficial owner of the Collateral, and (ii) the Collateral is genuine and subject to no Liens (other than Permitted Liens), rights or defenses of others. (b) LOCATION OF COLLATERAL. Other than mobile goods as defined in Division 9 of the California Uniform Commercial Code, as amended, Borrower's chief executive office, Records, Equipment, and any other offices or places of business are located at the address(es) shown on the Supplement as amended in writing by Borrower from time to time. (c) BUSINESS NAMES. Other than its full corporate name, Borrower has not conducted business using any trade names or fictitious business names except as shown on the Supplement. ARTICLE 4 - CONDITIONS PRECEDENT 4.1 CONDITIONS TO FIRST LOAN. The obligation of Lender to make its first Loan hereunder is, in addition to the conditions precedent specified in Section 4.2, subject to the fulfillment of the following conditions and to the receipt by Lender of the documents described below, duly executed and in form and substance satisfactory to Lender and its counsel: (a) RESOLUTIONS. A certified copy of the resolutions of the Board of Directors of Borrower authorizing the execution, delivery and performance by Borrower of the Loan Documents. (b) INCUMBENCY AND SIGNATURES. A certificate of the secretary of Borrower certifying the names of the officer or officers of Borrower authorized to sign the Loan Documents, together with a sample of the true signature of each such officer. (c) LEGAL OPINION. The opinion of legal counsel for Borrower as to such matters as Lender may reasonably request, including the matters covered by Sections 3.1, 3.2 and 3.4 hereof. (d) ARTICLES AND BY-LAWS. Certified copies of the Articles or Certificate of Incorporation and By-Laws of Borrower, as amended through the Closing Date. (e) THIS AGREEMENT. A counterpart of this Agreement and an initial Supplement, with all schedules completed and attached thereto, and disclosing such information as is acceptable to Lender. (f) FINANCING STATEMENTS. Filing copies (or other evidenced of filing satisfactory to Lender and its counsel) of such Uniform Commercial Code financing statements, collateral assignments and termination statements, with respect to the Collateral as Lender shall request. 3 5 (g) LIEN SEARCHES. Uniform Commercial Code lien, judgment, bankruptcy and tax lien searches of Borrower from such jurisdictions or offices as Lender may reasonably request, all as of a date reasonably satisfactory to Lender and its counsel. (h) GOOD STANDING CERTIFICATE. A Certificate of status or good standing of Borrower as of a date acceptable to Lender from the jurisdiction of Borrower's organization and any foreign jurisdictions where Borrower is or should be qualified to do business. (i) WARRANT. A warrant issued by Borrower to Lender exercisable for such number, type and class of shares of Borrower's capital stock, and for an initial exercise price as is specified in the Supplement. 4.2 CONDITIONS TO ALL LOANS. The obligation of Lender to make its initial Loan and each subsequent Loan is subject to the following further conditions precedent that: (a) NO DEFAULT. No Default or Event of Default has occurred and is continuing or will result from the making of such Loan, and the representations and warranties of Borrower contained in Article 3 of this Agreement and in any Supplement are true and correct as of the Borrowing Date of such Loan. (b) NO MATERIAL ADVERSE CHANGE. No Material Adverse Change shall have occurred since the date of the most recent financial statements submitted to Lender. (c) BORROWING REQUEST. Borrower shall have delivered to Lender a Borrowing Request for such Loan. (d) NOTE. Borrower shall have delivered an executed Note evidencing such Loan, in form and substance satisfactory to Lender. (e) SUPPLEMENTAL LIEN FILINGS. Borrower shall have executed and delivered such amendments or supplements to this Agreement and such financing statements as Lender may reasonably request in connection with the proposed Loan, in order to create or perfect or to maintain the perfection of Lender's Liens on the Collateral. (f) VCOC LIMITATION. Lender shall not be obligated to make any Loan under its Commitment if at the time of or after giving effect to the proposed Loan Lender would no longer qualify as: (A) a "venture capital operating company" under U.S. Department of Labor Regulations Section 2510.3-101(d), Title 29 of the Code of Federal Regulations, as amended; and (B) a "business development company" under the provisions of federal Investment Company Act of 1940, as amended; and (C) a "regulated investment company" under the provisions of the Internal Revenue Code of 1986, as amended. ARTICLE 5 - AFFIRMATIVE COVENANTS During the term of this Agreement and until its performance of all obligations to Lender, Borrower will: 5.1 NOTICE TO LENDER. Promptly give written notice to Lender of: (a) Any litigation or administrative or regulatory proceeding affecting Borrower where the amount claimed against Borrower is at the Threshold Amount or more, or where the granting of the relief requested could have a Material Adverse Effect. (b) Any substantial dispute which may exist between Borrower or any governmental or regulatory authority and which could have a Material Adverse Effect. (c) The occurrence of any Default or any Event of Default. (d) Any change in the location of any of Borrower's places of business or Collateral other than mobile goods as defined in Division 9 of the California Uniform Commercial Code, as amended, at least thirty (30) days in advance of such change, or of the establishment of any new, or the discontinuance of any existing, place of business. (e) Any dispute or default by Borrower or any other party under any joint venture, partnering, distribution, cross-licensing, strategic alliance, collaborative research or manufacturing, license or similar agreement which could reasonably be expected to have a Material Adverse Effect. (f) Any other matter which has resulted or might reasonably result in a Material Adverse Change. 4 6 5.2 FINANCIAL STATEMENTS. Deliver to each Lender or cause to be delivered to Lender, in form and detail satisfactory to Lender and Lender agrees to protect the confidentiality of the following financial information, which Borrower warrants shall be accurate and complete in all material respects: (a) MONTHLY FINANCIAL STATEMENTS. As soon as available but no later than thirty (30) days after the end of each month, Borrower's balance sheet as of the end of such period, and Borrower's income statement for such period and for that portion of Borrower's financial reporting year ending with such period, prepared and attested by a responsible financial officer of Borrower as being complete and correct and fairly presenting Borrower's financial condition and the results of Borrower's operations; provided, however, that after the effective date of the initial Qualified Public Offering Borrower's obligations hereunder to deliver financial statements shall apply only to those statements required to be filed by the Securities and Exchange Commission, to be provided no less frequently than quarterly. (b) YEAR-END FINANCIAL STATEMENTS. As soon as available but no later than ninety (90) days after and as of the end of each financial reporting year, a complete copy of Borrower's audit report, which shall include balance sheet, income statement, statement of changes in equity and statement of cash flows for such year, prepared and certified by an independent certified public accountant selected by Borrower and satisfactory to Lender (the "Accountant"); provided, however, that after the effective date of the initial Qualified Public Offering Borrower's obligations hereunder to deliver financial statements shall apply only to those statements required to be filed by the Securities and Exchange Commission, to be provided no less frequently than quarterly. The Accountant's certification shall not be qualified or limited due to a restricted or limited examination by the Accountant of any material portion of Borrower's records or otherwise. (c) COMPLIANCE CERTIFICATES. Simultaneously with the delivery of each set of financial statements referred to in paragraphs (a) and (b) above, a certificate of the chief financial officer of Borrower substantially in the form of Exhibit "C" to the Supplement (i) setting forth in reasonable detail any calculations required to establish whether Borrower is in compliance with any financial covenants or tests set forth in the Supplement, and (ii) stating whether any Default or Event of Default exists on the date of such certificate, and if so, setting forth the details thereof and the action which Borrower is taking or proposes to take with respect thereto. (d) GOVERNMENT REQUIRED REPORTS; PRESS RELEASES. Promptly after sending, issuing, making available, or filing, copies of all statements released to any news media for publication, all reports, proxy statements, and financial statements that Borrower sends or makes available to its stockholders, and, not later than five (5) days after actual filing or the date such filing was first due, all registration statements and reports that Borrower files or is required to file with the Securities and Exchange Commission, or any other governmental or regulatory authority. (e) OTHER INFORMATION. Such other statements, lists of property and accounts, budgets, forecasts, reports, or other information as Lender may from time to time reasonably request. 5.3 MANAGERIAL ASSISTANCE FROM LENDER. Permit Lender, as a "venture capital operating company" to participate in, and influence the conduct of management of Borrower through the exercise of "management rights," as such terms are defined in 29 C.F.R. Sections 2610.3-101(d), and; (a) Permit Lender to make available to Borrower, at no cost to Borrower, "significant managerial assistance", as defined in Section 2(a)(47) of the Investment Company Act of 1940, as amended, either in the form of: (i) consulting arrangements with Lender or any of its officers, directors, employees or affiliates, (ii) Borrower's allowing Lender to provide recommendations of prospective candidates for election to Borrower's Board of Directors, or (iii) Lender, at Borrower's request, seeking the services of third-party consultants to aid Borrower with respect to its management and operations; (b) Permit Lender to make available consulting and advisory services to officers of Borrower regarding Borrower's equipment acquisition and financing plans, and such other matters affecting the business, financial condition and prospects of Borrower as Lender shall reasonably deem relevant; and (c) If Lender reasonably believes that financial or other developments affecting Borrower have impaired or are likely to impair Borrower's ability to perform its obligations under this Agreement, permit Lender reasonable access to Borrower's management and/or 5 7 Board of Directors and opportunity to present Lender's views with respect to such developments. 5.4 EXISTENCE. Maintain and preserve Borrower's existence, present form of business, and all rights and privileges necessary or desirable in the normal course of its business; and keep all Borrower's property in good working order and condition, ordinary wear and tear excepted. 5.5 INSURANCE. Obtain and keep in force insurance in such amounts and types as is usual in the type of business conducted by Borrower, with insurance carriers having a policyholder rating of not less than "A" and financial category rating of Class VII in "Best's Insurance Guide," unless otherwise approved by Lender. Such insurance policies must be in form and substance satisfactory to Lender, and shall list Lender as an additional insured or loss payee, as applicable, on endorsement(s) in form reasonably acceptable to Lender. Borrower shall furnish to Lender such endorsements, and upon Lender's request, copies of any or all such policies. 5.6 ACCOUNTING RECORDS. Maintain adequate books, accounts and records, and prepare all financial statements in accordance with GAAP, and in compliance with the regulations of any governmental or regulatory authority having jurisdiction over Borrower or Borrower's business; and permit employees or agents of Lender at such reasonable times as Lender may request, at Borrower's expense, to inspect Borrower's properties, and to examine, and make copies and memoranda of Borrower's books, accounts and records. Such inspections shall occur no more frequently than once a year except after a Default. 5.7 COMPLIANCE WITH LAWS. Comply with all laws (including Environmental Laws), rules, regulations applicable to, and all orders and directives of any governmental or regulatory authority having jurisdiction over, Borrower or Borrower's business, and with all material agreements to which Borrower is a party, except where the failure to so comply would not have a Material Adverse Effect. 5.8 TAXES AND OTHER LIABILITIES. Pay all Borrower's obligations when due; pay all taxes and other governmental or regulatory assessments before delinquency or before any penalty attaches thereto, except as may be contested in good faith by the appropriate procedures and for which Borrower shall maintain appropriate reserves; and timely file all required tax returns. 5.9 SPECIAL COLLATERAL COVENANTS. (a) MAINTENANCE OF COLLATERAL; INSPECTION. Do all things reasonably necessary to maintain, preserve, protect and keep all Collateral in good working order and salable condition, ordinary wear and tear excepted, deal with the Collateral in all ways as are considered good practice by owners of like property, and use the Collateral lawfully and, to the extent applicable, only as permitted by Borrower's insurance policies. Maintain, or cause to be maintained, complete and accurate Records relating to the Collateral. Upon reasonable prior notice at reasonable times during normal business hours, Borrower hereby authorizes Lender's officers, employees, representatives and agents, at Lender's expense, to inspect the Collateral and to discuss the Collateral and the Records relating thereto with Borrower's officers and employees. (b) FINANCING STATEMENTS AND OTHER ACTIONS. Execute and deliver to Lender all financing statements, notices and other documents from time to time reasonably requested by Lender to maintain a first perfected security interest in the Collateral in favor of Lender; perform such other acts, and execute and deliver to Lender such additional conveyances, assignments, agreements and instruments, as Lender may at any time request in connection with the administration and enforcement of this Agreement or Lender's rights, powers and remedies hereunder. (c) LIENS. Not create, incur, assume or permit to exist any Lien or grant any other Person a negative pledge on any Collateral, except Permitted Liens. (d) DOCUMENTS OF TITLE. Not sign or authorize the signing of any financing statement or other document naming Borrower as debtor or obligor, or acquiesce or cooperate in the issuance of any bill of lading, warehouse receipt or other document or instrument of title with respect to any Collateral, except those negotiated to Lender, or those naming Lender as secured party. (e) DISPOSITION OF COLLATERAL. Not sell, transfer, lease or otherwise dispose of any Collateral. Unless Borrower grants to Lender a perfected first security interest in replacement collateral, acceptable to Lender, with a value equal to or greater than the Collateral being disposed of. 6 8 (f) CHANGE IN LOCATION OR NAME. Without at least 30 days' prior written notice to Lender: (a) not relocate any Collateral except as provided in Section 3.11(b) or Records, its chief executive office, or establish a place of business at a location other than as specified in the Supplement; and (b) not change its name, mailing address, location of Collateral except as provided in Section 3.11(b), or its legal structure. (g) DECALS, MARKINGS. At the request of Lender, firmly affix a decal, stencil or other marking to designated items of Equipment, indicating thereon the security interest of Lender. (h) AGREEMENT WITH REAL PROPERTY OWNER/LANDLORD. Obtain and maintain such acknowledgments, consents, waivers and agreements from the owner, lienholder, mortgagee and landlord with respect to any real property on which Equipment is located as Lender may require, all in form and substance satisfactory to Lender. ARTICLE 6 - NEGATIVE COVENANTS During the term of this Agreement and until the performance of all obligations to Lender, Borrower will not (without Lender's prior written consent which shall not be unreasonably withheld): 6.1 DIVIDENDS. Except after a Qualified Public Offering, pay any dividends or purchase, redeem or otherwise acquire or make any other distribution with respect to any of Borrower's capital stock, except (a) dividends or other distributions solely of capital stock of Borrower, (b) conversions of its securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange therefore, and (c) repurchases of stock from employees upon termination of employment under reverse vesting or similar repurchase plans. 6.2 CHANGES/MERGERS. Liquidate or dissolve, or enter into any consolidation, merger, partnership, joint venture or other combination except: (a) joint ventures, strategic alliances, licensing and similar arrangements customary in Borrower's industry, or (b) mergers or consolidations in which the surviving entity: (i) succeeds to all or substantially all of Borrower's business and assets to which this Agreement pertains; and (ii) agrees in writing to be bound by the Agreement, including all of the terms, rights and obligations thereto; and (iii) has a net worth balances and cash balances, each after giving effect to the merger or consolidation, greater than the net worth and cash of Borrower immediately prior to such merger or consolidation; or (c) the creation of additional direct or indirect subsidiaries of Borrower. 6.3 SALES OF ASSETS. Except for in connection with mergers or consolidations permitted under Section 6.2(b), sell, transfer, lease or otherwise dispose of any of Borrower's assets except for fair consideration and in the ordinary course of its business. 6.4 LOANS/INVESTMENTS. Make or suffer to exist any loans, guaranties, advances, or investments, except: (a) Accounts receivable in the ordinary course of Borrower's business; (b) Investments in domestic certificates of deposit issued by, and other domestic investments with financial institutions organized under the laws of the United States or a state thereof, having One Hundred Million Dollars ($100,000,000) in capital and a rating of at least "investment grade" or "A" by Moody's or any successor rating agency." (c) Investments in marketable obligations of the Untitled States of America and in open market commercial paper given the highest credit rating by a national credit agency and maturing not more than one year from the creation thereof, and (d) Temporary advances to cover incidental expenses to be incurred in the ordinary course of business. 6.5 TRANSACTION WITH RELATED PERSONS. Directly or indirectly enter into any transaction with any Affiliate except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower that would be obtained in an arm's length transaction with a non-Affiliate party and except for transactions with a Subsidiary that are upon fair and reasonable terms and transactions constituting permitted investments under Section 6.4. 7 9 6.6 OTHER BUSINESS. Engage in any material line of business other than the business Borrower conducts as of the Closing Date. 6.7 FINANCIAL COVENANTS. Fail to comply with any financial covenants or tests set forth in the Supplement. ARTICLE 7 - EVENTS OF DEFAULT 7.1 EVENTS OF DEFAULT; ACCELERATION. Upon the occurrence and during the continuation of any Default, the obligation of Lender to make any additional Loan shall be suspended. The occurrence of any of the following (each, as "Event of Default") shall terminate any obligation of Lender to make any additional Loan; and shall, at the option of Lender (1) make all sums of Basic Interest and principal, all Terminal Payments, and any Obligations and other amounts owing under any Loan Documents immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor or any other notices or demands, and (2) give Lender the right to exercise any other right or remedy provided by contract or applicable law; (a) Borrower shall fail to pay any principal, interest or Terminal Payment under this Agreement, or fail to pay any fees or other charges when due under any Loan Document, and such failure continues for five (5) Business Days or more after the same first becomes due; or an Event of Default as defined in any other Loan Document shall have occurred. (b) Any representation or warranty made, or financial statement, certificate or other document provided, by Borrower under any Loan Document shall prove to have been false or misleading in any material respect when made or deemed made herein. (c) Borrower shall fail to pay its debts generally as they become due or shall commence any Insolvency Proceeding with respect to itself; an involuntary Insolvency Proceeding shall be filed against Borrower, or a custodian, receiver, trustee, assignee for the benefit of creditors, or other similar official, shall be appointed to take possession, custody or control of the properties of Borrower, and such involuntary Insolvency Proceeding, petition or appointment is acquiesced to by Borrower or is not dismissed within sixty (60) days; or the dissolution or termination of the business of Borrower. (d) Borrower shall be in default beyond any applicable period of grace or cure under any other agreement involving the borrowing of money, the purchase of property, the advance of credit or any other monetary liability of any kind to Lender or to any Person, exceeding the Threshold Amount or aggregate indebtedness exceeding the sum of One Hundred Thousand Dollars ($100,000), which results in the acceleration of payment of such obligation in an amount in excess of the Threshold Amount. (e) Any governmental or regulatory authority shall take any judicial or administrative action, or any defined benefit pension plan maintained by Borrower shall have any unfunded liabilities, any of which, in the reasonable judgment of Lender, might have a Material Adverse Effect. (f) Except for a merger pursuant to Section 6.2, any sale, transfer or other disposition of all or a substantial or material part of the assets of Borrower, including without limitation to any trust or similar entity, shall occur. (g) Any judgment(s) singly or in the aggregate in excess of the Threshold Amount shall be entered against Borrower which remain unsatisfied, unvacated or unstayed pending appeal for ten (10) or more days after entry thereof. (h) Except as provided for in Section 6.2, any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission) of twenty-five percent (25%) or more of the outstanding shares of voting stock of Borrower. (i) Borrower shall fail to perform or observe any covenant contained in Article 6 of this Agreement. (j) Borrower shall fail to perform or observe any covenant contained in this Agreement or any other Loan Document (other than a covenant which is dealt with specifically elsewhere in this Article 7) and the breach of such covenant is not cured within 30 days after the sooner to occur of Borrower's receipt of notice of such breach from Lender or the date on which such breach first becomes known to any officer of Borrower, provided, however, that if such breach is not capable of being cured within such 30-day period and Borrower 8 10 timely notifies Lender of such fact and Borrower diligently pursues such cure, then the cure period shall be extended to the date requested by Borrower's notice but in no event more than 90 days from the initial breach; provided, further, that such additional 60-day opportunity to cure shall not apply in the case of any failure to perform or observe any covenant which has been the subject of a prior failure within the preceding 180 days or which is a willful and knowing breach by Borrower. 7.2 REMEDIES UPON DEFAULT. Upon the occurrence and during the continuance of an Event of Default, Lender shall be entitled to, at its option, exercise any or all of the rights and remedies available to a secured party under the Uniform Commercial Code or any other applicable law, and exercise any or all of its rights and remedies provided for in this Agreement and in any other Loan Document. The obligations of Borrower under this Agreement shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any Obligations is rescinded or must otherwise be returned by Lender upon, on account of, or in connection with, the insolvency, bankruptcy or reorganization of Borrower or otherwise, all as though such payment had not been made. 7.3 SALE OF COLLATERAL. Upon the occurrence and during the continuance of an Event of Default, Lender may sell all or any part of the Collateral, at public or private sales, to itself, a wholesaler, retailer or investor, for cash, upon credit or for future delivery, and at such price or prices as Lender may deem commercially reasonable. To the extent permitted by law, Borrower hereby specifically waives all rights of redemption and any rights of stay or appraisal which it has or may have under any applicable law in effect from time to time. Any such public or private sales shall be held at such times and at such place(s) as Lender may determine. In case of the sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by Lender until the selling price is paid by the purchaser, but Lender shall not incur any liability in case of the failure of such purchaser to pay for the Collateral and, in case of any such failure, such Collateral may be resold. Lender may, instead of exercising its power of sale, proceed to enforce its security interest in the Collateral by seeking a judgment or decree of a court of competent jurisdiction. 7.4 BORROWER'S OBLIGATIONS UPON DEFAULT. Upon the request of Lender after the occurrence and during the continuance of an event of Default, Borrower will: (a) Assemble and make available to Lender the Collateral at such place(s) as Lender shall reasonably designate, segregating all Collateral so that each item is capable of identification; and (b) Subject to the rights of any lessor, permit Lender, by Lender's officers, employees, agents and representatives, to enter any premises where any Collateral is located, to take possession of the Collateral, to complete the processing, manufacture or repair of any Collateral, and to remove the Collateral, or to conduct any public or private sale of the Collateral, all without any liability of Lender for rent or other compensation for the use of Borrower's premises. ARTICLE 8 - SPECIAL COLLATERAL PROVISIONS 8.1 PERFORMANCE OF BORROWER'S OBLIGATIONS. Without having any obligation to do so, upon reasonable prior notice to Borrower, Lender may perform or pay any obligation which Borrower has agreed to perform or pay under this Agreement, including, without limitation, the payment or discharge of taxes or Liens levied or placed on or threatened against the collateral. In so performing or paying, Lender shall determine the action to be taken and the amount necessary to discharge such obligations. Borrower shall reimburse Lender on demand for any amounts paid by Lender pursuant to this Section, which amounts shall constitute Obligations secured by the Collateral and shall bear interest from the date of demand at the Default Rate. 8.2 POWER OF ATTORNEY. For the purpose of protecting and preserving the Collateral and Lender's rights under this Agreement, Borrower hereby irrevocably appoints Lender, with full power of substitution, as its attorney-in-fact with full power and authority, after the occurrence and during the continuance of an Event of Default, to do any act which Borrower is obligated to do hereunder; to exercise such rights with respect to the Collateral as Borrower might exercise; to use such Equipment, Fixtures or other property as Borrower might use; to enter Borrower's premises; to give notice of Lender's security interest in, and to collect the Collateral; and to execute and file in Borrower's name any financing statements, amendments and continuation statements necessary or desirable to perfect or continue the perfection of 9 11 Lender's security interests in the Collateral. Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by virtue of this appointment. 8.3 AUTHORIZATION FOR LENDER TO TAKE CERTAIN ACTION. The power of attorney created in Section 8.2 is a power coupled with an interest and shall be irrevocable. The powers conferred on Lender hereunder are solely to protect its interests in the Collateral and shall not impose any duty upon Lender to exercise such powers. Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers and in no event shall Lender or any of its directors, officers, employees, agents or representatives be responsible to Borrower for any act or failure to act, except for gross negligence or willful misconduct. After the occurrence and during the continuance of an Event of Default, Lender may exercise this power of attorney without notice to or assent of Borrower, in the name of Borrower, or in Lender's own name, from time to time in Lender's sole discretion and at Borrower's expense, provided that such expenses are reasonable and actually incurred. To further carry out the terms of this Agreement, after the occurrence and during the continuance of an Event of Default, Lender may: (a) Sign and endorse any invoice, freight or express bills, bills of loading, storage or warehouse receipts; drafts, certificates and statements under any commercial or standby letter of credit relating to Collateral; or any other documents relating to the Collateral, including without limitation the Records. (b) Use or operate Collateral or any other property of Borrower for the purpose of preserving or liquidating Collateral. (c) File any claim or take any other action or proceeding in any court of law or equity or as otherwise deemed appropriate by Lender for the purpose of collecting any and all monies due or securing any performance to be rendered with respect to the Collateral. (d) Commence, prosecute or defend any suits, actions or proceedings or as otherwise deemed appropriate by Lender for the purpose of protecting or collecting the Collateral. (e) Prepare, adjust, execute, deliver and receive payment under insurance claims, and collect and receive payment of and endorse any instrument in payment of loss or returned premiums or any other insurance refunds or return, and apply such amounts at Lender's sole discretion toward repayment of the Obligation or replacement of the Collateral. 8.4 APPLICATION OF PROCEEDS. Any Proceeds and other monies or property received by Lender pursuant to the terms of this Agreement or any Loan Document may be applied by Lender first to the payment of expenses of collection, including without limitation reasonable attorney's fees, and then to the payment of the Obligations in such order of application as Lender may elect. 8.5 DEFICIENCY. If the Proceeds of any disposition of the Collateral are insufficient to cover all costs and expenses of such sale and the payment in full of all the Obligations, plus all other sums required to be expended or distributed by Lender, then Borrower shall be liable for any such deficiency. 8.6 LENDER TRANSFER. Upon the transfer of all or any part of the Obligations, Lender may transfer all or part of the Collateral and shall be fully discharged thereafter from all liability and responsibility with respect to such Collateral so transferred, and the transferee shall be vested with all the rights and powers of Lender hereunder with respect to such Collateral so transferred, but with respect to any Collateral not so transferred, Lender shall retain all rights and powers hereby given. 8.7 LENDER'S DUTIES. (a) Lender shall use reasonable care in the custody and preservation of any Collateral in its possession. Without limitation on other conduct which may be considered the exercise of reasonable care, Lender shall be deemed to have exercised reasonable care in the custody and preservation of such Collateral if such Collateral is accorded treatment substantially equal to that which Lender accords its own property, or taking any necessary steps to preserve any rights against any Person with respect to any Collateral. Under no circumstances shall Lender be responsible for any injury or loss to the Collateral, or any part thereof, arising from any cause beyond the reasonable control of Lender. (b) Neither Lender, nor any of its directors, officers, employees, agents, attorneys or any other person affiliated with or representing Lender shall be liable for any claims, demands, losses or damages, of 10 12 any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the ordinary negligence of Lender, or any of its directors, officers, employees, agents, attorneys or any other person affiliated with or representing Lender. 8.8 TERMINATION OF SECURITY INTERESTS. Upon the payment in full of the Obligations and if Lender has no further obligations under its Commitment, the security interest granted hereby shall terminate and all rights to the Collateral shall revert to Borrower. Upon any such termination, the Lender shall, at Borrower's expense, execute and deliver to Borrower such documents as Borrower shall reasonably request to evidence such termination. ARTICLE 9 - GENERAL PROVISIONS 9.1 NOTICES. Any notice given by any party under any Loan Document shall be in writing and personally delivered, sent by overnight courier, or United States mail, postage prepaid, or sent by facsimile, or other authenticated message, charges prepaid, to the other party's or parties' addresses shown on the Supplement. Each party may change the address or facsimile number to which notices, requests and other communications are to be sent by giving written notice of such change to each other party. Notice given by hand delivery shall be deemed received on the date delivered; if sent by overnight courier, on the next business day after delivery to the courier service; if by first class mail, on the third business day after deposit in the U.S. Mail; and if by facsimile, on the date of transmission. 9.2 BINDING EFFECT. The Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns; provided, however, that Borrower may not assign or transfer Borrower's rights or obligations under any Loan Document, except to a person or entity into which it has merged or which has otherwise succeeded to all or substantially all of its business and assets to which this Agreement pertains, by merger reorganization or otherwise, in accordance with Section 6.2 without Lender's prior written consent. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Lender's rights and obligations under the Loan Documents. In connection with any of the foregoing, Lender may disclose all documents and information which Lender now or hereafter may have relating to the Loans, Borrower, or its business; provided that any person who receives such information shall have agreed in writing in advance to maintain the confidentiality of such information on terms reasonably acceptable to Borrower. 9.3 NO WAIVER. Any waiver, consent or approval by Lender of any Event of Default or breach of any provision, condition, or covenant of any Loan Document must be in writing and shall be effective only to the extent set forth in writing. No waiver of any breach or default shall be deemed a waiver of any later breach or default of the same or any other provision of any Loan Document. No failure or delay on the part of Lender in exercising any power, right, or privilege under any Loan Document shall operate as a waiver thereof, and no single or partial exercise of any such power, right, or privilege shall preclude any further exercise thereof or the exercise of any other power, right or privilege. Lender has the right at its sole option to continue to accept interest and/or principal payments due under the Loan Documents after default, and such acceptance shall not constitute a waiver of said default or an extension of the Maturity Date unless Lender agrees otherwise in writing. 9.4 RIGHTS CUMULATIVE. All rights and remedies existing under the Loan Documents are cumulative to, and not exclusive of, any other rights or remedies available under contract or applicable law. 9.5 UNENFORCEABLE PROVISIONS. Any provision of any Loan Document executed by Borrower which is prohibited or unenforceable in any jurisdiction, shall be so only as to such jurisdiction and only to the extent of such prohibition or unenforceability, but all the remaining provisions of any such Loan Document shall remain valid and enforceable. 9.6 ACCOUNTING TERMS. Except as otherwise provided in this Agreement, accounting terms and financial covenants and information shall be determined and prepared in accordance with GAAP. 9.7 INDEMNIFICATION; EXCULPATION. Borrower shall pay and protect, defend and indemnify Lender and Lender's employees, officers, directors, shareholders, affiliates, correspondents, agents and representatives (other than Lender, collectively "Agents") against, and hold Lender and each such Agent harmless from, all claims, actions, proceedings, liabilities, damages, losses, expenses (including, without limitation, attorneys' fees and costs) and other amounts incurred by Lender and each such Agent, arising from (i) the 11 13 matters contemplated by this Agreement or any other Loan Documents or (ii) any contention that Borrower has filed to comply with any law, rule, regulation, order or directive applicable to Borrower's business; PROVIDED, HOWEVER, that this indemnification shall not apply to any of the foregoing incurred solely as the result of Lender's or any Agent's gross negligence or willful misconduct. This indemnification shall survive the payment and satisfaction of all of Borrower's Obligations to Lender. 9.8 REIMBURSEMENT. Borrower shall reimburse Lender for all reasonable costs and expenses actually incurred, including without limitation reasonable attorneys' fees and disbursements expended or incurred by Lender in any arbitration, mediation, judicial reference, legal action or otherwise in which Lender obtains a favorable judgement, award or other similar favorable outcome and in connection with (a) the preparation and negotiation of the Loan Documents, (b) the amendment and enforcement of the Loan Documents, including without limitation during any workout, attempted workout, and/or in connection with the rendering or legal advice as to Lender's rights, remedies and obligations under the loan Documents, (c) collecting any sum which becomes due Lender under any Loan Document, (d) any proceeding for declaratory relief, any counterclaim to any proceeding, or any appeal or (e) the protection, preservation or enforcement of any rights of Lender. For the purposes of this section, attorney's fees shall include, without limitation, fees incurred in connection with the following; (1) contempt proceedings; (12) discovery; (3) any motion, proceeding or other activity of any kind in connection with an Insolvency Proceeding; (4) garnishment, levy, and debtor and third party examinations; and (5) postjudgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment. All of the foregoing costs and expenses shall be payable upon demand by Lender, and if not paid within forty-five (45) days of presentation of invoices shall bear interest at the highest applicable Default Rate. 9.9 EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts which, when taken together, shall constitute but one agreement. 9.10 ENTIRE AGREEMENT. The Loan Documents are intended by the parties as the final expression of their agreement and therefore contain the entire agreement between the parties and supersede all prior understandings or agreements concerning the subject matter hereof. This Agreement may be amended only in a writing signed by Borrower and Lender. 9.11 GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY CALIFORNIA LAW. 9.12 WAIVER OF JURY TRIAL. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OTHERWISE. BORROWER AND 12 14 LENDER EACH AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY, WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. ARTICLE 10 - DEFINITIONS The definitions appearing in this Agreement or any Supplement shall be applicable to both the singular and plural forms of the defined terms: "AFFILIATE" means any Person which directly or indirectly controls, is controlled by, or is under common control with Borrower. "Control," "controlled by" and "under common control with" mean direct or indirect possession of the power to direct or cause the direction of management or policies (whether through ownership of voting securities, by contract or otherwise); provided, that control shall be conclusively presumed when any Person or affiliated group directly or indirectly owns five percent (5%) or more of the securities having ordinary voting power for the election of directors of a corporation. "AGREEMENT" means this Loan and Security Agreement and each Supplement thereto, as each may be amended or supplemented from time to time. "BANKRUPTCY CODE" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. Section 191, et seq.), as amended. "BASIC INTEREST" means the fixed rate of interest payable on the outstanding balance of each Loan at the applicable Designated Rate. "BORROWING DATE" means the Business Day on which the proceeds of a Loan are disbursed by Lender. "BORROWING REQUEST" means a written request from Borrower in substantially the form of Exhibit "B" to the Supplement, requesting the funding of one or more Loans on a particular Business Date. "BUSINESS DAY" means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or San Francisco are authorized or required by law to close. "CLOSING DATE" means the date of this Agreement. "COLLATERAL" means all Borrower's Equipment now owned or hereafter acquired or arising, wherever located, and whether held by Borrower or any third party, and all proceeds and products thereof, including all insurance and condemnation proceeds ("Proceeds"), and all monies now or at any time hereafter in the possession or under the control of Lender or a bailee or affiliate of Lender, including any cash collateral in any cash collateral or other account, and all Records. "COMMITMENT" means the obligation of Lender to make Loans to Borrower up to the aggregate principal amount set forth in the Supplement. "DEFAULT" means an event which with the giving of notice, passage of time, or both would constitute an Event of Default. "DEFAULT RATE" is defined in Section 2.7. "DESIGNATED RATE" means the rate of interest per annum described in the Supplement as being applicable to an outstanding Loan from time to time. "ENVIRONMENTAL LAWS" means all federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authorities, each case relating to environmental, health, or safety matters. "EQUIPMENT" means all of Borrower's specific items of equipment described on Schedule 1 attached to this Agreement and incorporated herein by this reference (as such Schedule 1 may be amended or supplemented from time to time), and all such property which is or is to become fixtures on real property, and all improvements, replacements, accessions and additions thereto, wherever located, and all proceeds thereof arising from the sale, lease, rental or other use or 13 15 disposition of any such property, including all rights to payment with respect to insurance or condemnation, returned premiums, or any cause of action relating to any of the foregoing. "EVENT OF DEFAULT" means any event described in Section 7.1. "FIXTURES" means all items of Equipment that are so related to the real property upon which they are located that an interest in them arises under real property law, and improvements, replacements, parts, accessions and additions thereto, and substitutions therefor. "GAAP" means generally accepted accounting principles and practices consistent with those principles and practices promulgated or adopted by the Financial Accounting Standards Board and the Board of the American Institute of Certified Public Accountants, their respective predecessors and successors. Each accounting term used but not otherwise expressly defined herein shall have the meaning given it by GAAP. "INSOLVENCY PROCEEDING" means (a) any case, action or proceeding before any court or other governmental authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors, composition, marshalling of assets for creditors, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "LIEN" means any voluntary or involuntary security interest, mortgage, pledge, claim, charge, encumbrance, title retention agreement, or third party interest, covering all or any part of the property of Borrower or any other Person. "LOAN" means an extension of credit by Lender under this Agreement. "LOAN DOCUMENTS" means individually and collectively, this Loan and Security Agreement, each Supplement, each Note, and any other security or pledge agreement(s), any Warrants issued by Borrower in connection with this Agreement, and all other contracts, instruments, addenda and documents executed in connection with this Agreement or the extensions of credit which are the subject of this Agreement. "MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, or condition (financial or otherwise) of Borrower; (b) a material impairment of the ability of Borrower to perform under any Loan Document; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against Borrower of any Loan Document. "MATURITY DATE" means, with regard to a Loan, the earlier of (i) its maturity by reason of acceleration, or (ii) its stated maturity date; and is the date on which payment of all outstanding principal, accrued interest, and the Terminal Payment with respect to such Loan is due. "NOTE" means a promissory note substantially in the form attached to the Supplement as Exhibit "A", executed by Borrower evidencing each Loan. "OBLIGATIONS" means all debts, obligations and liabilities of Borrower to Lender currently existing or now or hereafter made, incurred or created under, pursuant to or in connection with this Agreement, whether voluntary or involuntary and however arising or evidenced, whether direct or acquired by Lender by assignment or succession, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Borrower may be liable individually or jointly, or whether recovery upon such debt may be or become barred by any statute of limitations or otherwise unenforceable; and all renewals, extensions and modifications thereof; and all attorneys' fees and costs incurred by Lender in connection with the collection and enforcement thereof as provided for in any Loan Document. "PERMITTED LIEN" means (a) Involuntary Liens which, in the aggregate, would not have a Material Adverse Effect and which in any event would not exceed the Threshold Amount; (b) Liens for current taxes or other governmental or regulatory assessments which are not delinquent, or which are contested in good faith by the appropriate procedures and for which appropriate reserves are maintained; 14 16 (c) Liens in favor of Lender; (d) materialmen's, mechanics', repairmen's, employees' or other like Liens arising in the ordinary course of business and which are not delinquent for more than 45 days or are being contested in good faith by appropriate proceedings; (e) any judgment, attachment or similar Lien, unless the judgment it secures has not been discharged or execution thereof effectively stayed and bonded against pending appeal within 30 days of the entry thereof; and (f) Any Liens existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents. "PERSON" means any individual or entity. "QUALIFIED PUBLIC OFFERING" means the closing of a firmly underwritten public offering of Borrower's common stock with aggregate proceeds of not less than $20,000,000 (prior to underwriting expenses and commissions). "RECORDS" means all Borrower's computer programs, software, hardware, source codes and data processing information, all written documents, books, invoices, ledger sheets, financial information and statements, and all other writings concerning Equipment. "RELATED PERSON" means any Affiliate of Borrower, or any officer, employee, director or equity security holder of Borrower or any Affiliate. "TERMINAL PAYMENT" means, with respect to each Loan, an amount payable on the Maturity Date of such Loan in an amount equal to that percentage of the original principal amount of such Loan specified in the Supplement. "TERMINAL DATE" has the meaning specified in the Supplement. "THRESHOLD AMOUNT" has the meaning specified in the Supplement. "UCC" means the Uniform Commercial Code as enacted in the applicable jurisdiction, in effect on the Closing Date and as amended from time to time. 15 17 SUPPLEMENT TO THE LOAN AND SECURITY AGREEMENT (EQUIPMENT) DATED AS OF FEBRUARY 9, 1999 BETWEEN NEW FOCUS, INC. ("BORROWER") AND VENTURE LENDING & LEASING II, INC. ("LENDER") ________________________________________________________________________________ This is a Supplement identified in the document entitled Loan and Security Agreement (Equipment) dated as of February 9, 1999 between Borrower and Lender. All capitalized terms used in this Supplement and not otherwise defined in this Supplement have the meanings ascribed to them in Section 10 of the Loan and Security Agreement, which is incorporated in its entirety into this Supplement. In the event of any inconsistency between the provisions of that document and this Supplement, this Supplement is controlling. Execution of this Supplement by the Lender and Borrower shall constitute execution of the Loan and Security Agreement. In addition to the provisions of the Loan and Security Agreement, the parties agree as follows: 1. - ADDITIONAL DEFINITIONS: "COMMITMENT": Lender commits to make Loans to Borrower up to the aggregate, original principal amount of Two Million Dollars ($2,000,000.00). "DESIGNATED RATE": The Designated Rate is eight and 40/100 percent (8.40%) per annum. "TERMINAL PAYMENT": Each Terminal Payment shall be an amount equal to ten percent (10%) of the original principal amount of the associated Loan. "TERMINATION DATE": The Termination Date is the earlier of (a) the date Lender may terminate making Loans or extending other credit pursuant to the rights of Lender under Article 7 of the Agreement, or (b) December 31, 1999. "THRESHOLD AMOUNT": Fifty Thousand Dollars ($50,000.00). 2. - Additional Terms and Conditions: A. ISSUANCE OF WARRANT TO LENDER. As additional consideration for the making of the Loans under the Agreement, upon the making of, and as a condition to, the initial Loan, Lender shall be entitled to receive a warrant to purchase 35,000 shares of Series D Preferred Stock of Borrower ("Warrant Shares") with an aggregate initial exercise price of $140,000 and a per share exercise price of $4.00 which is determined on the basis of the per share price of the preferred stock issued in the most recent round of venture capital equity financing prior to the Closing Date. The warrant under this Agreement shall be in substantially the form attached hereto as Exhibit "D"; shall be transferable by Lender, subject to compliance with applicable securities laws; shall expire not earlier than December 31, 2004; and shall include piggy-back registration rights, "net issuance" provisions, and anti-dilution protections reasonably satisfactory to Lender and its counsel. Page 1 18 B. LIMITATION ON REIMBURSEMENT OF DOCUMENTATION COSTS. Notwithstanding anything to the contrary in Section 9.8 of the Loan and Security Agreement, Borrower's obligation to reimburse Lender its attorneys' fees and costs of documenting this transaction shall not exceed $1,000.00. C. LIMITATION ON EQUIPMENT LOANS. Each Loan shall be in an amount not to exceed one hundred percent (100%) of the amount paid or payable by Borrower to a non-affiliated manufacturer, vendor or dealer for an item of equipment as shown on an invoice therefor (excluding any commissions and any portion of the payment which relates to the servicing of the equipment and sales taxes payable by Borrower upon acquisition, and delivery charges). Used equipment purchased by Borrower may be financed at the depreciated value of the equipment purchase price (excluding any commissions and any portion of the payment which relates to the servicing of the equipment and sales taxes payable by Borrower upon acquisition, and delivery charges). Lender has the right to approve individual items of Equipment for funding. Each Loan requested by Borrower to be made on a single Business Day shall be for a minimum principal amount equal to $50,000 except to the extent the remaining Commitment is a lesser amount. 3. - ADDITIONAL REPRESENTATIONS: Borrower represents and warrants that as of the Closing Date: Its chief executive office is located at: 2630 Walsh Avenue, Santa Clara, CA 95051-0905 Its Equipment is located at: Same Its Records are located at: Same In addition to its chief executive office, Borrower maintains offices or operates its business at the following locations: Madison, WI (Fab Facility) Other than its full corporate name and the name of its fully-owed subsidiary Focused Research, Borrower has conducted business using the following trade names or fictitious business names: None 4. - ADDITIONAL LOAN DOCUMENTS: Schedule 1 to the Loan and Security Agreement Form of Note Exhibit "A" Form of Borrowing Request Exhibit "B" Form of Compliance Certificate Exhibit "C" Form of Warrant Exhibit "D" Page 2 19 IN WITNESS WHEREOF, the parties have executed this Supplement as of the date first above written. BORROWER: LENDER: NEW FOCUS, INC. VENTURE LENDING & LEASING II, INC. By: /s/ KENNETH E. WESTRICK By: /s/ SALVADOR O. GUTIERREZ --------------------------- --------------------------- Name: KENNETH E. WESTRICK Name: SALVADOR O. GUTIERREZ --------------------------- --------------------------- Title: President & CEO Title: President -------------------------- -------------------------- Address for Notices: Attn: Chief Financial Officer Attn: Chief Financial Officer 2630 Walsh Avenue 2010 North First Street, Suite 310 Santa Clara, Ca 95051 San Jose, CA 95131 Fax # 408-980-8883 Fax # (408) 436-8625 Page 3 20 EXHIBIT A [Note No. X-XXX] FORM OF PROMISSORY NOTE $[Face Amount of Note] [Note Date] San Jose, California The undersigned ("Borrower") promises to pay to the order of VENTURE LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at 2010 North First Street, Suite 310, San Jose, California 95131, or at such other place as Lender may designate in writing, in lawful money of the United States of America, the principal sum of _____________________ Dollars ($______), with Basic Interest thereon from the date until maturity, whether scheduled or accelerated, at a fixed rate per annum of eight and 40/100 percent (8.40%), and a Terminal Payment in the sum of [10% of face amount] Dollars ($_______) payable on the Maturity Date. This Note is one of the Notes referred to in, and is entitled to all the benefits of, a Loan and Security Agreement dated [Agreement Date], between Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise defined herein shall have the meaning set forth in the Loan Agreement. The Loan Agreement contains provisions for the acceleration of the maturity of this Note upon the happening of certain stated events. Principal of and interest on this Note shall be payable as follows: On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance, on the outstanding principal balance of this Note at the Designated Rate for the period from the Borrowing Date through [THE LAST DAY OF THE SAME MONTH]; and (ii) a first (1st) amortization installment of principal and Basic Interest in the amount of _______________, in advance for the month of [first full month after Borrowing Date] and (iii) a 36th [last] amortization installment of principal and Basic Interest in the amount of $________________, in advance for the month [date of last regular amortization payment]. Commencing of the first day of the second full month after the Borrowing Date, and continuing on the first day of each consecutive month thereafter, principal and Basic Interest shall be payable, in advance, in [thirty-three (33) equal consecutive installments of ___________________ Dollars ($________) each, with a [thirty-fourth (34th)] installment equal to the entire unpaid principal balance and accrued Basic Interest on ___________, 2000_. The Terminal Payment amount shall be payable on [ONE MONTH LATER], 200_. Any unpaid payments of principal or interest on this Note shall bear interest from their respective maturities, whether scheduled or accelerated, at a rate per annum equal to the Default Rate. Borrower shall pay such interest on demand. Interest, charges and fees shall be calculated for actual days elapsed on the basis of a 360-day year, which results in higher interest, charge or fee payments than if a 365-day year were used. In no event shall Borrower be obligated to pay interest, charges or fees at a rate in excess of the highest rate permitted by applicable law from time to time in effect. If Borrower is late in making any payment under this Note by more than five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of the installment due, but not less than fifty dollars ($50.00) for any one such delinquent payment. This late charge may be charged by Lender for the purpose of defraying the expenses 21 incidental to the handling of such delinquent amounts. Borrower acknowledges that such late charge represents a reasonable sum considering all of the circumstances existing on the date of this Note and represents a fair and reasonable estimate of the costs that will be sustained by Lender due to the failure of Borrower to make timely payments. Borrower further agrees that proof of actual damages would be costly and inconvenient. Such late charge shall be paid without prejudice to the right of Lender to collect any other amounts provided to be paid or to declare a default under this Note or any of the other Loan Documents or from exercising any other rights and remedies of Lender. This Note shall be governed by, and construed in accordance with, the laws of the State of California. NEW FOCUS, INC. By: ___________________________________ Name: _________________________________ Its: __________________________________ 22 EXHIBIT B BORROWING REQUEST _______________, ___ Venture Lending & Leasing II, Inc. 2010 North First Street, Suite 310 San Jose, CA 95131 Re: NEW FOCUS, INC. Gentlemen: Reference is made to the two Loan and Security Agreement dated as of _________ (as the same have been and may be amended from time to time, the "Loan Agreement", the capitalized terms used herein as defined therein), between Venture Lending & Leasing II, Inc. on one hand and New Focus, Inc. (the "Company") on the other. The undersigned is an Officer of the Company, authorized to borrow under The Loan Agreement, and hereby requests Loan under the Loan Agreement, and in that connection certifies as follows: 1. The aggregate amount of the proposed Loan is $________. The Business Day of the proposed Loan is ________, 199X. 2. As of this date, no Default or Event of Default has occurred and is continuing, or will result from the making of the proposed Loan, and the representations and warranties of the Company contained in the Loan Agreement are true and correct. 3. No Material Adverse Change has occurred since the date of the most recent financial statements submitted to you by the Company. The Company agrees to notify you promptly before the funding of the Loan if any of the matters to which I have certified above shall not be true and correct on the Borrowing Date. Very Truly Yours, By: ___________________________________ Name: _________________________________ Its: __________________________________ 23 EXHIBIT C COMPLIANCE CERTIFICATE Venture Lending & Leasing II, Inc. 2010 North First Street, Suite 310 San Jose, CA 95131 Re:_________________ Gentlemen: Reference is made to the two Loan and Security Agreement dated as of ______ (as the same have been and may be amended from time to time, the "Loan Agreement", the capitalized terms used herein as defined therein), between Venture Lending & Leasing II, Inc. on one hand and __________ (the "Company") on the other. The undersigned authorized representative of the Company hereby certifies that in accordance with the terms and conditions of the Loan Agreement, the Company is in complete compliance for the period ending _____ of all required conditions and terms except as noted below. Attached herewith are the required documents supporting the above certification. The representative further certifies that these are prepared in accordance with Generally Accepted Accounting Principles and are consistent from one period to the next except as explained below. Indicate compliance status by circling Yes/No under "Complies"
REPORTING REQUIREMENT REQUIRED COMPLIES - --------------------- -------- -------- Interim Financial Statements Monthly within 45 days YES/NO Audited Financial Statements FYE within 90 days YES/NO FINANCIAL COVENANTS REQUIRED COMPLIES - ------------------- -------- --------
REQUIRED EXPLANATIONS: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Very Truly Yours, By: ____________________ Name: ____________________ Its: ____________________ 24 EXHIBIT D THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. WARRANT TO PURCHASE 35,000 SHARES OF SERIES D PREFERRED STOCK OF NEW FOCUS, INC. (Void after December 31, 2004) This certifies that VENTURE LENDING & LEASING II, INC., a Maryland corporation, or assigns (the "Holder"), for value received, is entitled to purchase from NEW FOCUS, INC., a California corporation (the "Company"), 35,000 fully paid and nonassessable shares of the Company's Series D Preferred Stock ("Preferred Stock") for cash at a price of $4.00 per share (the "Stock Purchase Price") at any time or from time to time up to and including 5:00 p.m. (Pacific time) on December 31, 2004 (the "Expiration Date"), upon surrender to the Company at its principal office at 2630 Walsh Avenue, Santa Clara, CA 95051-0905, (or at such other location as the Company may advise Holder in writing) of this Warrant properly endorsed with the Form of Subscription attached hereto duly filled in and signed and upon payment in cash or by check of the aggregate Stock Purchase Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof. The Stock Purchase Price and the number of shares purchasable hereunder are subject to adjustment as provided in Section 4 of this Warrant. This Warrant is subject to the following terms and conditions: 1. Exercise; Issuance of Certificates; Payments for Shares. (a) Unless an election is made pursuant to clause (b) of this Section 1, this Warrant shall be exercisable at the option of the Holder, at any time or from time to time, on or before the Expiration Date for all or any portion of the shares of Preferred Stock (but not for a fraction of a share) which may be purchased hereunder for the Stock Purchase Price multiplied by the number of shares to be purchased. In the event, however, that pursuant to the Company's Articles of Incorporation, as amended, an event causing automatic conversion of the Company's Preferred Stock shall have occurred prior to the exercise of this Warrant, in whole or in part, then this Warrant shall be exercisable for the number of shares of Common Stock of the Company into which the Preferred Stock not purchased upon any prior exercise of the Warrant would have been so converted (and, where the context requires, reference to "Preferred Stock" shall be deemed to include such Common Stock). The Company agrees that the shares of Preferred Stock purchased under this Warrant shall be and are deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which the form of subscription shall have been delivered and payment made for such shares. Subject to the provisions of Section 2, certificates for the shares of Preferred Stock so purchased, together with any other securities or property to which the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company's expense within a reasonable time after the rights represented by this Warrant have been so exercised. Except as provided in clause (b) of this Section 1, in case of a purchase of less than all the shares which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor for the balance of the shares purchasable under the Warrant surrendered upon such purchase to the Holder hereof within a reasonable time. Each stock certificate so delivered shall be in such denominations of 25 Preferred Stock as may be requested by the Holder hereof and shall be registered in the name of such Holder or such other name as shall be designated by such Holder, subject to the limitations contained in Section 2. (b) The Holder, in lieu of exercising this Warrant by the payment of the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect, at any time on or before the Expiration Date, to receive that number of shares of Preferred Stock equal to the quotient of: (i) the difference between (A) the Per Share Price (as hereinafter defined) of the Preferred Stock, less (B) the Stock Purchase Price then in effect, multiplied by the number of shares of Preferred Stock the Holder would otherwise have been entitled to purchase hereunder pursuant to clause (a) of this Section 1 (or such lesser number of shares as the Holder may designate in the case of a partial exercise of this Warrant); over (ii) the Per Share Price. Election to exercise under this section (b) may be made by delivering a signed form of subscription to the Company via facsimile, to be followed by delivery of the warrant. (c) For purposes of clause (b) of this Section 1, "Per Share Price" means the product of: (i) the greater of (A) the closing price of the Company's Common Stock as quoted by NASDAQ or listed on any exchange, whichever is applicable, as published in the Western Edition of the Wall Street Journal for the trading day immediately prior to the date of the Holder's election hereunder or, (B) if applicable at the time of or in connection with the exercise under clause (b) of this Section 1, the gross sales price of one share of the Company's Common Stock pursuant to a registered public offering or that amount which shareholders of the Company will receive for each share of Common Stock pursuant to a merger, reorganization or sale of assets; and (ii) that number of shares of Common Stock into which each share of Preferred Stock is convertible. If the Company's Common Stock is not quoted by NASDAQ or listed on an exchange, the Per Share Price of the Preferred Stock (or the equivalent number of shares of Common Stock into which such Preferred Stock is convertible) shall be the price per share which the Company would obtain from a willing buyer for shares sold by the Company from authorized but unissued shares as such price shall be agreed upon by the Holder and the Company or, if agreement cannot be reached within ten (10) business days of the Holder's election hereunder, as such price shall be determined by a panel of three (3) appraisers, one (1) to be chosen by the Company, one (1) to be chosen by the Holder and the third to be chosen by the first two (2) appraisers. If the appraisers cannot reach agreement within 30 days of the Holder's election hereunder, then each appraiser shall deliver its appraisal and the appraisal which is neither the highest nor the lowest shall constitute the Per Share Price. In the event either party fails to choose an appraiser within 30 days of the Holder's election hereunder, then the appraisal of the sole appraiser shall constitute the Per Share Price. Each party shall bear the cost of the appraiser selected by such party and the cost of the third appraiser shall be borne one-half by each party. In the event either party fails to choose an appraiser, the cost of the sole appraiser shall be borne one-half by each party. 2. Limitation on Transfer. (a) The Warrant and the Preferred Stock shall not be transferable except upon the conditions specified in this Section 2, which conditions are intended to insure compliance with the provisions of the Securities Act of 1933, as amended (the "Securities Act"). Each holder of this Warrant or the Preferred Stock issuable hereunder will cause any proposed transferee of the Warrant or Preferred Stock to agree to take and hold such securities subject to the provisions and upon the conditions specified in this Section 2. (b) Each certificate representing (i) this Warrant, (ii) the Preferred Stock, (iii) shares of the Company's Common Stock issued upon conversion of the Preferred Stock and (iv) any other securities issued in respect to the Preferred Stock or Common Stock issued upon conversion of the Preferred Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of this Section 2 or unless such securities have been registered under the Securities Act or sold under Rule 144) be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable state securities laws): THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR 2 26 THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. (c) The Holder of this Warrant and each person to whom this Warrant is subsequently transferred represents and warrants to the Company (by acceptance of such transfer) that it will not transfer the Warrant (or securities issuable upon exercise hereof unless a registration statement under the Securities Act was in effect with respect to such securities at the time of issuance thereof) except pursuant to (i) an effective registration statement under the Securities Act, (ii) Rule 144 under the Securities Act (or any other rule under the Securities Act relating to the disposition of securities), or (iii) an opinion of counsel, reasonably satisfactory to counsel for the Company, that an exemption from such registration is available. 3. Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees that all shares of Preferred Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with respect to the issue thereof (other than taxes in respect of transfer occurring contemporaneously or as otherwise specified herein). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of share of authorized but unissued Preferred Stock, or other securities and property, when and as required to provide for the exercise of the rights represented by this Warrant. The Company will take all such action as may be necessary to assure that such shares of Preferred Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the Preferred Stock may be listed. The Company will not take any action which would result in any adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i) if the total number of shares of Preferred Stock issuable after such action upon exercise of all outstanding warrants, together with all shares of Preferred Stock then outstanding and all shares of Preferred Stock then issuable upon exercise of all options and upon the conversion of all convertible securities then outstanding, would exceed the total number of shares of Preferred Stock then authorized by the Company's Articles of Incorporation, or (ii) if the total number of shares of Common Stock issuable after such action upon the conversion of all such shares of Preferred Stock together with all shares of Common Stock then outstanding and then issuable upon exercise of all options and upon the conversion of all convertible securities then outstanding would exceed the total number of shares of Common Stock then authorized by the Company's Articles of Incorporation. 4. Adjustment of Stock Purchase Price Number of Shares. The Stock Purchase Price and the number of shares purchasable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 4. Upon each adjustment of the Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price resulting from such adjustment, the number of shares obtained by multiplying the Stock Purchase Price in effect immediately prior to such adjustment by the number of shares purchasable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Stock Purchase Price resulting from such adjustment. 4.1 Subdivision or Combination of Stock. In case the Company shall at any time subdivide its outstanding shares of Preferred Stock into a greater number of shares, the Stock Purchase Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Preferred Stock of the Company shall be combined into a smaller number of shares, the Stock Purchase Price in effect immediately prior to such combination shall be proportionately increased. 4.2 Dividends in Preferred Stock, Other Stock, Property, Reclassification. If at any time or from time to time the holders of Preferred Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefor, (a) Preferred Stock, or any shares of stock or other securities whether or not such securities are at any time directly or indirectly convertible into or exchangeable for Preferred Stock, or any rights or 3 27 options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or (b) any cash paid or payable otherwise than as a cash dividend, or (c) Preferred Stock or other or additional stock or other securities or property (including cash) by way of spinoff, split-up, reclassification, combination of shares or similar corporate rearrangement, (other than shares of Preferred Stock issued as a stock split, adjustments in respect of which shall be covered by the terms of Section 4.1 above). Then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Preferred Stock receivable thereupon, and without payment of any additional consideration therefore, the amount of stock and other securities and property (including cash in the cases referred to in clauses (b) and (c) above) which such Holder would hold on the date of such exercise had he been the holder of record of such Preferred Stock as of the date on which holders of Preferred Stock received or became entitled to receive such shares and/or all other additional stock and other securities and property. 4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Preferred Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Preferred Stock (Corporate Event), then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Preferred Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Preferred Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, provided, however, in the event that 1) the effective price of such Corporate Event is in excess of the exercise price hereof effective at the time of the Corporate Event, 2) the consideration received in such Corporate Event is cash or shares that are of a publicly traded company listed on a national market or exchange, without restrictions within 90 days of the close of such Corporate Event, except for those of Rule 144 or 145, and 3) the Company's shareholders own less than 50% of the voting securities of the surviving entity, then this Warrant shall be deemed exercised in accordance with the provisions of section 1(b) upon the closing of the Corporate Event. In any such case, appropriate provision shall be made with respect to the rights and interests of the holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Stock Purchase Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be possible, in relation to any share of stock, securities or assets thereafter deliverable upon the exercise hereof. 4.4 Sale or Issuance Below Purchase Price. If the Company shall at any time or from time to time issue or sell any of its Common Stock, Preferred Stock, options to acquire (or rights to acquire such options), or any other securities convertible into or exercisable for Common Stock, for a consideration per share less than the Stock Purchase Price in effect immediately prior to the time of such issue or sale, the Conversion ratio shall be adjusted in accordance with the Company's Articles of Incorporation. 4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase Price, and/or any increase or decrease in the number of shares purchasable upon the exercise of this Warrant the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the registered holder of this Warrant at the address of such holder as shown on the books of the Company. The notice, which may be substantially in the form of Exhibit "A" attached hereto, shall be signed by the Company's chief financial officer and shall state the Stock Purchase Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which calculation is based. 4 28 4.6 Other Notices. If at any time: (a) the Company shall declare any cash dividend upon its Preferred Stock; (b) the Company shall declare any dividend upon its Preferred Stock payable in stock or make any special dividend or other distribution to the holders of its Preferred Stock; (c) the Company shall offer for subscription pro rata to the holders of its Preferred Stock any additional shares of stock of any class or other rights; (d) there shall be any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; (e) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (f) the Company shall take or propose to take any other action, notice of which is actually provided to holders of the Preferred Stock; then, in any one or more of said cases, the Company shall give, by first class mail, postage prepaid, addressed to the holder of this Warrant at the address of such holder as shown on the books of the Company, (i) at least 20 day's prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action, at least 20 day's written notice of the date when the same shall take place. Any notice given in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Preferred Stock shall be entitled thereto. Any notice given in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action as the case may be. 4.7 Certain Events. If any change in the outstanding Preferred Stock of the Company or any other event occurs as to which the other provisions of this Section 4 are not strictly applicable or if strictly applicable would not fairly protect the purchase rights of the Holder of the Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares available under the Warrant, the Stock Purchase Price and/or the application of such provisions, in accordance with such essential intent and principles, so as to protect such purchase rights as aforesaid. The adjustment shall be such as will give the Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price the total number, class and kind of shares as he would have owned had the Warrant been exercised prior to the event and had he continued to hold such shares until after the event requiring adjustment. 5. Issue Tax. The issuance of certificates for shares of Preferred Stock upon the exercise of the Warrant shall be made without charge to the Holder of the Warrant for any issue tax in respect thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Holder of the Warrant being exercised. 6. Closing of Books. Provided that the Holder shall be in compliance with the terms of this Agreement, including but not limited to, Section 2, the Company will at no time close its transfer books against the transfer of any Warrant or of any shares of Preferred Stock issued or issuable upon the exercise of any warrant. 5 29 7. No Voting or Dividend Rights; Limitation of Liability. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent as a shareholder in respect of meetings of shareholders for the election of directors of the Company or any other matters or any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised. No provisions hereof, in the absence of affirmative action by the holder to purchase shares of Preferred Stock, and no mere enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder for the Stock Purchase Price or as a shareholder of the Company, whether such liability is asserted by the Company or by its creditors. 8. Intentionally Omitted. 9. Registration Rights. The Holder hereof shall be entitled, with respect to the shares of Preferred Stock issued upon exercise hereof or the shares of Common Stock or other securities issued upon conversion of such Preferred Stock as the case may be, to, and bound by, all of the registration rights and obligations set forth in the First Amended and Restated Registration Rights Agreement dated as of July 31, 1998 to the same extent and on the same terms and conditions as possessed by the Investors thereunder. The Company shall take such action as may be reasonably necessary to assure that the granting of such registration rights to the Holder does not violate the provisions of such agreement or any of the Company's charter documents or rights of prior Grantees of registration rights. 10. Rights and Obligations Survive Exercise of Warrant. The rights and obligations of the Company, of the Holder of this Warrant and of the holder of shares of Preferred Stock issued upon exercise of this Warrant, contained in Sections 6 and 9 shall survive the exercise of this Warrant. 11. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 12. Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof or the Company shall be deemed to have been given (i) upon receipt if delivered personally or by courier (ii) upon confirmation of receipt if by telecopy or (iii) three business days after deposit in the US mail, with postage prepaid and certified or registered, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant. 13. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. All of the obligations of the Company relating to the Preferred Stock issuable upon the exercise of this Warrant shall survive the exercise and termination of this Warrant. All of the covenants and agreements of the Company shall inure to the benefit of the successors or assign of the holder hereof. The Company will, at the time of the exercise of this Warrant, in whole or in part, upon request of the Holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the Holder hereof in respect of any rights (including, without limitation, any right to registration of the shares of Common Stock) to which the holder hereof shall continue to be entitled after such exercise in accordance with this Warrant; provided, that the failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the Holder hereof in respect to such rights. 14. Descriptive Headings and Governing Law. The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California. 6 30 15. Lost Warrants or Stock Certificates. The Company represents and warrants to the Holder hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant or stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company at its expense will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 16. Fractional Shares. No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to such fraction a sum in cash equal to such fraction multiplied by the then effective Stock Purchase Price. 17. Representations of Holder. With respect to this Warrant, Holder represents and warrants to the Company as follows: 17.1 Experience. It is experienced in evaluating and investing in companies engaged in businesses similar to that of the Company; it understands that investment in the Warrant involves substantial risks; it has made detailed inquiries concerning the Company, its business and services, its officers and its personnel; the officers of the Company have made available to Holder any and all written information it has requested; the officers of the Company have answered to Holder's satisfaction all inquiries made by it; in making this investment it has relied upon information made available to it by the Company; and it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Company and it is able to bear the economic risk of that investment. 17.2 Investment. It is acquiring the Warrant for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof. It understands that the Warrant, the shares of Preferred Stock issuable upon exercise thereof and the shares of Common Stock issuable upon conversion of the Preferred Stock, have not been registered under the Securities Act of 1933, as amended, nor qualified under applicable state securities laws. 17.3 Rule 144. It acknowledges that the Warrant, the Preferred Stock and the Common Stock must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. It has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act. 17.4 Access to Data. It has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management and has had the opportunity to inspect the Company's facilities. 18. Additional Representations and Covenants of the Company. The Company hereby represents, warrants and agrees as follows: 18.1 Corporate Power. The Company has all requisite corporate power and corporate authority to issue this Warrant and to carry out and perform its obligations hereunder. 18.2 Authorization. All corporate action on the part of the Company, its directors and shareholders necessary for the authorization, execution, delivery and performance by the Company of this has been taken. This Warrant is a valid and binding obligation of the Company, enforceable in accordance with its terms. 18.3 Offering. Subject in part to the truth and accuracy of Holder's representations set forth in Section 17 hereof, the offer, issuance and sale of the Warrant is, and the issuance of Preferred Stock upon exercise of the Warrant and the issuance of Common Stock upon conversion of the Preferred Stock will be exempt from the registration requirements of the Securities Act, and are exempt from the qualification requirements of any applicable state securities laws; and neither the Company nor anyone acting on its behalf will take any action hereafter that would cause the loss of such exemptions. 7 31 18.4 Stock Issuance. Upon exercise of the Warrant, the Company will use its best efforts to cause stock certificates representing the shares of Preferred Stock purchased pursuant to the exercise to be issued in the individual names of Holder, its nominees or assignees, as appropriate at the time of such exercise. Upon conversion of the shares of Preferred Stock to shares of Common Stock, the Company will issue the Common Stock in the individual names of Holder, its nominees or assignees, as appropriate. 18.5 Articles and By-Laws. The Company has provided Holder with true and complete copies of the Company's Articles or Certificate of Incorporation, By-Laws, and each Certificate of Determination or other charter document setting, forth any rights, preferences and privileges of Company's capital stock, each as amended and in effect on the date of issuance of this Warrant. 18.6 Conversion of Preferred Stock. As of the date hereof, each share of the Preferred Stock is convertible into one share of the Common Stock. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers, thereunto duly authorized this 1st day of February, 1999. NEW FOCUS, INC. By: ---------------------------- Title: ------------------------ 8 32 FORM OF SUBSCRIPTION (To be signed only upon exercise of Warrant) To: ------------------------------ The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, (1) See Below ______________________ (________) shares (the "Shares") of Stock of _______ and herewith makes payment of ______________ Dollars ($_____) therefor, and requests that the certificates for such shares be issued in the name of, and delivered to, ____________, whose address is ________________________. The undersigned hereby elects to convert ___ percent (___%) of the value of the Warrant pursuant to the provisions of Section 1(b) of the Warrant. The undersigned represents that it is acquiring such Common Stock for its own account for investment and not with a view to or for sale in connection with any distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within its control. Dated ______________________ Holder: ______________________ By: ______________________ Its: ______________________ (Address) ______________________________ ______________________________ (1) Insert here the number of shares called for on the face of the Warrant (or, in the case of a partial exercise, the portion thereof as to which the Warrant is being exercised), in either case without making any adjustment for additional Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of the Warrant, may be deliverable upon exercise. 9 33 ASSIGNMENT FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Preferred Stock covered thereby set forth hereinbelow, unto:
Name of Assignee Address No. of Shares - --------------------------------------------------------------------------------
Dated: ----------------------------------- Holder: ----------------------------------- By: ----------------------------------- Its: ----------------------------------- 10 34 EXHIBIT "A" [On letterhead of the Company] Reference is hereby made to that certain Warrant dated ________________________, 199__, issued by ____________________________________, a ______________________________ corporation (the "Company"), to VENTURE LENDING & LEASING II, INC., a Maryland corporation (the "Holder"). [IF APPLICABLE] The Warrant provides that the actual number of shares of the Company's capital stock issuable upon exercise of the Warrant and the initial exercise price per share are to be determined by reference to one or more events or conditions subsequent to the issuance of the Warrant. Such events or conditions have now occurred or lapsed, and the Company wishes to confirm the actual number of shares issuable and the initial exercise price. The provisions of this Supplement to Warrant are incorporated into the Warrant by this reference, and shall control the interpretation and exercise of the Warrant. [IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the Warrant that the following adjustment(s) have been made to the Warrant: [describe adjustments, setting forth details regarding method of calculation and facts upon which calculation is based]. This certifies that the Holder is entitled to purchase from the Company ______________________________ (__________________________) fully paid and nonassessable shares of the Company's ___________ Stock at a price of ______________________________ Dollars ($________________) per share (the "Stock Purchase Price"). The Stock Purchase Price and the number of shares purchasable under the Warrant remain subject to adjustment as provided in Section 4 of the Warrant. Executed this ___ day of ________________________, 199___. [COMPANY] By: _______________________________ Name: _____________________________ Title: ____________________________ 11 35 THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. WARRANT TO PURCHASE 35,000 SHARES OF SERIES D PREFERRED STOCK OF NEW FOCUS, INC. (Void after December 31, 2004) This certifies that VENTURE LENDING & LEASING II, INC., a Maryland corporation, or assigns (the "Holder"), for value received, is entitled to purchase from NEW FOCUS, INC., a California corporation (the "Company"), 35,000 fully paid and nonassessable shares of the Company's Series D Preferred Stock ("Preferred Stock") for cash at a price of $4.00 per share (the "Stock Purchase Price") at any time or from time to time up to and including 5:00 p.m. (Pacific time) on December 31, 2004 (the "Expiration Date"), upon surrender to the Company at its principal office at 2630 Walsh Avenue, Santa Clara, CA 95051-0905, (or at such other location as the Company may advise Holder in writing) of this Warrant properly endorsed with the Form of Subscription attached hereto duly filled in and signed and upon payment in cash or by check of the aggregate Stock Purchase Price for the number of shares for which this Warrant is being exercised determined in accordance with the provisions hereof. The Stock Purchase Price and the number of shares purchasable hereunder are subject to adjustment as provided in Section 4 of this Warrant. This Warrant is subject to the following terms and conditions: 1. Exercise; Issuance of Certificates; Payment for Shares. (a) Unless an election is made pursuant to clause (b) of this Section 1, this Warrant shall be exercisable at the option of the Holder, at any time or from time to time, on or before the Expiration Date for all or any portion of the shares of Preferred Stock (but not for a fraction of a share) which may be purchased hereunder for the Stock Purchase Price multiplied by the number of shares to be purchased. In the event, however, that pursuant to the Company's Articles of Incorporation, as amended, an event causing automatic conversion of the Company's Preferred Stock shall have occurred prior to the exercise of this Warrant, in whole or in part, then this Warrant shall be exercisable for the number of shares of Common Stock of the Company into which the Preferred Stock not purchased upon any prior exercise of the Warrant would have been so converted (and, where the context requires, reference to "Preferred Stock" shall be deemed to include such Common Stock). The Company agrees that the shares of Preferred Stock purchased under this Warrant shall be and are deemed to be issued to the holder hereof as the record owner of such shares as of the close of business on the date on which the form of subscription shall have been delivered and payment made for such shares. Subject to the provisions of Section 2, certificates for the shares of Preferred Stock so purchased, together with any other securities or property to which the Holder hereof is entitled upon such exercise, shall be delivered to the Holder hereof by the Company at the Company's expense within a reasonable time after the rights represented by this Warrant have been so exercised. Except as provided in clause (b) of this Section 1, in case of a purchase of less than all the shares which may be purchased under this Warrant, the Company shall cancel this Warrant and execute and deliver a new Warrant or Warrants of like tenor for the balance of the shares purchasable under the Warrant surrendered upon such purchase to the Holder hereof within a reasonable time. Each stock certificate so delivered shall be in such denominations of 36 Preferred Stock as may be requested by the Holder hereof and shall be registered in the name of such Holder or such other name as shall be designated by such Holder, subject to the limitations contained in Section 2. (b) The Holder, in lieu of exercising this Warrant by the payment of the Stock Purchase Price pursuant to clause (a) of this Section 1, may elect, at any time on or before the Expiration Date, to receive that number of shares of Preferred Stock equal to the quotient of: (i) the difference between (A) the Per Share Price (as hereinafter defined) of the Preferred Stock, less (B) the Stock Purchase Price then in effect, multiplied by the number of shares of Preferred Stock the Holder would otherwise have been entitled to purchase hereunder pursuant to clause (a) of this Section 1 (or such lesser number of shares as the Holder may designate in the case of a partial exercise of this Warrant); over (ii) the Per Share Price. Election to exercise under this section (b) may be made by delivering a signed form of subscription to the Company via facsimile, to be followed by delivery of the warrant. (c) For purposes of clause (b) of this Section 1, "Per Share Price" means the product of: (i) the greater of (A) the closing price of the Company's Common Stock as quoted by NASDAQ or listed on any exchange, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the trading day immediately prior to the date of the Holder's election hereunder or, (B) if applicable at the time of or in connection with the exercise under clause (b) of this Section 1, the gross sales price of one share of the Company's Common Stock pursuant to a registered public offering or that amount which shareholders of the Company will receive for each share of Common Stock pursuant to a merger, reorganization or sale of assets; and (ii) that number of shares of Common Stock into which each share of Preferred Stock is convertible. If the Company's Common Stock is not quoted by NASDAQ or listed on an exchange, the Per Share Price of the Preferred Stock (or the equivalent number of shares of Common Stock into which such Preferred Stock is convertible) shall be the price per share which the Company would obtain from a willing buyer for shares sold by the Company from authorized but unissued shares as such price shall be agreed upon by the Holder and the Company or, if agreement cannot be reached within ten (10) business days of the Holder's election hereunder, as such price shall be determined by a panel of three (3) appraisers, one (1) to be chosen by the Company, one (1) to be chosen by the Holder and the third to be chosen by the first two (2) appraisers. If the appraisers cannot reach agreement within 30 days of the Holder's election hereunder, then each appraiser shall deliver its appraisal and the appraisal which is neither the highest nor the lowest shall constitute the Per Share Price. In the event either party fails to choose an appraiser within 30 days of the Holder's election hereunder, then the appraisal of the sole appraiser shall constitute the Per Share Price. Each party shall bear the cost of the appraiser selected by such party and the cost of the third appraiser shall be borne one-half by each party. In the event either party fails to choose an appraiser, the cost of the sole appraiser shall be borne one-half by each party. 2. Limitation on Transfer. (a) The Warrant and the Preferred Stock shall not be transferable except upon the conditions specified in this Section 2, which conditions are intended to insure compliance with the provisions of the Securities Act of 1933, as amended (the "Securities Act"). Each holder of this Warrant or the Preferred Stock issuable hereunder will cause any proposed transferee of the Warrant or Preferred Stock to agree to take and hold such securities to the provisions and upon the conditions specified in this Section 2. (b) Each certificate representing (i) this Warrant, (ii) the Preferred Stock, (iii) shares of the Company's Common Stock issued upon conversion of the Preferred Stock and (iv) any other securities issued in respect to the Preferred Stock or Common Stock issued upon conversion of the Preferred Stock upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise permitted by the provisions of this Section 2 or unless such securities have been registered under the Securities Act or sold under Rule 144) be stamped or otherwise imprinted with a legend substantially in the following form (in addition to any legend required under applicable state securities laws): THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES. THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR 2 37 THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT. (c) The Holder of this Warrant and each person to whom this Warrant is subsequently transferred represents and warrants to the Company (by acceptance of such transfer) that it will not transfer the Warrant (or securities issuable upon exercise hereof unless a registration statement under the Securities Act was in effect with respect to such securities at the time of issuance thereof) except pursuant to (i) an effective registration statement under the Securities Act, (ii) Rule 144 under the Securities Act (or any other rule under the Securities Act relating to the disposition of securities), or (iii) an opinion of counsel, reasonably satisfactory to counsel for the Company, that an exemption from such registration is available. 3. Shares to be Fully Paid; Reservation of Shares. The Company covenants and agrees that all shares of Preferred Stock which may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be duly authorized, validly issued, fully paid and nonassessable and free from all preemptive rights of any shareholder and free of all taxes, liens and charges with respect to the issue thereof (other than taxes in respect of transfer occurring contemporaneously or as otherwise specified herein). The Company further covenants and agrees that during the period within which the rights represented by this Warrant may be exercised, the Company will at all times have authorized and reserved, for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this Warrant, a sufficient number of shares of authorized but unissued Preferred Stock, or other securities and property, when and as required to provide for the exercise of the rights represented by this Warrant. The Company will take all such action as may be necessary to assure that such shares of Preferred Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any domestic securities exchange upon which the Preferred Stock may be listed. The Company will not take any action which would result in any adjustment of the Stock Purchase Price (as defined in Section 4 hereof) (i) if the total number of shares of Preferred Stock issuable after such action upon exercise of all outstanding warrants, together with all shares of Preferred Stock then outstanding and all shares of Preferred Stock then issuable upon exercise of all options and upon the conversion of all convertible securities then outstanding, would exceed the total number of shares of Preferred Stock then authorized by the Company's Articles of Incorporation, or (ii) if the total number of shares of Common Stock issuable after such action upon the conversion of all such shares of Preferred Stock together with all shares of Common Stock then outstanding and then issuable upon exercise of all options and upon the conversion of all convertible securities then outstanding would exceed the total number of shares of Common Stock then authorized by the Company's Articles of Incorporation. 4. Adjustment of Stock Purchase Price Number of Shares. The Stock Purchase Price and the number of shares purchaseable upon the exercise of this Warrant shall be subject to adjustment from time to time upon the occurrence of certain events described in this Section 4. Upon each adjustment of the Stock Purchase Price, the Holder of this Warrant shall thereafter be entitled to purchase, at the Stock Purchase Price resulting from such adjustment, the number of shares obtained by multiplying the Stock Purchase Price in effect immediately prior to such adjustment by the number of shares purchaseable pursuant hereto immediately prior to such adjustment, and dividing the product thereof by the Stock Purchase Price resulting from such adjustment. 4.1 Subdivision or Combination of Stock. In case the Company shall at any time subdivide its outstanding shares of Preferred Stock into a greater number of shares, the Stock Purchase Price in effect immediately prior to such subdivision shall be proportionately reduced, and conversely, in case the outstanding shares of Preferred Stock of the Company shall be combined into a smaller number of shares, the Stock Purchase Price in effect immediately prior to such combination shall be proportionately increased. 4.2 Dividends in Preferred Stock, Other Stock, Property, Reclassification. If at any time or from time to time the holders of Preferred Stock (or any shares of stock or other securities at the time receivable upon the exercise of this Warrant) shall have received or become entitled to receive, without payment therefor, (a) Preferred Stock or any shares of stock or other securities whether or not such securities are at any time directly or indirectly convertible into or exchangeable for Preferred Stock, or any rights or 3 38 options to subscribe for, purchase or otherwise acquire any of the foregoing by way of dividend or other distribution, or (b) any cash paid or payable otherwise than as a cash dividend, or (c) Preferred Stock or other or additional stock or other securities or property (including cash) by way of spinoff, split-up, reclassification, combination of shares or similar corporate rearrangement, (other than shares of Preferred Stock issued as a stock split, adjustments in respect of which shall be covered by the terms of Section 4.1 above). Then and in each such case, the Holder hereof shall, upon the exercise of this Warrant, be entitled to receive, in addition to the number of shares of Preferred stock receivable thereupon, and without payment of any additional consideration therefore, the amount of stock and other securities and property (including cash in the cases referred to in clauses (b) and (c) above) which such Holder would hold on the date of such exercise had he been the holder of record of such Preferred Stock as of the date on which holders of Preferred Stock received or became entitled to receive such shares and/or all other additional stock and other securities and property. 4.3 Reorganization, Reclassification, Consolidation, Merger or Sale. If any capital reorganization of the capital stock of the Company, or any consolidation or merger of the Company with another corporation, or the sale of all or substantially all of its assets to another corporation shall be effected in such a way that holders of Preferred Stock shall be entitled to receive stock, securities or assets with respect to or in exchange for Preferred Stock (Corporate Event), then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provisions shall be made whereby the holder hereof shall thereafter have the right to purchase and receive (in lieu of the shares of the Preferred Stock of the Company immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby) such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Preferred Stock equal to the number of shares of such stock immediately theretofore purchasable and receivable upon the exercise of the rights represented hereby, provided, however, in the event that 1) the effective price of such Corporate Event is in excess of the exercise price hereof effective at the time of the Corporate Event, 2) the consideration received in such Corporate Event is cash or shares that are of a publicly traded company listed on a national market or exchange, without restrictions within 90 days of the close of such Corporate Event, except for those of Rule 144 or 145, and 3) the Company's shareholders own less than 50% of the voting securities of the surviving entity, then this Warrant shall be deemed exercised in accordance with the provisions of section 1(b) upon the closing of the Corporate Event. In any such case, appropriate provision shall be made with respect to the rights and interests of the holder of this Warrant to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Stock Purchase Price and of the number of shares purchasable and receivable upon the exercise of this Warrant) shall thereafter be applicable, as nearly as may be possible, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise hereof. 4.4 Sale or Issuance Below Purchase Price. If the Company shall at any time or from time to time issue or sell any of its Common stock, Preferred Stock, options to acquire (or rights to acquire such options), or any other securities convertible into or exercisable for Common Stock, for a consideration per share less than the Stock Purchase Price in effect immediately prior to the time of such issue or sale, the Conversion ratio shall be adjusted in accordance with the Company's Articles of Incorporation. 4.5 Notice of Adjustment. Upon any adjustment of the Stock Purchase Price, and/or any increase or decrease in the number of shares purchasable upon the exercise of this Warrant the Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the registered holder of this Warrant at the address of such holder as shown on the books of the Company. The notice, which may be substantially in the form of Exhibit "A" attached hereto, shall be signed by the Company's chief financial officer and shall state the Stock Purchase Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. 4 39 4.6 Other Notices. If at any time: (a) the Company shall declare any cash dividend upon its Preferred Stock; (b) the Company shall declare any dividend upon its Preferred Stock payable in stock or make any special dividend or other distribution to the holders of its Preferred Stock; (c) the Company shall offer for subscription pro rata to the holders of its preferred Stock any additional shares of stock of any class or other rights; (d) there shall be any capital reorganization or reclassification of the capital stock of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to, another corporation; (e) there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company; or (f) the Company shall take or propose to take any other action, notice of which is actually provided to holders of the Preferred Stock; then, in any one or more of said cases, the Company shall give, by first class mail, postage prepaid, addressed to the holder of this Warrant at the address of such holder as shown on the books of the Company, (i) at least 20 day's prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights or for determining rights to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action and (ii) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action, at least 20 day's written notice of the date when the same shall take place. Any notice given in accordance with the foregoing clause (i) shall also specify, in the case of any such dividend, distribution or subscription rights, the date on which the holders of Preferred Stock shall be entitled thereto. Any notice given in accordance with the foregoing clause (ii) shall also specify the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, or other action as the case may be. 4.7 Certain Events. If any change in the outstanding Preferred Stock of the Company or any other event occurs as to which the other provisions of this Section 4 are not strictly applicable or if strictly applicable would not fairly protect the purchase rights of the Holder of the Warrant in accordance with the essential intent and principles of such provisions, then the Board of Directors of the Company shall make an adjustment in the number and class of shares available under the Warrant, the Stock Purchase Price and/or the application of such provisions, in accordance with such essential intent and principles, so as to protect such purchase rights as aforesaid. The adjustment shall be such as will give the Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price the total number, class and kind of shares as he would have owned had the Warrant been exercised prior to the event and had he continued to hold such shares until after the event requiring adjustment. 5. Issue Tax. The issuance of certificates for share of Preferred Stock upon the exercise of the Warrant shall be made without charge to the Holder of the Warrant for any issue tax in respect thereof; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the then Holder of the Warrant being exercised. 6. Closing of Books. Provided that the Holder shall be in compliance with the terms of this Agreement, including but not limited to, Section 2, the Company will at no time close its transfer books against the transfer of any Warrant or of any shares of Preferred Stock issued or issuable upon the exercise of any warrant. 5 40 7. No Voting or Dividend Rights; Limitation of Liability. Nothing contained in this Warrant shall be construed as conferring upon the Holder hereof the right to vote or to consent as a shareholder in respect of meetings of shareholders for the election of directors of the Company or any other matters or any rights whatsoever as a shareholder of the Company. No dividends or interest shall be payable or accrued in respect of this Warrant or the interest represented hereby or the shares purchasable hereunder until, and only to the extent that, this Warrant shall have been exercised. No provisions hereof, in the absence of affirmative action by the holder to purchase shares of Preferred Stock, and no more enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder for the Stock Purchase Price or as a shareholder of the Company, whether such liability is asserted by the Company or by its creditors. 8. Intentionally Omitted. 9. Registration Rights. The Holder hereof shall be entitled, with respect to the shares of Preferred Stock issued upon exercise hereof or the shares of Common Stock or other securities upon conversion of such Preferred Stock as the case may be, to, and bound by, all of the registration rights and obligations set forth in the First Amended and Restated Registration Rights Agreement dated as of July 31, 1998 to the same extent and on the same terms and conditions as possessed by the Investors thereunder. The Company shall take such action as may be reasonably necessary to assure that the granting of such registration rights to the Holder does not violate the provision of such agreement or any of the Company's charter documents or rights of prior Grantees of registration rights. 10. Rights and Obligations Survive Exercise of Warrant. The rights and obligations of the Company, of the Holder of this Warrant and of the holder of shares of Preferred Stock issued upon exercise of this Warrant, contained in Sections 6 and 9 shall survive the exercise of this Warrant. 11. Modification and Waiver. This Warrant and any provision hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the same is sought. 12. Notices. Any notice, request or other document required or permitted to be given or delivered to the holder hereof or the Company shall be deemed to have been given (i) upon receipt if delivered personally or by courier (ii) upon confirmation of receipt if by telecopy or (iii) three business days after deposit in the US mail, with postage prepaid and certified or registered, to each such holder at its address as shown on the books of the Company or to the Company at the address indicated therefor in the first paragraph of this Warrant. 13. Binding Effect on Successors. This Warrant shall be binding upon any corporation succeeding the Company by merger, consolidation or acquisition of all or substantially all of the Company's assets. All of the obligations of the Company relating to the Preferred Stock issuable upon the exercise of this Warrant shall survive the exercise and termination of this Warrant. All of the covenants and agreements of the Company shall inure to the benefit of the successors and assigns of the holder hereof. The Company will, at the time of the exercise of this Warrant in whole or in part, upon request of the Holder hereof but at the Company's expense, acknowledge in writing its continuing obligation to the Holder hereof in respect of any rights (including, without limitation, any right to registration of the shares of Common Stock) to which the holder hereof shall continue to be entitled after such exercise in accordance with this Warrant; provided, that the failure of the holder hereof to make any such request shall not affect the continuing obligation of the Company to the Holder hereof in respect of such rights. 14. Descriptive Headings and Governing Law. The descriptive headings of the several sections and paragraphs of this Warrant are inserted for convenience only and do not constitute a part of this Warrant. This Warrant shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the laws of the State of California. 6 41 15. Lost Warrants or Stock Certificates. The Company represents and warrants to the Holder hereof that upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of any Warrant or stock certificate and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or in the case of any such mutilation upon surrender and cancellation of such Warrant or stock certificate, the Company at its expense will make and deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Warrant or stock certificate. 16. Fractional Shares. No fractional shares shall be issued upon exercise of this Warrant. The Company shall, in lieu of issuing any fractional share, pay the holder entitled to such fraction a sum in cash equal to such fraction multiplied by the then effective Stock Purchase Price. 17. Representations of Holder. With respect to this Warrant, Holder represents and warrants to the Company as follows: 17.1 Experience. It is experienced in evaluating and investing in companies engaged in businesses similar to that of the Company; it understands that investment in the Warrant involves substantial risks; it has made detailed inquiries concerning the Company, its business and services, its officers and its personnel; the officers of the Company have made available to Holder any and all written information it has requested; the officers of the Company have answered to Holder's satisfaction all inquiries made by it; in making this investment it has relied upon information made available to it by the Company; and it has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of investment in the Company and it is able to bear the economic risk of that investment. 17.2 Investment. It is acquiring the Warrant for investment for its own account and not with a view to, or for resale in connection with, any distribution thereof. It understands that the Warrant, the shares of Preferred Stock issuable upon exercise thereof and the shares of Common Stock issuable upon conversion of the Preferred Stock, have not been registered under the Securities Act of 1933, as amended, nor qualified under applicable state securities laws. 17.3 Rule 144. It acknowledges that the Warrant, the Preferred Stock and the Common Stock must be held indefinitely unless they are subsequently registered under the Securities Act or an exemption from such registration is available. It has been advised or is aware of the provisions of Rule 144 promulgated under the Securities Act. 17.4 Access to Data. It has had an opportunity to discuss the Company's business, management and financial affairs with the Company's management and has had the opportunity to inspect the Company's facilities. 18. Additional Representations and Covenants of the Company. The Company hereby represents, warrants and agrees as follows: 18.1 Corporate Power. The Company has all requisite corporate power and corporate authority to issue this Warrant and to carry out and perform its obligations hereunder. 18.2 Authorization. All corporate action on the part of the Company, its directors and shareholders necessary for the authorization, execution, delivery and performance by the Company of this has been taken. This Warrant is a valid and binding obligation of the Company, enforceable in accordance with its terms. 18.3 Offering. Subject in part to the truth and accuracy of Holder's representations set forth in Section 17 hereof, the offer, issuance and sale of the Warrant is, and the issuance of Preferred Stock upon exercise of the Warrant and the issuance of Common Stock upon conversion of the Preferred Stock will be exempt from the registration requirements of the Securities Act, and are exempt from the qualification requirements of any applicable state securities laws; and neither the Company nor anyone acting on its behalf will take any action hereafter that would cause the loss of such exemptions. 7 42 18.4 Stock Issuance. Upon exercise of the Warrant, the Company will use its best efforts to cause stock certificates representing the shares of Preferred Stock purchased pursuant to the exercise to be issued in the individual names of Holder, its nominees or assignees, as appropriate at the time of such exercise. Upon conversion of the shares of Preferred Stock to shares of Common Stock, the Company will issue the Common Stock in the individual names of Holder, its nominees or assignees, as appropriate. 18.5 Articles and By-Laws. The Company has provided Holder with true and complete copies of the Company's Articles or Certificate of Incorporation, By-Laws, and each Certificate of Determination or other charter document setting, forth any rights, preferences and privileges of Company's capital stock, each as amended and in effect on the date of issuance of this Warrant. 18.6 Conversion of Preferred Stock. As of the date hereof, each share of the Preferred Stock is convertible into one share of the Common Stock. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its officers, thereunto duly authorized this 1st day of February, 1999. NEW FOCUS, INC. By: /s/ KENNETH E. WESTRICK ------------------------- Title: President & CEO ------------------------- 8 43 FORM OF SUBSCRIPTION (To be signed only upon exercise of Warrant) To:___________________ The undersigned, the holder of the within Warrant, hereby irrevocably elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, (1) See Below _________ (____) shares (the "Shares") of Stock of ________ and herewith makes payment of _________ Dollars ($______) therefor, and requests that the certificates for such shares be issued in the name of, and delivered to, ________, whose address is _________. The undersigned hereby elects to convert _____ percent (__%) of the value of the Warrant pursuant to the provisions of Section 1(b) of the Warrant. The undersigned represents that it is acquiring such Common Stock for its own account for investment and not with a view to or for sale in connection with any distribution thereof (subject, however, to any requirement of law that the disposition thereof shall at all times be within its control. Dated __________________ Holder: __________________ By: __________________ Its: __________________ (Address) __________________________ __________________________ (1) Insert here the number of shares called for on the face of the Warrant (or, in the case of a partial exercise, the portion thereof as to which the Warrant is being exercised), in either case without making any adjustment for additional Preferred Stock or any other stock or other securities or property or cash which, pursuant to the adjustment provisions of the Warrant, may be deliverable upon exercise. 9 44 ASSIGNMENT FOR VALUE RECEIVED, the undersigned, the holder of the within Warrant, hereby sells, assigns and transfers all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Preferred Stock covered thereby set forth hereinbelow, unto: Name of Assignee Address No. of Shares - -------------------------------------------------------------------------------- Dated ______________________ Holder: ____________________ By: ________________________ Its: _______________________ 10 45 EXHIBIT "A" [On letterhead of the Company] Reference is hereby made to that certain Warrant dated ________, 199__, issued by ____________, a __________ corporation (the "Company"), to VENTURE LENDING & LEASING II, INC., a Maryland corporation (the "Holder"). [IF APPLICABLE] The Warrant provides that the actual number of shares of the Company's capital stock issuable upon exercise of the Warrant and the initial exercise price per share are to be determined by reference to one or more events or conditions subsequent to the issuance of the Warrant. Such events or conditions have now occurred or lapsed, and the Company wishes to confirm the actual number of shares issuable and the initial exercise price. The provisions of this Supplement to Warrant are incorporated in the Warrant by this reference, and shall control the interpretation and exercise of the Warrant. [IF APPLICABLE] Notice is hereby given pursuant to Section 4.5 of the Warrant that the following adjustment(s) have been made to the Warrant: [describe adjustments, setting forth details regarding method of calculation and facts upon which calculation is based]. This certifies that the Holder is entitled to purchase from the Company ____________ (________) fully paid and nonassessable shares of the Company's ________ Stock at a price of _________________ Dollars ($______) per share (the "Stock Purchase Price"). The Stock Purchase Price and the number of shares purchasable under the Warrant remain subject to adjustment as provided in Section 4 of the Warrant. Executed this ___ day of ________, 199__. [COMPANY] By: ______________________________ Name: ____________________________ Title: ___________________________ 11 46 SECRETARY'S CERTIFICATE AS TO INCUMBENCY AND RESOLUTIONS The undersigned certifies that he is the duly elected Secretary of New Focus, Inc., a California corporation (the "Company"), and that, as such, he is authorized to execute this Certificate on behalf of the Company, and further certifies that: (a) Attached hereto is a true and correct copy of the resolutions duly adopted by the Board of Directors of the Company on February 9, 1999 by proceedings in accordance with the Articles or Certificate of Incorporation and bylaws of the Company, and that said resolutions have not been amended and are in full force and effect on the date hereof: (b) Each of the offices of the Company listed below is held by the person whose name is indicated opposite such office, each such person has been duly elected to such office, and the signatures opposite their respective names are their authentic signatures:
Office Name Signature - ------ ---- --------- President Kenneth E. Westrick /s/ KENNETH E. WESTRICK ----------------------- ------------------------- Vice President Controller DAVID A. SHOQUIST /s/ DAVID A. SHOQUIST ----------------------- ------------------------- Secretary Judith M. O'Brien ----------------------- -------------------------
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Company as of the 9th day of February, 1999 /s/ JUDITH M. O'BRIEN ------------------------- Secretary 47 RESOLUTIONS OF THE BOARD OF DIRECTORS OF NEW FOCUS, INC. WHEREAS, it is in the best interest of the Corporation to enter into like Loan Agreements (the "Agreements") with VENTURE LENDING & LEASING II, INC., as Lender ("Lender") providing for equipment or other financing, and as partial consideration therefor, to grant to Lender warrants to purchase shares of the Corporation's Series D Preferred Stock. WHEREAS, it is also in the interests of the Corporation to avail itself from time to time during the Agreement of managerial assistance offered by Lenders or its agents or affiliates, in areas such as advice on equipment financing, cash flow management, and general financing opportunities. NOW, THEREFORE, BE IT RESOLVED that the President, any Vice President or Chief Financial Officer be, and they each hereby are, acting singly, authorized, empowered and directed, on the Corporation's behalf, to: 1) execute, deliver and perform the Agreement and Promissory Notes and other documents related, and 2) execute and deliver Warrants for 35,000 shares of the Corporation's Series D Preferred Stock thereto, under the terms contemplated in the Commitment letter dated November 13, 1998 and to enter into any arrangement with Lenders or other third parties for consulting services relating to the Corporation's management, operations or business objectives, on such terms and conditions as any such officer may deem necessary or appropriate. FURTHER RESOLVED, that the officers of the Corporation be, and they each hereby are, authorized, empowered and directed to do and perform any and all other acts and deeds that they (or any one of them) may deem necessary or appropriate to carry out and give effect to the foregoing resolution, including (but not limited to) pledging such cash collateral or other security as may be required from time to time under the Agreement and from time to time entering into, executing and delivering, on behalf of the Corporation, any Promissory Notes and/or other documents now or hereafter required by Lender in connection with the Agreement, providing for the authorization and reservation for issuance of shares of Preferred Stock issuable upon exercise of the Warrants and shares of its Common Stock issuable upon conversion of such Preferred Stock. FURTHER RESOLVED, that Lender is authorized to rely upon the foregoing resolutions until receipt by it of written notice of any change, which changes of whatever nature shall not be effective as to such Lender to the extent that it has theretofore relied upon the foregoing resolutions as set forth above. 48 RESOLVED: That the officers of the Company are authorized and directed to enter into a Loan and Security Agreement (the "Agreement") with Venture Lending & Leasing II, Inc. (the "Lender") on substantially the terms presented to this Board of Directors with such changes as the officers of the Company may deem necessary or appropriate; RESOLVED FURTHER: That pursuant to the Agreement, the officers of the Company are authorized and directed to issue a warrant (the "Warrant") to the Lender to purchase 35,000 shares of the Company's Series D Preferred Stock with an exercise price of $4.00 per share. RESOLVED FURTHER: That the Company hereby reserves an aggregate of 35,000 shares of Series D Preferred Stock for issuance upon exercise of the Warrant. RESOLVED FURTHER: That the Company hereby reserves an aggregate of 35,000 shares of Common Stock to provide for the issuance of such shares upon the conversion of the Series D Preferred Stock. RESOLVED FURTHER: That, subject to obtaining all applicable consents, at the time of the Company's next round of financing, the shares of Common Stock issuable upon conversion of the shares shall be included as "Registrable Securities" under an amendment to the Company's First Amended and Restated Registration Rights Agreement, and the officers of the Company are hereby authorized and directed to obtain such consents to such amendment. RESOLVED FURTHER: That the resolutions attached hereto as Exhibit __ and incorporated herein by this reference are hereby approved. RESOLVED FURTHER: That the officers of the Company are hereby authorized and directed to take whatever other actions they deem necessary or appropriate, including the filing of all applications, exhibits, fees, notices and other documents and amendments as may be required by federal and state securities laws, to fulfill the intent of the foregoing resolutions and whatever actions the officers have previously taken are hereby ratified and approved. 49 CERTIFICATE CONCERNING CAPITALIZATION As Chief Financial Officer or other authorized officer of New Focus, Inc. ("Borrower"), I hereby certify that as of the date hereof the following shares of the Borrower's securities (listed by common and preferred by series) were issued and outstanding: Number of Shares* ----------------- PREFERRED STOCK SERIES A 3,790,000 PREFERRED STOCK SERIES B 250,000 PREFERRED STOCK SERIES C 150,000 PREFERRED STOCK SERIES D 994,250 Options Outstanding 1,995,897 COMMON STOCK 573,813 --------- TOTAL 7,753,960 =========
Signature: /s/ KENNETH E. WESTRICK ------------------------ Title: President & CEO ---------------------------- As of Date: 3 Feb 99 ----------------------- - -------------------------------------------------------------------------------- * Number of shares of Preferred Stock are stated in terms of number of shares of Common Stock into which each series is convertible. 50 INSURANCE AUTHORIZATION LETTER In accordance with the insurance coverage requirements of the Loan and Security Agreement dated February 1, 1999 (the "Agreement") between VENTURE LENDING & LEASING II, INC. ("Lender"), and NEW FOCUS, INC. ("Borrower"), coverage is to be provided as set forth below: COVERAGE: All risk including liability and property damage covering equipment financed under the Agreement. INSURED: NEW FOCUS, INC. 2630 Walsh Avenue Santa Clara, CA 95051 LOCATION(s) OF EQUIPMENT: Madison, WI (Fab Facility) Insuring Agent: PAT STROUD, TANNER INS. BROKERS --------------------------------- Address: 4670 WILLOW RD, SUITE 250 --------------------------------- PLEASANTON, CA 94588 --------------------------------- Phone Number: (925) 463-9672 --------------------------------- ADDITIONAL INSURED AND LOSS PAYEE: Lenders and their Assignees, as their respective interests may appear. LENDERS: VENTURE LENDING & LEASING II, INC. 2010 North First Street, Suite 310 San Jose, CA 95131 ASSIGNEE: FLEET BANK N.A. AS AGENT (if any) 1185 Avenue of the Americas, 16th Floor New York, NY 10036 Attn: John Topolovec The above coverage is to be provided prior to funding the Agreement. Borrower hereby agrees to pay for the coverage above and by signing below acknowledges its obligation to do so. Signature: /s/ KENNETH E. WESTRICK --------------------------------- Title: Kenneth E. Westrick --------------------------------- Date: 3 Feb '99 --------------------------------- 51 Note No. 2060-001 PROMISSORY NOTE $800,000.00 February 26, 1999 San Jose, California The undersigned ("Borrower") promises to pay to the order of VENTURE LENDING & LEASING II, INC., a Maryland corporation ("Lender") at its office at 2010 North First Street, Suite 310, San Jose, California 95131, or at such other place as Lender may designate in writing, in lawful money of the United States of America, the principal sum of Eight Hundred Thousand Dollars ($800,000.00), with Basic Interest thereon from the date hereof until maturity, whether scheduled or accelerated, at a fixed rate per annum of eight and 40/100 percent (8.40%), and a Terminal Payment in the sum of Eighty Thousand Dollars ($80,000.00) payable on the Maturity Date. This Note is one of the Notes referred to in, and is entitled to all the benefits of, a Loan and Security Agreement dated February 9, 1999, between Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise defined herein shall have the meaning set forth in the Loan Agreement. The Loan Agreement contains provisions for the acceleration of the maturity of this Note upon the happening of certain stated events. Principal of and interest on this Note shall be payable as follows: On the Borrowing Date, Borrower shall pay (i) Basic Interest, in advance, on the outstanding principal balance of this Note at the Designated Rate for the period from the Borrowing Date through February 28, 1999; and (ii) a first (1st) amortization installment of principal and Basic Interest in the amount of $25,040.00, in advance for the month of March, 1999 and (iii) a 36th last amortization installment of principal and Basic Interest in the amount of $25,040.00, in advance for the month of February, 2002. Commencing on the first day of the second full month after the Borrowing Date, and continuing on the first day of each consecutive month thereafter, principal and Basic Interest shall be payable, in advance, in thirty-three (33) equal consecutive installments of Twenty Five Thousand Forty Dollars ($25,040.00) each, with a thirty-fourth (34th) installment equal to the entire unpaid principal balance and accrued Basic Interest on January 1, 2002. The Terminal Payment amount shall be payable on March 1, 2002. Any unpaid payments of principal or interest on this Note shall bear interest from their respective maturities, whether scheduled or accelerated, at a rate per annum equal to the Default Rate. Borrower shall pay such interest on demand. Interest, charges and fees shall be calculated for actual days elapsed on the basis of a 360-day year, which results in higher interest, charge or fee payments than if a 365-day year were used. In no event shall Borrower be obligated to pay interest, charges or fees at a rate in excess of the highest rate permitted by applicable law from time to time in effect. If Borrower is late in making any payment under this Note by more than five (5) days, Borrower agrees to pay a "late charge" of five percent (5%) of the installment due, but not less than fifty dollars ($50.00) for any one such delinquent payment. This late charge may be charged by Lender for the purpose of defraying the expenses incidental to the handling of such delinquent amounts. Borrower acknowledges that such late charge represents a reasonable sum considering all of the circumstances existing on the date of this Note and represents a fair and reasonable estimate of the costs that will be sustained by Lender due 52 to failure of Borrower to make timely payments. Borrower further agrees that proof of actual damages would be costly and inconvenient. Such late charge shall be paid without prejudice to the right of Lender to collect any other amounts provided to be paid or to declare a default under this Note or any of the other Loan Documents or from exercising any other rights and remedies of Lender. This Note shall be governed by, and construed in accordance with, the laws of the State of California. NEW FOCUS, INC. By: /s/ DAVID A. SHOQUIST Name: David A. Shoquist Its: Controller 53 BORROWING REQUEST February 23, 1999 Venture Lending & Leasing II, Inc. 2010 North First Street, Suite 310 San Jose, CA 95131 Re: NEW FOCUS, INC. Gentlemen: Reference is made to the two Loan and Security Agreement dated as of February 9, 1999 (as the same have been and may be amended from time to time, the "Loan Agreement", the capitalized terms used herein as defined therein), between Venture Lending & Leasing II, Inc. on one hand and New Focus, Inc. (the "Company") on the other. The undersigned is an Officer of the Company, authorized to borrow under The Loan Agreement, and hereby requests Loan under the Loan Agreement, and in that connection certifies as follows: 1. The aggregate amount of the proposed Loan is $800,000.00. The Business Day of the proposed Loan is February 26, 1999. 2. As of this date, no Default or Event of Default has occurred and is continuing, or will result from the making of the proposed Loan, and the representations and warranties of the Company contained in the Loan Agreement are true and correct. 3. No Material Adverse Change has occurred since the date of the most recent financial statements submitted to you by the Company. The Company agrees to notify you promptly before the funding of the Loan if any of the matters to which I have certified above shall not be true and correct on the Borrowing Date. Very Truly Yours, By: /s/ DAVID A. SHOQUIST Name: David A. Shoquist Its: Controller 54 CERTIFICATE OF CHIEF FINANCIAL OFFICER As Chief Financial Officer of New Focus, Inc. ("Borrower") hereby certify that all financial statements heretofore and hereafter delivered to VENTURE LENDING & LEASING II, INC. ("LENDER"), by or upon behalf of Borrower, and any statements and data submitted in writing to Lender in connection with a Loan and Security Agreement dated February 9, 1999 (the "Agreement"), are true and correct and fairly present the financial condition of Borrower for the periods involved, and have been prepared in accordance with generally accepted accounting principles consistently applied. Furthermore, since the date of the financial statements dated December 31, 1998, I am certifying that there has been no material adverse change in the condition, financial or otherwise, of the Borrower. Signature: /s/ DAVID A. SHOQUIST ---------------------------- Title: Controller ---------------------------- Date: 2/24/99 ---------------------------- 55 [WESTERN TECHNOLOGY INVESTMENT LETTERHEAD] February 23, 1999 Mr. David Shoquist Controller New Focus, Inc. 2630 Walsh Avenue Santa Clara, CA 95051-0905 RE: Loan and Security Agreement dated February 9, 1999 between New Focus, Inc., as Borrower, and VENTURE LENDING & LEASING II, INC., as Lender and related Note No. 2060-001 dated February 26, 1999 for $800,000.00 ("Note") Dear David: Pursuant to the above referenced Note, Principal and Basic Interest and Terminal payments are due as follows: Advance Payments - Due at Funding:
Description Payments Payment Date - ----------- -------- ------------ Partial Interim Payment 560.00 Due in Advance Principal and Basic Interest 50,080.00 Due in Advance First and Last Expenses Collected 1,000.00 Due at First Funding ---------- $51,640.00
For a term of thirty-six (36) months followed by 1 final payment, commencing on March 1, 1999 through March 1, 2002, thirty-seven (37) consecutive installments of principal and Basic Interest payments and Terminal Payment payable on the first day of the month as indicated for Loan No. 2060-001 on the attached Payment Summaries which will be amended with each additional funding. Commencing on April 1, 1999, please send your remittance to the following addresses using the loan transaction Numbers indicated below on each remittance. Your checks should be made payable to Venture Lending & Leasing II, Inc. If you prefer to make paymentS by wire transfer in the future, please let us know so it can be arranged. 56 VENTURE LENDING AND LEASING II, INC. NEW FOCUS, INC. PAYMENT SUMMARY AS OF 03/01/99
LOAN TOTAL TOTAL PAYMENT TOTAL TOTAL NUMBER PAYMENT DUE PAYMENT PAYMENT # TO REFERENCE DUE 04/01/99 THRU DUE DUE ON CHECK 3/1/99 1/1/02 2/1/02 3/1/02 - ----------------------------------------------------------------------- 2060-001 $ - $25,040.00 $ - $80,000.00
- -------------------------------------------------------------------------------- REGULAR MAIL: OVERNIGHT DELIVERY ADDRESS: - -------------------------------------------------------------------------------- BANK OF BOSTON BANK OF BOSTON LOCKBOX 414334 LOCK BOX DEPARTMENT BOSTON, MA 02241-4334 2 MORRISEY BLVD. DORCHESTER, MA 02125 REF: LOCKBOX#414334 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- *PAYMENT IS DUE ON THE FIRST OF EACH MONTH - -------------------------------------------------------------------------------- IF YOU HAVE ANY QUESTIONS, PLEASE CONTACT US AT 408-436-8577 EXT 12 Page 1 57 Mr. David Shoquist 2/23/99 Page 2 Loan Payment Remittance Address: Bank of Boston Lockbox 414334 Boston, MA 02241-4334 Loan Transaction No. 2060-001 PLEASE BE ADVISED THAT THIS IS THE ONLY PAYMENT NOTICE YOU WILL RECEIVE. WE DO NOT PROCESS MONTHLY INVOICES. Please acknowledge your receipt of this letter by signing the enclosed counterpart of this letter where indicated below. Sincerely, /s/ Linda White - ----------------- Linda White Acknowledged and agreed to: NEW FOCUS, INC. /s/ DAVID A. SHOQUIST By: ____________________________________ CONTROLLER Title: _________________________________ 2/24/99 Date: __________________________________ -----END PRIVACY-ENHANCED MESSAGE-----